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TMI Blog2007 (12) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred then mutual understanding is usually arrived at between the parties in such a way that joint efforts are made to make the transaction and agreement effectively. No doubt, the assessee was required to obtain the confirmation of HLL but at the same time, Mr. Smith was required to assist the assessee in getting the contract transferred in assessee s name, (clause 2 of the agreement). It also appears from clause 4 which provides that Mr. Smith shall inform HLL that he is still involved in the assessee-company. All this arrangement was made in order to get the said contract transferred in the name of assessee so as to make the agreement effective. That does not mean that payment was not made for acquiring the rights under the contract. The substance of the agreement was to acquire all the rights in the contract. Accordingly, it is held that the payment done by the assessee for acquiring all the rights in the said contract as well as all the articles and paraphernalia belonging to Mr. Smith which were lying at the canteen. The rule of ejusdem generis would apply. The scope of the rule is that words of a general nature following specific and particular words should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act of M/s. Skyline Caterers with HLL with effect from 1-9-2000 against a consideration of Rs. 27 lakhs. Mr. Rui Smith had been carrying on such business for the last 30 years. The amount so paid by the assessee was reflected in its Balance Sheet as Goodwill, on which depreciation at the rate 25 per cent was claimed treating the same as intangible asset. In the course of assessment proceedings, the assessee was asked to explain as to why depreciation on goodwill should not be disallowed. In response to the same, the explanation of the assessee was that it was entitled to depreciation in respect of intangible assets as well as in respect of commercial rights acquired by the assessee. The payment under the head Goodwill in the books of assessee represented the rights under the contract acquired by the assessee which amounted to commercial rights and therefore, the depreciation was allowable under section 32. However, the Assessing Officer was not satisfied with the explanation of the assessee since in his view, the goodwill does not find place in section 32 as part of intangible assets which included only know-how, patents, copyrights, trademarks, etc. He was also of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract in favour of the assessee in view of clause 2 of the agreement. It was also observed by him that the right to carry on the catering business in the canteen of HLL was entirely dependent on HLL and the assessee was responsible to obtain such permission from HLL Mr. Smith had no obligation in this regard. Accordingly, it could not be said that assessee-company had acquired any commercial right. Lastly, he was of the view that the entire payment was infact on account of non-compete which amounted to capital expenditure not covered by section 32(1)( ii ) of the Act. The order of the Assessing Officer was therefore upheld by the learned CIT(A). Aggrieved by the same, the assessee is in further appeal before the Tribunal. 4. Both the parties have been heard at length. The learned Counsel for the assessee, Mr. Mistri, has assailed the order of learned CIT(A) by submitting-( i ) that the nomenclature under which the entry is passed in the books of account is not relevant in deciding the nature of the transaction. The real nature of the transaction has to be seen with reference to the agreement between the parties; ( ii ) that the learned CIT(A) was not justified in holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... canteen located at Backbay Reclamation, Mumbai for the last 30 years as sole proprietor of M/s. Skyline Caterers. On the other hand, the assessee is a 100 per cent subsidiary of RHSL who are in the business of institutional foods and services management and allied services. The Party of the Second Part approached the Party of the First Part with an offer to take over the catering contract of the party of the First part at HLL canteen effective from 1-9-2000 on the terms and conditions mentioned in the agreement. The sum of Rs. 25 lakhs was agreed to be paid by the Party of the Second Part to the Party of the First Part as a consideration for assigning all the rights under the said contract and further sum of Rs. 2 lakhs was agreed to be paid on account of non-compete clause. Clause 2 of the agreement provides that it shall be the entire endeavour and responsibility of the Party of the Second Part to obtain the confirmation of HLL but the Party of the First Part shall assist the Party of the Second Part in whatever way the Party of the Second Part desires. Clause 4 provides that Party of the First Part shall inform HLL that he is also involved in the Party of the Second Part. Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said contract transferred in the name of assessee so as to make the agreement effective. That does not mean that payment was not made for acquiring the rights under the contract. The substance of the agreement was to acquire all the rights in the contract. Accordingly, it is held that the payment of Rs. 25 lakhs was paid by the assessee for acquiring all the rights in the said contract as well as all the articles and paraphernalia belonging to Mr. Smith which were lying at the canteen. 9. The next question for consideration is whether the rights acquired under the contract can be said to be intangible asset within the ambit of section 32(1)( ii ) which reads as under : "32. (1) In respect of depreciation of ( i ).................. ( ii )Know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after 1st day of April, 1998." The perusal of the above shows that Legislature has specified certain intangible assets on which depreciation can be claimed namely know-how, patents, copyrights, trademarks, licences, franchises. These specific intangible assets are followed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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