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TMI Blog2009 (8) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... me and the business and in order to take advantage of the reputation built up by Shri Uday S. Kotak for carrying on the business, the assessee company has agreed to pay the goodwill. The assets which are included in the definition of intangible assets given in clause ( ii ) are know-how, patents, copyrights, trademarks, licenses, franchises etc., and any other business or commercial rights of similar nature are also included. Therefore, all these rights are similar to the rights under goodwill. Applying the principles of ejusdem generis , the meaning has to be extended to the phrase other business or commercial rights of similar nature . As seen from the agreement of sale between Shri Uday S. Kotak and the assessee company fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any which filed its return of income on 31-10-2001 declaring total income of ₹ 86,106. The return was revised subsequently on 26-7-2002. During the assessment proceedings under section 143(3), Assessing Officer observed that the assessee has acquired the foreign exchange broking business from M/s. Uday S. Kotak for a sum of ₹ 5.90 crores, out of which ₹ 1.88 crores was towards goodwill and ₹ 3.83 crores was towards forex broking rights and balance towards net current assets. The agreement for purchase of the business was submitted during the course of assessment proceedings. The Assessing Officer observed that the assessee had claimed depreciation on goodwill and on forex business rights under section 32(1)( ii ) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, trademarks etc., it would have added one more item as goodwill and in the absence of same, it cannot be said that the intangible asset which qualifies for depreciation is goodwill. He, therefore, disallowed the claim of the assessee of depreciation of ₹ 23,55,000 on the goodwill of ₹ 1,88,40,000. Aggrieved, assessee filed an appeal before the CIT(A) who confirmed the order of the Assessing Officer and the assessee is in second appeal before us. 4. The ld. counsel for the assessee Shri F.V. Irani while reiterating the submissions made by the assessee before the authorities below submitted that Shri Uday S. Kotak was carrying on the foreign exchange broking business and has acquired considerable experience and reputatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration paid for such usage is akin to the consideration paid for a trademark. He submitted that had the name Kotak been the registered trademark of Shri Uday S. Kotak, the consideration paid for the usage of the said name would have undisputedly been eligible for the claim of depreciation under section 32. Merely because the said name is not a registered trademark it cannot assume any other nature of asset. He submitted that the usage of the same being of commercial value to the assessee, it falls within the meaning of the term business or commercial rights of similar nature used in section 32 of the Act. He submitted that the principle of ejusdem generis is applicable to the term above and the term goodwill also falls within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial right of carrying on the export business acquired by the assessee also fulfils the condition by way of a logical corollary. 5. The Ld. DR, on the other hand, placed reliance upon the orders of the authorities below and reiterated the findings therein. 6. Having heard both the parties and having considered their rival contentions, we find that the goodwill paid by the assessee is towards the use of the name Kotak in the name of the assessee company. The assessee company was in no way related to Shri Uday S. Kotak at the time of acquiring the name and the business and in order to take advantage of the reputation built up by Shri Uday S. Kotak for carrying on the business, the assessee company has agreed to pay the goodwil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reputation. They assume importance in the commercial world as they represent a particular benefit or advantage or reputation built over a period of time and customers associate with such assets. Similarly, goodwill is nothing but positive reputation built by a person/company/business-house over a period of time. Thus, goodwill is a business or commercial right of similar nature. As seen from the agreement of sale between Shri Uday S. Kotak and the assessee company formerly known as Komaz Financial Services Ltd., we find that the name Kotak has tremendous importance as the assessee company was to be benefited by the usage of the said name and it has gone as far as amending its name by including Kotak in its name. Therefore, it is of co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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