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TMI Blog2012 (5) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... and other advantage attached to the marketing network and hence, the same falls under the category of intangible asset as contemplated u/s 32(1)(ii) of the IT Act. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act and submitted that the depreciation is allowable on any business or commercial rights. He has further submitted that the assessee acquired the commission business rights of similar nature vide transfer agreement dt 9.1.2007. The ld AR has referred by various clauses of the agreement and submitted that as per clause A & B of the recital of the agreement, the assessee and AFL are the representatives of Western Union network and also having sub representative in respect of the business of money transfer. The ld AR has further pointed out that by virtue of transfer agreement, the assessee replaces AFL being the representative of Western Union and acquired the network of sub representative of AFL. He has referred to clause 1.1 of the agreement which contains the definition of asset and submitted that the assets which are subjected to transfer between the parties are described in the agreement. The ld AR has submitted that basically the assessee has acquired the agreement with the sub representative which is a marketing network of business of money transfer. The ld AR has pointed that there is no dispute on the point that the assessee has not claimed purchase of any goodwill; there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the said payment on account of goodwill in the books of account, no adverse inference could be drawn against the assessee. It was held that the payment was for acquiring all the business rights under the catering contract between R and HLL which is eligible for depreciation being on business or commercial rights. 4.5 The ld AR has also relied upon the decision of the Hon'ble Delhi High Court in the case of CIT v. Hindustan Coca Cola Beverages (P.) Ltd. [2011] 331 ITR 192/198 Taxman 104/9 taxmann.com 104 and submitted that the Hon'ble Delhi High Court has observed that the meaning of business or commercial rights of similar nature has to be understood in the backdrop of section 32(1)(ii) of the Act and such rights which are obtained for carrying on the business with effectiveness is likely to fall or come within the sweep of meaning of intangible asset. 4.6 The ld AR has also referred the decision of the Hon'ble Gujarat High Court in the case of CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 and submitted that the said decision has been upheld by the Hon'ble Supreme Court in CIT v. Elecon Engg. Co. Ltd. [1987] 166 ITR 66. The Hon'ble High Court has observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e representatives of Western Union. The Transferor also possesses the necessary approvals from Reserve Bank of India to offer such Money Transfer Service." 6.2 It is clear from the starting word of the clause (B) that money transfer services is one of the various businesses of AFL and not the sole and only business. 6.3 Similarly, clause (C) of the recital of the agreement contains the subject matter of transfer between the parties as under: "(C). The Transferor has agreed to assign and transfer and the Transferee has agreed to purchase and acquire the licenses and franchises consisting of Representation Agreement executed with Western Union facilitating the Transferor to function as one of the representatives of Western Union offering Western Union Money Transfer Service Business (as defined hereinafter) and the Sub Representation Agreements executed between the Transferor and the Sub Representatives to enable the said Sub Representatives to function as the representatives of the Transferor in the matter of offering Western Union Money Transfer services." 6.4 It is clear from the above two clauses (B) & (C) that what was transferred by AFL and acquired by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... physical wear & tear is not necessary and also not required for allowing the claim of depreciation u/s 32(1)(ii). Further, no such conditions is provided under the provisions of the Act that deprecation on intangible asset is allowable only if there is wear & tear in the value. The Chennai Bench of the Tribunal in the case of Medicorp Technologies India Ltd. (supra) in para 15.3 and 15.4 has held as under: "15.3 The above examples, show that the provisions of s. 32 do not necessarily follow the traditional concept of an 'asset', and an accountant's approach to 'depreciation'. In fact, the taxation laws are known to have been used as a tool for implementing the economic/fiscal policies of the State. 15.4 It becomes clear from the above discussion that capability to have a market value, assignability, transferability, diminution in value, are no more the 'touch stones' on which the admissibility for depreciation under s. 32 of the Act has to tested. We are living in the commercial world of 'e-banking', 'e-commerce', and 'e-governance'; the old, archaic, traditional concepts have undergone a sea change, and our law- makers ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stern Union network including rights of AFL, qua sub representative. After the transaction of transfer the assessee acquired the right to become representative of Western Union in place of AFL and consequently to deal with and to do the business through the sub representative earlier working with AFL. In this way, the assessee gets the rights to have access with the marketing network consisting of sub representative having infrastructure, customer lists, marketing strategies etc. Hence, by virtue of agreement of transfer, the assessee acquired the rights to avail the infrastructure of the networking earlier available to AFL for doing the business of money transfer being representative of Western Union. This right has been understood by the parties as explained in the definition of asset under clause 1.1 of the agreement as under: "1.1. Definitions. Unless otherwise defined in this Agreement, the following capitalised terms shall be used in this Agreement with the following meanings: "Agreement" shall mean this Agreement for transfer of necessary licenses and franchises offering Western Union Money Transfer Service and all schedules, annexes and amendments hereto. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reveal the similarity in the sense that all the intangible assets specified are tools of the trade which facilitate the assessee carrying on the business. Therefore, in my opinion, the expression "any other business or commercial rights of similar nature" would include such rights which can be used as a tool to carry on the business. If this test is applied, then the rights acquired by the assessee under the agreement would fall within the expression mentioned above, since catering business at HLL canteen could be carried on only with the help of such rights under the contract and consequently, the assessee would be entitled to depreciation." 12.1 In the above said case, the Tribunal has held that the term 'any other business or commercial rights of similar nature' used in sec. 32(1)(ii) would include such right which can be used as tool to carry on the business. 12.2 Similarly, the business/commercial rights was held to be eligible for depreciation being intangible asset like patents, copyrights, license, franchise as held by the Chennai Bench of the Tribunal in the case of Medicorp Technologies India Ltd. (supra). 13. The Hon'ble Gujarat High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and the word " discarded " has been understood to cover the case of obsolescence. It appears to us, therefore, that it would not be correct to limit the meaning of the word "plant" in section 32 to only such articles as are capable of diminution in value year after year by reason of wear and tear in the course of their application for the purposes of the assessee's business or profession. It would also take in other articles which diminish in value on account of other known factors such as obsolescence. It cannot be disputed that know-how, in whatever form it may be, is capable of diminishing in value over years by obsolescence. It would, therefore, be included within the meaning of the word "plant " in section 32." 13.1 As observed by the Hon'ble High Court in the above case the meaning of the word "plant" would not be limited to the articles which are capable of diminution in value year after year by reason of wear and tear; but it would also take in other articles which diminish in value on account of other known factors such as obsolescence. 14. The Hon'ble Delhi High Court in the case of Hindustan Coca Cola Beverag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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