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TMI Blog2012 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... sment was completed u/s 143(3) of the Income Tax Act, 1961 (the Act) on 28-2-2005 determining total loss at Rs. 4,87,54,080/-. Subsequently, the A.O. issued notice u/s 148 of the Act after recording the reasons for reopening on 18-3-2009. The reason has been reproduced in the impugned assessment order passed by the A.O. The relevant portion of the reasons recorded read as under:- "From the record of the assessee, it is noticed that the assessee has claimed depreciation towards trade and marketing network at Rs. 75,16,330/-. Since, the said assets does not fall under the intangible assessee and depreciation on the same is not allowable u/s. 32(ii) of the Act." 3. During the course of re-assessment proceedings, the A.O. observed that the assessee has claimed depreciation @ 25% on goodwill of Rs. 3,75,81,650/- and in the notes to accounts the assessee stated as under:- "Rs. 75,81,650/- being excess of consideration paid over fair market value of and liabilities taken over from Noble Paints And Varnishes Pvt. Ltd. Rs. 3,00,00,000/- being amount paid for acquisition of marketing and distribution network, market goodwill, etc. of Noble Synthetics Ltd." From the above, the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 3 crores by the assessee. Copy of the agreement enclosed. 2. The main thrust of the agreement 19th May 1999 as may be seen, was for purchase of trademarks and other distribution rights rather than goodwill. The assets purchased are intangible assets eligible for depreciation. The language used in section 32(1)(ii) of the Income Tax Act, which is reproduced as under for your reference: -32(1) in respect of depreciation of- (ii) Know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st of April 1998. Owned wholly or partly, by the assessee and used for the purposes of the business or profession." 3. Considering the above position, the amount paid of Rs. 3 crores squarely falls within the definition of intangible assets as governed by section 32(1)(ii) of the Income Tax Act and the same is eligible for depreciation. It is also further submitted that goodwill is a right of similar nature for which a price has been paid by the assessee on which depreciation is to be allowed as per the Act. It is not a case of notional valuation in respect of market g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a total consideration of Rs. 3 crores includes the goodwill and depreciation on the same is not allowable to the assessee. He further observed that since the assessee has not furnished the break-up of such goodwill etc., therefore, he treated 40% of such consideration as goodwill and accordingly disallowed the depreciation of Rs. 30 lacs being 25% of Rs. 1,20,00,000/- and added to the total income of the assessee. 4. On appeal, the ld. CIT(A) while relying on the decisions of Hon'ble Bombay High Court in Piaggio Vehicles P. Ltd. v. Dy. CIT and Another (2007) 290 ITR 377 (Bom) and the decision of Hon'ble Delhi High Court in Consolidated Photo and Finvest Ltd. vs. Asst. CIT (2006) 281 ITR 394 (Delhi) held that the assessment has validly been reopened by the A.O. u/s 147 of the Act. On merits, on the issue disallowance of depreciation on goodwill, the ld. CIT(A) while observing that similar issue had come up before him in assessee's own case for the A.Y. 2006-07 wherein the issue has been decided against the assessee, he following the same held that the A.O. was justified in disallowing the depreciation on goodwill. 5. Being aggrieved by the order of the ld. CIT(A), the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments has reopened the assessments, therefore, it is a case of change of opinion and hence the proceeding initiated and completed u/s 147/148 by the A.O. and upheld by the ld. CIT(A) be quashed. The reliance was also placed on following decisions:- i) DCIT v. M/s Beta Cosmetics in ITA No. 6742/M/2007 order dtd. 22-7-2009, ITAT B Bench, Mumbai - A.Y. 2004-05. ii) CIT v. M/s Beta Cosmetics in ITA No. 5759 of 2010 - A.Y. 2004- 05.(Bombay High Court). iii) M/s Beta Cosmetics v. DCIT in Writ Petition No. 2712 of 2007. (Bombay High Court). iv) M/s Beta Cosmetics v. DCIT in Writ Petition No. 2643 of 2007 A.Y. 2001-02 (Bombay High Court). v) M/s Beta Cosmetics v. DCIT in Writ Petition No. 2645 of 2007 A.Y. 2002-03. (Bombay High Court). vi) M/s Beta Cosmetics v. DCIT in Writ Petition No. 2644 of 2007 A.Y. 2003-04. (Bombay High Court). vii) Direct Information (P.) v. ITO Bombay High Court (2011) 203 Taxmann 70(Bom). 8. On the other hand, the ld. D.R. supports the order of the A.O. and the ld. CIT(A). 9. We have carefully considered the submissions of both parties and perused the material available on record. We find that the facts are not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the above assessment years. This view also finds support from the judgment of Hon'ble Delhi High Court in Honda Siel Power Products Limited v. Dy. CIT and Another [2012] 340 ITR 53 (Delhi) wherein it has been held (Headnotes) : " Held, dismissing the petition, that after the return of income for the assessment year 2000-01 was filed on November 30, 2000, the case was taken up in scrutiny. Assessment order under section 143(3) of the Act was passed on March 7, 2003. Failure on the part of the Assessing Officer to apply section 14A when he passed the assessment order under section 143(3) of the Act dated March 7, 2003, had prima facie resulted in escaped income. The fact that section 14A was in the statute book was known to the Assessing Officer and the assessee when the original assessment order was passed. There was an omission and failure on the part of the assessee to point out the expenses incurred relatable to taxfree/ exempt income which prima facie had been claimed as a deduction in the income and expenditure account. There was, therefore, omission and failure on the part of the assessee to disclose fully and truly material facts. The reassessment proceedings were v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the view that there was an omission and failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessments for the assessment years 2002-03 and 2004-05, therefore, the A.O. was justified in initiating/completing the proceeding u/s 147/148 of the Act. Accordingly, the ground taken by the assessee is rejected. 17. Ground No. 2 reads as under:- "On facts and in circumstances of the case and in law, the Commissioner of Income-tax (appeals), [CIT(A)] has erred in : ii) Rejecting the appellant's claim for depreciation made under section 32 of the Income tax Act in respect of intangible assets such as brands, formulations, patents and marketing distribution network etc. acquired by it, as per terms of agreement dated 19/05/1999 from Noble Synthetics Ltd. The claim for depreciation as made by the appellant in the return of income filed by in respect of these intangibles was Rs. 75 lacs." 18. At the time of hearing, both the parties have agreed that the Tribunal in assessee's own case has allowed the depreciation for the A.Y. 2006-07, therefore, the issue may be decided accordingly. 19. We have carefully considered the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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