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TMI Blog2013 (1) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... if no depreciation is allowed on capital expenditure incurred on intangible asset, then the same should be allowed as revenue expenditure. 4. Facts giving rise to the grievance raised by ground No.1 show that during the course of the assessment proceedings, the Assessing Officer noticed that the assessee is a share broker and the main source of income is generated through brokerage. The Assessing Officer further observed that during the year the assessee has purchased entire clientele business of M/s. Ashmavir Financial Consultants Pvt. Ltd. (hereinafter called as "M/s. AFC") by assigning all clients to the appellant company for a consideration of Rs. 2.50 crores . The Assessing Officer noticed that the assessee has booked these expenses as purchase of goodwill and has claimed 25% of depreciation amounting to Rs. 62,50,000/- thereon. 5. The Assessing Officer sought explanation from the assessee to justify its claim on depreciation of such purchase of clientele business. The assessee filed a detailed reply. In its reply, the assessee also took an alternative plea that the payment if not considered eligible for depreciation then, the same should be allowed as revenue expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The Assessing Officer was of the opinion that depreciation is allowable only to assets which are kept depreciating over a period of time due to damage, wear and tear and obsolescence whereas, client do not depreciate and moreover, they are tangible. Therefore, do not fulfil the conditions of intangibility. The Assessing Officer concluded that any capital asset tangible or intangible has to be put to use. The commercial right that the assessee company has claimed to have purchased has not been put to use during the year and accordingly, disallowed the claim of depreciation on account of goodwill at Rs. 62,50,000/-. 8. The assessee agitated this matter before the CIT(A) and reiterated that it has purchased an intangible asset in the form of clientele business of M/s. AFC and therefore, eligible for depreciation under section 32 (1) (ii) of the Act. After considering the facts and submissions, the CIT(A) was of the view that the disallowance of depreciation of Rs. 62,50,000/- is found to be correct for the following reasons : (a) The payment of Rs. 2.50 crores was not for goodwill but for purchase of clientele business of M/s. AFC. (b) The name and fame of old place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We have also gone through the copy of the Deed of Assignment of Business, Sale of Goodwill and Master Services Agreement. By virtue of Clause (1) of the said Deed, it is provided as under "(1) Assignment and Consideration : (a) That in consideration of the sum of Rs. 2,50,00,000/- (Rs. Two crore and Fifty Lacs Only) paid by the Assignee to the Assignor-1 on the execution of these presents, receipt whereof the Assignor-1 do hereby admit, the Assignor-1 as beneficial owner, irrevocably assigns, conveys, sells, grants and transfers onto the Assignee without limitation and in perpetual, all the said retail Clientele of the Assignor-1 in stock broking business including the existing business associates (a List of Retail Clientele/Business Associates is enclosed as Annexure-A), together with the Goodwill attached thereto with all the rights and benefits belonging thereto to hold the same and all the said retail Clientele hereby assigned on to the Assignee absolutely; as on 1st September, 2005. (b) The Assignor-1 hereby covenants with the Assignee that he has full right and absolute authority to assign the said retail clientele together with the Goodwill atta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words should be constitute as limited to things which are of same nature as those specified. The specific words in section 32 of the Act reveal the similarity in the sense that all the intangible assets specified are tools of the trade which facilitates the assessee to carry on the business. Therefore, 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. This view finds support from the decision of the Tribunal in the case of Skyline Caterers (P.) Ltd v. ITO [2008] 306 ITR (AT) 369 (Mum.) 14. In the light of these observations, it cannot be denied that by getting a right over 3709 clients of M/s. AFC, such right is used as a tool to carry on the business by the assessee. Merely because the assessee showed the payment to be on account of goodwill in the books of account, no adverse inference could be drawn against the assessee. 15. Even assuming that the payment has been made for the purchase of goodwill of M/s. AFC it has to be accepted that in this line of business the goodwill of the broker is paramount. Because of certain stray incidences which have taken place in the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words "business or commercial rights of similar nature" have been additionally used, clearly demonstrates that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of "business or commercial rights" cannot be restricted to only the aforesaid six categories of assets, viz., know-how, patents, trade marks, copyrights, licences or franchises. The nature of "business or commercial rights" can be of the same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets that form part of the tool of trade of an assessee facilitating smooth carrying on of the business. In the circumstances, it is observed that in the case of the assessee, intangible assets, viz., business claims ; business information ; business records ; contracts ; employees ; and know-how, are all assets, which are inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. has held that goodwill is an asset eligible for depreciation. 21. In our considerate view, after considering the entire gamut of facts of instant case, we have no hesitation to hold that the assessee is entitled for depreciation on payment of Rs. 2.50 crores @ 25% which comes to Rs. 62,50,000/- as claimed by the assessee. The Assessing Officer is accordingly directed to allow the depreciation. Ground No.1 is accordingly allowed. 22. Ground No.2 is an alternative plea claiming the payment of Rs. 2.50 crores as a revenue expenditure. As we have already held that it is a capital expenditure eligible for depreciation, ground No.2 becomes otios and accordingly dismissed. 23. In the result, assessee's appeal is partly allowed. 24. ITA.No.4851/Mum/2010 : Revenue has shown its grievance by raising two grounds. Ground No.1 relates to the deletion of the addition made by the Assessing Officer on account of non-deduction of TDS on Bloomberg Data Services charges at Rs. 4,74,109/-. According to the Revenue, the CIT(A) erred in holding that no TDS was required to be deducted on payment of Rs. 4,74,109/- to Bloomberg. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the business of the company and in view of clause (ii) to section 2 (22) (e) such advance or loan are not dividend. The CIT(A) concluded that the facts and circumstances for the year under consideration being the same, following the decision in assessment year 2005-2006, deleted the entire addition made by the Assessing Officer. 29. Before us, the Counsel drew our attention to the decision of the Tribunal in assessee's own case in ITA.No.1496/Mum/2009 and ITA.No.949/Mum/ 2009 pertaining to assessment year 2005-2006 and submitted that the Tribunal has dismissed Revenue's appeal holding that section 2 (22) (e) is applicable in the case of deemed dividend only in the hands of shareholder. In the case under consideration the assessee-company is not share holder of NFSPL. Therefore, in the light of judgment of jurisdictional High Court in the case of CIT v. Universal Medicare held that deemed dividend under section 2 (22) (e) cannot be taken in the hands of the assessee. As no distinguishable facts has been brought on record by the D.R. we have no hesitation to follow the findings of the Tribunal in assessee's own case in ITA. No. 1496/Mum/2009 and ITA.No.949/Mum/ 2009 (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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