9911796707
TMI Blog2015 (1) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby the appeals filed by the assessee (respondent herein) came to be allowed in terms of the impugned orders and the Assessing Officer was directed to allow the claim of the assessee vis.-a-vis. the depreciation on goodwill and also depreciation on intangible assets. 3. Feeling aggrieved, the Revenue has challenged the orders of the Appellate Tribunal by the medium of these appeals. 4. All these appeals have been admitted on the following analogous substantial questions of law, on 3rd September, 2014: 1. Whether the ITAT was justified in applying the ratio of the judgment in CIT vs. SMIFS Securities (SC) wherein there was a categorical finding by the CIT(A) that the difference between the cost of asset and total amount paid constituted goodwill whereas in the present case the finding of the CIT (A) is that the amount paid over and above the value of assets is nothing but a premium paid which has been given the nomenclature of 'goodwill' and does not comprise of any type of business or commercial rights u/s 32. 2. Whether the impugned judgment is perverse as the ITAT failed to appreciate that the judgment in SMIFS Securities case was based on the finding of fact of the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis.-a-vis. the depreciation on goodwill. It is apt to reproduce paragraphs No.27 and 28 of the impugned order hereunder: "27. The second aspect of the issue is that the assessee had booked the said consideration of Rs. 12.62 crores as goodwill in its books of account. In this regard also the assessee is entitled to the claim of depreciation on the goodwill as the Hon'ble Supreme Court in CIT Vs. SNIFS Securities Ltd. (supra) held that the goodwill by itself was an intangible asset under Explanation 3(b) to section 32(1) of the Act and is eligible for deduction. The relevant portion of the ratio laid down by the Hon'ble Supreme Court is as under: "The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 {'Act', for short}. We quote hereinbelow Explanation 3 to Section 32(1) of the Act. "Explanation 3- For the purpose of this sub-section, the expressions 'assets' and 'block of assets' shall meana} tangible assets, being buildings, machinery, plant or Furniture; {b} intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graphs 13, 14, 15 and 16 of the said decision hereunder: "13. In the present case, applying the principle of ejusdem generis, which provides that where there are general words following particular and specific words, the meaning of the latter words shall be confined to things of the same kind, as specified for interpreting the expression "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act. It is seen that such rights need not answer the description of "knowhow, patents, trademarks, licenses or franchises" but must be of similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred in Section 32(1)(ii) of the Act preceding the term "business or commercial rights of similar nature", it is seen 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside. ITA No.1151/2010 and ITA No.1152/2010 16. In these appeals, the Income-tax Appellate Tribunal, relying upon the decision in assesse's own case I.T.A. No.336/Del/08 dated July 6, 2009, pertaining to assessment year 2005-06, held:- "5.On careful consideration of rival submission, we are of view that learned Commissioner Income-tax (Appeals) has rightly allowed relief to the assessee after considering relevant facts and circumstances of the case. The assessee has not claimed depreciation on goodwill it acquired commercial rights to sell products under the trade name and paid consideration in dispute for acquiring marketing and territorial rights to sell through dealers and distributors i.e. the network created by the seller for sale in India. Under the agreement. It become entitled to use of infrastructure developed by the seller. Rights were acquired since April 1, 1998 and these rights have all along been treated as an asset entitled to depreciation and depreciation was actually allowed in the past. The learned Assessing Officer, in our view was not cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act. However, after the amendment by the Finance (No.2) Act, 1998, w.e.f. 1.4.1999 the depreciation is also to be allowed on intangible assets i.e. know-how, patent and copyrights, trademarks, licences or franchises or any other business or commercial rights of similar nature. The Hon'ble Delhi High Court in Areva T and D India Ltd. Vs. DCIT (supra) applied the principle of ejusdem generic to interpret the expression "business or commercial rights of similar nature" referred to in section 32(I)(ii) of the Act and held 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. The Hon'ble Court further held that in the circumstances, the nature of business or commercial rights could be of the same genus in which all the aforesaid six assets fall and thus intangible assets i.e. business claims; business information; business records;, contracts; employees; and know-how, were held to be assets which are invaluable and result in carrying on the business of the assessee, without any interruption and are comparable t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
