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TMI Blog2015 (1) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... technicality of an asset being registered in the name of the asset can not come in the way of an assessee’s eligibility for depreciation as long as such an asset is de facto owned by the assessee and is used for the purposes of the business. In the present case, in the light of the business transfer agreement, there is no doubt that the asset was owned by the assessee. It is not even in dispute that the asset was used for the purposes of the business, nor has that been the case of the Assessing Officer. The conditions for eligibility to claim depreciation are thus satisfied on the facts of the present case. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance of ₹ 64,821. - Decided in favour of assessee. Disallowance of 50% of legal and professional fees - CIT(A) deleted addition - Held that:- In the present case, there is no dispute about the facts of service being rendered and there is no benchmark set for as to what would constitute a fair market value of the services in question. Unless there is a clear finding that the market value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the appellant case depreciation on the bundle of business and commercial rights , which was titled as goodwill in the books of the appellant was legally and properly allowable u/s 32(1)(ii) of the Income-tax Act. 4. So far as this grievance of the assessee is concerned, the relevant material facts are like this. In the course of the assessment proceedings, the Assessing Officer noticed that the assessee had claimed depreciation, amount to ₹ 5,48,622, on goodwill. The Assessing Officer was of the view that since goodwill does not form part of the intangible assets, which are eligible for deprecation, the depreciation on goodwill cannot be allowed. When this proposition was put to the assessee, it was explained by the assessee that goodwill in the present case is in the nature of business or commercial right as per section 32 of the Act. This plea was, however, rejected by the Assessing Officer. Aggrieved, assessee carried the matter in appeal but without any success. The assessee is not satisfied even with the stand so taken by the learned Commissioner (Appeals) and is in further appeal before us. 5. Learned representatives fairly agree that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company on grounds, namely, (a) depreciation under section 32(2)(ii) is not available on goodwill; (b) the assessee was unable to demonstrate that the amount shown as goodwill in the books of account was in fact a payment made towards acquisition of 'certain business and commercial rights' and therefore eligible for depreciation in tax as per section 32(1)(ii). The Hon'ble Delhi High Court has further held as under: - 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), 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) preceding the term 'business or commercial rights of similar nature - it is seen that the aforesaid intangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as mentioned above. Thus, we hold that the assessee s case is covered by the decision in the Hon ble Delhi High Court as above. The case laws relied upon by the Ld. Departmental Representative are not applicable as they are Tribunal s decisions and Hon ble Jurisdictional High Court takes a precedence over the same. 6. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance of ₹ 5,48,622 in respect of depreciation on goodwill. 7. Ground no. 1 is thus allowed. 8. In second ground of appeal, the assessee has raised the following grievance: 2.0 That the CIT(A) has grossly erred in law and on the facts of the appellant s case in denying the depreciation on the vehicles which were admittedly used for the purpose of business and were owned by the appellant but however, these were not registered in the name of the appellant. 9. During the course of the assessment proceedings, the Assessing Officer disallowed depreciation of ₹ 64,821 as the vehicles, in respect of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the assessee had purchased an asset but the said asset was not registered in the name of the assessee even as the assessee could exercise the rights of the owner qua the assets, Hon ble Supreme Court has, in the case of Mysore Minerals Limited Vs CIT [(1999) 239 ITR 775], observed that, The intention of the legislature in enacting s. 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent . It is thus clear that the technicality of an asset being registered in the name of the asset can not come in the way of an assessee s eligibility for depreciation as long as such an asset is de facto owned by the assessee and is used for the purposes of the business. In the present case, in the light of the business transfer agreement, there is no doubt that the asset was owned by the assessee. It is not even in dispute that the asset was used for the purposes of the business, nor has that been t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were made. It is due to these heavy payments made/expenses incurred in favour of related party that the N.P. rate is only 0.88%, while the GP rate is 25.80%. Considering that assessee has failed to justify these expenses, 50% of ₹ 60,19,476/- i.e. the expenses under this head are disallowed. 19. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) noted that there is no dispute about the factum of rendering of services as the A.O. himself allowed 50% of the amount paid by the assessee, and that the only question which needs to be analysed and adjudicated upon is whether the payments made by the assessee to M/s. Minda Industries Limited for the services so rendered was excessive or unreasonable. The learned CIT(A) was of the view that it is incorrect to come to the conclusion that there is no basis for the said payment as the payment has been made pursuant to the agreement entered into at the time of getting into the joint venture, and that, according to the said agreement only the payment has been made. He also noted that it is a common practice in the large corporate houses to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n excess of the said benchmark is to be disallowed but then such benchmark cannot be in terms of percentage of payment by the assessee. For this reason alone, the impugned disallowance indeed deserves to be disallowed. We have also noted that in the present case, there is no dispute about the facts of service being rendered and there is no benchmark set for as to what would constitute a fair market value of the services in question. Unless there is a clear finding that the market value of the services taken from the sister-concern is less than the price at which the services are obtained, there cannot be an occasion to apply the disabling provisions of s. 40A(2). This exercise, therefore, necessitates a finding about the fair market value of such services. There is no such finding in the present case. In these circumstances as also bearing in mind entirety of the case, we are of the considered view that the disallowance made by the A.O. was devoid of legally sustainable basis. The learned CIT(A) was thus quite justified in deleting the same. Ground no.2 is thus dismissed. 22. In the third ground of appeal, the A.O. has raised the following grievance: 3. On the facts and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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