9911796707
TMI Blog2015 (2) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of expanding its existing business which had been capitalized in its books of Account. The Petitioner had also claimed depreciation on its intangible assets i.e. Good will and Non-compete fees as a part of its block of intangible assets claiming depreciation at 25%. 4. During the course of assessment proceedings, the Assessing Office called upon the Petitioner to give detailed break up of interest expenditure, interest capitalized and also detailed working of the claim for depreciation. The Petitioner responded to the same by its letter dated 27th January, 2005 furnishing the details as sought. The Assessing Officer satisfied with the Petitioner's response, inter alia, passed an order on 28th January, 2005, accepting the Petitioner's claim on account of interest expenditure as well as on account of depreciation, save and except reducing depreciation claimed on building from the 10% as claimed to 5% which was the prescribed rate. However, as the tax payable under the normal provisions was nil, the Petitioner was brought to tax under Section 115JB of the Act. 5. On 30th March, 2007, the impugned notice was issued by the Assessing Officer, seeking to re-open the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tangible assets set out in Appendix to the Income Tax Rules, 1961 (Rules). 7. The Petitioner by its letter dated 21st September, 2007 filed objections to the reasons for re-opening of the notice on both issues viz. allowing of interest expenditure and depreciation on Goodwill and Noncompete fees. It was inter alia pointed out that the Assessing Officer had duly applied his mind to both the issues during the regular assessment proceedings under Section 143(3) of the Act. Thus, it was submitted that the impugned notice only arises on account of change of opinion and, therefore, not valid. However, by an order dated 27th July, 2007, the Assessing Officer rejected the Petitioner's objections to the reasons recorded in support of the notice. 8. It is agreed by Counsel that under Section 36(1)(iii) of the Act, interest paid in respect of amounts borrowed for capital expenses is allowable in view of the decision of the Supreme Court in Deputy Commissioner of Income Tax v/s. Core Health Care Ltd 298 ITR 194. Therefore, it is an accepted position that the first ground in the reasons recorded in support of the impugned notice is not sustainable. 9. Similarly, the Counsel are agreed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above rule of interpretation was interpreted by the Apex Court to apply to Goodwill. 12. On the other hand, Mr. Pinto learned Counsel appearing for the Revenue in support of the impugned notice submit as under:- (a) The re-opening notice is within the period of four years from the end of the relevant Assessment Year and, therefore, the scope of reopening is much wider. Therefore, the Court should not interfere; (b) No fault can be found with the impugned notice as the same is covered by Explanation 2(c)(iv) to Section 147 of the Act so far depreciation is allowed on Non-compete fees; (c) The decision of the Supreme Court in Smifs Securities (supra) deals only with depreciation on Goodwill and not with Non-compete fees. In that view of the matter, Smifs Securities (supra) is not applicable to the claim for depreciation on Non-compete fees; and (d) So far as orders passed by the Tribunal for the Assessment Years 2003-04, 2004-05 and 2005-06 allowing benefit of depreciation on Non-compete fees is concerned, the same even if accepted by the Revenue, is in applicable for Assessment Year 2002-03. This on the ground that the principle of res judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income filed for the Assessment Year 2002-03, the Petitioner had in the computation of income, disclosed the claim for depreciation made on intangible assets including the Non-compete fees. During the course of assessment proceedings, various queries were raised by the Assessing Officer including seeking a detailed working of the depreciation claimed. By letter dated 11th January, 2004, the Petitioner had supplied the necessary details and the Assessing Officer by an order dated 28th January, 2005 passed under Section 143(3) of the Act in regular assessment proceedings allowed the claim for depreciation on Non-compete fees. In fact, the order dated 28th January, 2005 passed in regular assessment proceedings specifically discusses the Petitioner's claim for depreciation and disallows the excess depreciation claimed on buildings at 10% to the extent it is in excess of the prescribed 5%. This would be further evidence of the Assessing Officer having applied his mind to the depreciation claimed by the Petitioner in respect of its block of assets. Hence, it is clear that the reason recorded in support of the impugned notice seeking to deny depreciation on Non-compete fees has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
