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TMI Blog2016 (2) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... f similar nature, the same is eligible for depreciation u/s 32 of the Act as claimed by the assessee. Since Ld. D.R. has failed to bring on record if the order passed in case of DCIT Vs Nitrex Chemical India Ltd. (supra) has been challenged or any contrary order has been passed on the question of law decided by the Hon'ble Supreme Court, we are of the considered view that there is no illegality or perversity in the findings returned by Ld. CIT(A) hence, ground is determined against the Revenue. Addition on account of royalty paid - revenue v/s capital - CIT(A) deleted the addition - Held that:- Held that:- In the instant case, benefit of enduring nature has to be transferred to the assessee company as is evident from Article 6 of the Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,25,40,533/-, the case was subjected to scrutiny and consequently, notices U/S 143(2) and 142(1) along with questionnaire, were served upon the assessee and in response thereto, Mrs. Vandana Gopal Sharda, CA/ AR appeared on behalf of the assessee, filed necessary details. 3. The assessee company is into the business of manufacturing and fabrication of various accessories of steel and other metal used in HV AC and other industries. Scrutiny of depreciation chart transpires that the assessee company has claimed depreciation @ 25% on 'goodwill' to the extent of ₹ 1,73,50,0001-, whereas under the Income tax Act, 1961 and I.T. Rules, 1962, 'goodwill' cannot be treated as intangible asset and hence, depreciation cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of royalty paid; that since the assessee was having enduring benefit of goodwill and the claim was made for non compete fee, the assessee was benefited so, the Assessing Officer has rightly disallowed the depreciation on 'goodwill. Ld. D.R. relied on the order passed by Assessing Officer. Ld. D.R. relied on the decision of Hon'ble Supreme Court in the case entitled Southern Switch Gear Ltd. Vs CIT 232 ITR 359. 7. On the other hand, Ld. A.R. to repel the arguments addressed by Ld. D.R. relied on the order passed by Income tax Appellate Tribunal Delhi Bench 'E', New Delhi in case entitled DCIT Vs Nitrex Chemicals India Ltd. in LT.A. No.3388/Del/2009 order dated 03.08.2015 contended that the issue in controversy in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the nature of intangible asset falling in the classification of assets as per Section 32(1 )(ii) of the Act for the use of trade mark 'CARYAIR'. 10.1 Similar issue arose before Income tax Appellate Tribunal, Delhi Bench 'E', New Delhi in the case cited as DCIT Vs Nitrex Chemicals India Ltd. in I.T.A. No. 3388IDelf2009 (supra) and has decided the issue in favour of the assessee by holding that 'goodwill' is eligible for depreciation u/s 32 of the Act. Operative portion (para 32 33) of the order (supra) is reproduced as under: 32. We, therefore, by considering the totality of the facts and discussed hereinabove set aside the findings of the Ld. CIT(A) on this issue and upheld the view taken by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial rights of similar nature. Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression (any other business or commercial right of a similar nature '. The principle of ejusdem generis could strictly apply while interpreting the said expression which finds place in Explanation 3 (b). In the circumstances, we are of the view that (Goodwill' is an asset under Explanation 3 (b) to Section 32 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of 'royalty' as per the technical services and licence agreement between and CEIPL under Articles 4 and 6 of the agreement. However, Assessing Officer disallowed the claim of assessee by relying upon the judgement cited as Southern Switch Gear Ltd. V s CIT, 232 ITR 359 by holding that the right to manufacture certain goods exclusively in India should be taken to be an independent right, secured by the assessee from the foreign co., which was of an enduring nature. 13. Undisputedly, the amount of 'royalty' of ₹ 58,15,2001- was paid by the assessee on the basis of turnover @ 3% of the net selling price of the licenced product as per Article 6 of the Agreement. However, in the case of Southern Switch Gear Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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