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TMI Blog2016 (5) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... re but still it being in the nature of goodwill, the assessee is eligible to claim depreciation. Further it is also in accordance with the accepted accounting principle and Accounting Standard as brought on record by the learned counsel for the assessee. Even otherwise such balancing figure is on account of goodwill. - Decided in favour of assessee. Allowance of distribution expenses - non-deduction of tax u/s. 40(a)(i) - Held that:- On a perusal of the order passed by the co-ordinate Bench for A.Y. 2006-07 it is seen that as far as distribution expenses are concerned, at the time of hearing before the Tribunal the assessee made a specific claim that either they have to be allowed in A.Y. 2006-07 or in A.Y. 2008-09. Considering such claim of the assessee, the Tribunal remitted the matter back to the file of the AO for deciding assessee’s claim afresh by considering additional evidence brought on record. The learned counsel for the assessee had submitted before us that the amount claimed towards distribution expenses which are subject matter of ground nos. 2 & 3 are also part of the expenditure claimed for A.Y. 2006-07. The aforesaid factual aspect has not been opposed or dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiring its Studio 18 Division as a going concern. The Studio 18 Division was carrying on the business of film production, marketing and acquisition of worldwide distribution rights. As per the terms of agreement, the assessee acquired net current assets of the concern at the value of ₹ 3,44,00,309/- against which the assessee paid total consideration of ₹ 4,13,53,652/- to Network18. As per the agreement, the additional amount of ₹ 69,55,343/- paid to Network18 was on account of goodwill. Though, in the original return of income filed for the assessment year the assessee had not claimed depreciation on the amount of ₹ 69,53,343/- paid to Network18 towards goodwill, but in the course of assessment proceedings the assessee vide letter dated 8.11.2011 put its claim for depreciation on goodwill. The AO rejected the assessee s claim of depreciation on goodwill for two reasons. Firstly, he observed that goodwill is not a capital asset let alone being an intangible asset. Secondly, he observed that the amount claimed towards goodwill is actually a balancing figure and not paid for acquiring any intangible asset as provided u/s. 32(1)(ii). He observed that from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of depreciation on balancing figure as alleged by the AO. As far as the observation of the CIT(A) that assessee s claim cannot be allowed as such claim was not made through the revised return, the learned counsel for the assessee submitted, in view of the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers Sharesholders Pvt. Ltd. 349 ITR 336, the observation of the CIT(A) is not valid. The learned DR relied on the order of the CIT(A). 5. We have considered the submissions of the parties and perused the material on record. The issue whether goodwill is an capital asset coming within the term intangible asset as provided u/s. 32(1)(ii) of the Act is no more res integra in view of the decision of the Hon ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (supra), where the Hon ble Apex Court after interpreting the explanation (3) to section 32(1) held that goodwill would fall under the expression any other business or commercial right of a similar nature and, hence has to be considered as a asset under Explanation (3b) to section 32(1). Same view has been expressed by Hon ble Delhi High Court in the case of Areva T D Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 69,53,343/-. This ground is allowed. 7. In ground nos. 2 3, the assessee has claimed allowance of distribution expenses of ₹ 28,23,279/- and ₹ 20,47,237/- disallowed in the A Y 2006-07 on account of non-deduction of tax u/s. 40(a)(i) in AY 2006-07. Briefly, the facts are in the AY 2006-07, the assessee had claimed distribution expenses of ₹ 5,55,28,565/- on account of payment made to MTV Asia and other channels. The AO on referring to the assessment made in case of MTV Asia found that the distribution revenue received was in the nature of royalty as per India Singapore DTTA. It was also noticed that the assessee had not deducted tax at source, though it is in the nature of royalty. He therefore called upon the assessee to explain why the expenses claimed should not be disallowed u/s. 40(a)(i). In response to the query it was stated by the assessee that it had deducted tax at source on the amount, which is subject to the deduction of tax in terms of section 197. But the AO not being convinced with the submissions of the assessee held that though the assessee was liable to deduct tax at source on the entire amount of ₹ 5,55,28,565/- paid towards r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure claimed for A.Y. 2006-07. The aforesaid factual aspect has not been opposed or disputed by the learned DR. Considering the fact that similar issue has arisen in A.Y. 2006-07, which is pending for adjudication before the CIT(A), we deem it proper to remit this issue to the file of the CIT(A) for deciding afresh along with similar issues pending for AY 2006-07 after due opportunity of being heard to the assessee. Grounds raised are allowed for statistical purposes. 9. Ground no.4 being consequential is not required to be adjudicated at this stage. Thus this ground is dismissed as infructuous. 10. In the result, the assessee s appeal is partly allowed. ITA 265/Mum/2013 for A.Y, 2008-09 11. The only issue raised in the departmental appeal pertains to deletion of addition of ₹ 2,79,26,769/- made by the AO on account of advertisement and sales promotion expenses. 12. Briefly stated, the assessee during the year claimed expenditure of ₹ 6,06,60,269/- on account of advertisement and sales promotion. When the AO called upon the assessee to justify the business expediency for incurring such expenditure the assessee as per its reply reproduced in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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