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TMI Blog2016 (12) TMI 1628X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Return of Income filed by the Assessee - Held that:- respectfully following the judgment of Hon. Apex Court in the case of CIT vs. Smiffs Securities Ltd. (2012 (8) TMI 713 - SUPREME COUR ), and CIT vs. Pruthvi Brokers and Shareholders (2012 (7) TMI 158 - BOMBAY HIGH COURT ) we are of the view that ld. CIT(A) has rightly allowed the justifiable & correct claim of depreciation on ‘goodwill’ made by the assessee through revised computation of income without filing revised return of income during the course of assessment proceedings. Therefore, no interference is called for in the order of ld. CIT(A) on this issue. Revenue appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... n good-will made by way of filing revised computation of income during assessment proceedings post judgment of Hon. Supreme Court in the case of CIT vs.Smifs Securities Ltd. reported at 348 ITR 302 (SC). 3. Aggrieved assessee went in appeal before ld. CIT(A) against all the additions except the additions towards donation of ₹ 11,000/- and disallowance u/s 40(a)(ia) of the Act of ₹ 24,000/-. Ld. CIT(A) allowed assessee's appeal by deleting the disallowance and also allowing assessee's claim of depreciation on goodwill of ₹ 7,19,01,743/-. 4. Aggrieved, Revenue is now in appeal before the Tribunal.. 5. First we take up ground nos.1,3 & 4 raised by the Revenue against the order of ld. CIT(A) deleting the additions on account of foreign travel expenses of ₹ 87,959/-, of trade mark expenses of ₹ 1,09,600/- and disallowances under section 40(a)(ia) of the Act of ₹ 2,23,307/- incurred towards sales promotion. 6. At the outset ld. AR submitted that similar types of grounds raised in the case of assessee for Asst. Year 2009-10 have been adjudicated by the Tribunal and have been decided in favour of assessee. 7. Ld. DR could not controvert the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature. With respect to survey expenses, he has given a finding that the expenses have been incurred to improve efficiency of the business by finding out customers preferences for sugar substitute, market research for its product, evaluation of its product and the expenses are necessary in line of the business. Before us, Revenue has not brought any material on record to controvert the finding of ld. CIT(A). We, thus, find no reason to interfere with the order of ld. CIT(A). Thus, this ground of Revenue is dismissed. 11. Similarly with regard to the issue of disallowance for nondeduction of TDS u/s 40(a)(ia) of the Act on sales promotion expenses, we find that Co-ordinate Bench vide its order dated 6.4.2016 held that the items that were purchased by the assessee were for sales promotion and were in the nature of ready goods and only logo of the company was printed on the items and the expenditure was not in the nature liable for deduction at source. While deciding so the Co-ordinate Bench observed as follows :- 23. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) while deleting the addition had noted that the items that were purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 32(1)(ii) of the Act. 17. On the other hand ld. AR submitted that similar issue came up before the Tribunal in assessee's own case for Asst. Year 2009-10 and the same has been decided in favour of assessee vide its order in ITA No.1674/Ahd/2012 dated 6.4.2016. Further the decision of the Tribunal in assessee's own case has been pronounced in the year 2016 whereas the judgment of Hon. Delhi High Court in the case of Sharp Business System vs. CIT (supra) was pronounced in November 5, 2012 and therefore, the decision of the Tribunal may please be applied for on the facts of the case; as it has been decided after considering various judicial pronouncements by various courts at the time of pronouncing the order. Ld. AR also submitted that assessee's claim of depreciation on the intangible value of noncompete fees has been allowed for Asst. Year 2007-08 and 2008-09. As far as Asst. Year 2009-10 is concerned, the Tribunal has decided the issue in favour of assessee. Therefore, the claim of depreciation may please be allowed on the non-compete fees on the principles of consistency. 18. We have heard the rival contentions and perused the material placed before us and gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch relied by the appellant appears to be quite logical as the payment of non -compete fee to another person to reduce the competition, tentamounts to a right and is, therefore, a capital asset which is intangible in nature. This asset is eligible for depreciation u/s. 32(1 )(ii) of the Act. Further, the claim of depreciation has been allowed in earlier two assessment years also. Respectfully following the decisions given by my predecessor in A. Y. 2009-10 vide order dated 28/05/2012, the disallowance made by the A. O. is directed to be deleted. The ground of appeal is accordingly allowed. 19. We further observe that ld. DR has referred and relied on the judgment of Hon. Delhi High Court in the case of Sharp Business System vs. CIT (supra) wherein Hon. Court has held that since in case of non-competition agreement advantage is a restricted one in point of time and it does not confer any exclusive right to carry on primary business activity, such amount paid as non-compete fees does not qualify for depreciation. 20. We further observe that the issue relating to depreciation relating to non-compete fees was adjudicated by the Co-ordinate Bench Chennai in the case of ITO vs. Medicor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark, license and franchise, fulfils the conditions of 'being intangible asset ', then surely the impugned business/commercial right acquired by the assessee also fulfilled that condition, by way of a logical corollary. [Para 29] Therefore, the impugned 'non-compete right' acquired by the assessee-company, was eligible for depreciation under clause (ii) of section 32(1). The order of the Commissioner (Appeals) was, accordingly, upheld. [Para 31]. 22. From going through the above judgment/decisions, as mentioned in paragraphs 19,20 & 21 above we find that both the views i.e. allowing/disallowing exist as regards the issue of claiming of depreciation on non-compete fees. However, in the given facts and circumstances of the case and looking to the consistency of allowability of depreciation on non-compete fees in the case of assessee for Asst. Year 2007-08, 2008-09 and for Asst. Year 2009- 10 decided by the Co-ordinate Bench pronounced in the year 2016, we are of the view that assessee's claim of depreciation on noncompete fees has rightly been allowed by ld. CIT(A). We therefore, find no reason to interfere with the order of ld. CIT(A) and we uphold the same. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). Accordingly, this ground of Revenue is dismissed. 27. Ground no.6 reads as under :- 6). The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the claim of the Assessee, amounting to ₹ 7,19,01,743/- on account of depreciation on Goodwill arising on Amalgamation, which was never claimed in the Return of Income filed by the Assessee. 28. Brief facts relating to this ground are that at the time of filing return of income for Asst. Year 2010-11 assessee did not make of depreciation in respect of "goodwill". After filing the return of income and during the course of assessment proceedings Hon. Supreme Court in the case of CIT vs. Smifs Securities Ltd. (supra), gave a land mark judgment stating that "good-will" is an asset within the meaning of section 32 of the Act and depreciation on "good-will" is eligible for deduction under the said section. On the strength of the judgment of Hon. Supreme Court, being the law of the land, assessee vide its submission dated 20.12.2012 revised computation of income making a fresh claim that a sum of ₹ 7,19,01,743/- be allowed as depreciation on "goodwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the appellant is accepted. The AO is directed to allow the depreciation on goodwill accordingly. The ground of appeal is allowed. . : 30. Aggrieved, Revenue is now in appeal before the Tribunal. 31. Ld. DR vehemently argued and supported the order of ld. Assessing Officer. 32. On the other hand ld. AR supporting the order of ld. CIT(A) submitted that post judgment of Hon. Supreme Court in the case of CIT Vs. Smifs Securities Ltd. (Supra) it is undisputed that assessee is eligible to claim depreciation on 'goodwill'. Further reason for not claiming the impugned depreciation on 'goodwill', the judgment of Hon. Apex Court was not available at the time of filing return of income Further assessee made a rightful claim for Asst. Year 2010- 11 during the course of assessment proceedings post judgment of Hon. Apex Court in the case of CIT vs. Smifs Securities Ltd. Ld. AR further submitted that the main reason for denial of claim by ld. Assessing Officer that assessee has not filed a revised return of income for claiming the depreciation, however, Hon. Bombay High Court in the case of CIT Vs. Pruthvi Brokers and Shareholders (supra) has been held that an assessee can raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;. The principle of ejusdem generis would 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) of the Act. " 35. Subsequent to the pronouncement of the judgment of Hon. Apex Court in the case of CIT vs. Smiffs Securities Ltd. (supra) assessee put forward its rightful claim for depreciation of ₹ 7,19,01,743/- being 25% value of assets of ₹ 28.76 crores. Assessee's claim of depreciation on goodwill was denied by ld. Assessing Officer, however, ld. CIT(A) allowed assessee's claim by following the judgment of Hon. Apex Court in the case of CIT vs. Smifs Securities Ltd. (supra). 36. Further we also observe that the main reason for denial of deduction by ld. Assessing Officer was that assessee has not filed revised return of income to make rightful claim. Ld. AR took us through the judgment of Hon. Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders 349 ITR 336 (Bom) wherein it has been categorically held that Assessing Officer is bound to entertain rightful claim of deduction made otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to, make a fresh assessment. The Appellate Assistant Commissioner has,therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do," 6. The above observations are squarely applicable to the interpretation of Section 251(l)(a) of the Act. The declaration of lawis clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income Tax Officer, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence'. Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz., where 'the ground became available on account of change of 'circumstances or law.'[Paras 12 and 13]: It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Ltd (supra). We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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