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TMI Blog2019 (5) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... law and facts, in upholding the disallowance of depreciation on customer relationship rights of INR 12,654,563, which is in the nature of Goodwill and is therefore eligible for depreciation under Section 32(1)(ii) of the Act. 3. The learned CIT(A) has failed to appreciate the fact that the Assessing Officer ("AO") himself characterized the customer relationship rights to be in the nature of goodwill and thus erred in not following the directions of the Hon'ble Tribunal. 4. The learned CIT(A) has erred in law and facts, in disregarding the directions of the Hon'ble Tribunal that allowability of depreciation on customer relationship rights is to be examined by considering the same as in the nature of Goodwill in line with the findings of the AO in the assessment order dated 7 December 2011. 5. The learned CIT(A) has erred in law in not appreciating that if customer relationship rights can otherwise be treated as Goodwill, the same would be entitled to depreciation in light of the decision of Hon'ble Supreme Court in CIT v Smifs Securities Ltd. (348 ITR 302). 6. The learned CIT(A) has erred in disregarding the various submissions of the Appellant that depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has disclosed customary relation rights as intangible asset and claimed depreciation of Rs. 1,26,54,563/-. When the case was posted, the learned AR of the assessee appeared from time to time and submitted that details and mentioned that the depreciation should be allowed on goodwill based on Hon'ble Supreme Court's decision in the case of Smifs Securities Ltd., (Supra) and similarly on customary relationship rights. Whereas the AO relied on the decision of the Tribunal in the case of M/s.Sanyo BPL Pvt. Ltd., vs. Deputy Commissioner of Income-tax (75 taxmann.com 253)(Bang.-Trib) where it was decided that customer distribution networks does not result in intangible asset and the AO referred to the relevant portion of the decision in the order. In the assessment proceedings, the AO dealt on two issues, first claim of depreciation on goodwill relying on the Apex Court decision in the case of Smifs Securities Ltd., (supra) as per the directions of the Tribunal and the AO has worked out depreciation on goodwill Rs. 47,93,063/- But in respect of the customary relationship Rights treated intangible assets by the assessee. The AO is of the opinion that the Tribunal has reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of claim of depreciation on intangibles including goodwill, it was directed that the AO decide the same as per law which includes the decision of Hon'ble Supreme Court on this point. Accordingly, we may clarify that the AO while deciding the issue shall consider the judgment of Honbe Supreme Court in the case of CIT vs. Smsifs Securities Ltd." 9. We found that in the earlier order of the Tribunal in ITA Nos.1469 to 1471/Bang/2014 for the assessment year 2009-10 to 2011-12 dated 9/3/2016 held as under at para.6 pages 7 to 11 of the order which reads as under: "6. We have heard the rival submissions as well as considered the relevant material on record. The transaction of purchase of contract manufacturing service division of TVS Electronics Ltd. by the assessee vide BTA dt.31.5.2007 is slump sale as the consideration was agreed and paid in lump sum without assigning any value to specific assets. Therefore as per the agreement the consideration was paid lump sum without giving any details of payment for any specific assets. The business was purchased by the assessee and it .was transferred by the TVS Electronics as an on going business/division. However, in its books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement the payment in question cannot be regarded as non-compete fees. Therefore, the decision of the Hon'ble jurisdictional High Court in the case of Ingersoll Rand International India Ltd. (supra) will not help the case of the assessee. As regards the nature of payment in question, as treated by the assessee in the books of accounts being customer relationship, the issue is clearly decided against the assessee by the decision of the Hon'ble Delhi High Court in the case of Sharp Business System (supra). However, this can be looked from another angle because the Assessing Officer while denying the claim of depreciation has taken a view that the customer relationship rights are in the nature of goodwill as under : "The submissions made by company are considered. The assessee has relied upon section 32(1)(ii) of the Income Tax Act, stating that the wordings äny other business or commercial rights of similar nature" gives scope to many such business or commercial rights including customer relationship rights which are as per assessee almost in nature of goodwill. Hence there is no dispute that customer relationship rights are in nature of goodwill." Therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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