9911796707
TMI Blog2019 (5) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... l.CIT. ORDER PER PAVAN KUMAR GADALE, JM : These are appeals filed by the assessee against different orders of the CIT(A) passed u/ss. 143(3) and 250 of the Income-tax Act,1961 ['the Act' for short]. Since issues are common in all these appeals, they were heard together and consolidated order is passed. 2. For the sake of convenience, we shall take up the appeal in ITA No.2214/Bang/2018. The assessee raised the following grounds of appeal: Ground No. 1: General Ground: 1. The order of the learned CIT(A) is based on incorrect interpretation of law and facts and therefore is erroneous and bad in law. Ground No. 2: Disallowance of depreciation on Customer Relationship Rights (Non-compete fee) The learned CIT(A) has erred in 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT and same was admitted. The Tribunal rejected the contention of the assessee for claim of depreciation on the Customary Relationship Rights and directed the AO to adjudicate the same in the light of the judgment of the Hon ble Supreme Court in the case of CIT vs. Smifs Securities Ltd.(348 ITR 302) as the depreciation on goodwill is a legal issue and directed the AO to follow the decision in the case of Smifs Securities Ltd (supra) and remanded the matter to the file of the AO for deciding the issue. 5. Whereas the assessee has filed Misc. Petition (MP) against the order of ITAT in respect of certain errors and omissions and the Tribunal passed the order on 18/04/2017 allowing the MP and further directed the AO, on the issue of depreciation of goodwill, to consider the decision of Hon ble Supreme Court in the case of Smifs Securities Ltd., (supra). Subsequently, the AO, based on the directions of the Tribunal, has passed the consequential order. The AO found that the assessee has disclosed customary relation rights as intangible asset and claimed depreciation of ₹ 1,26,54,563/-. When the case was posted, the learned AR of the assessee appeared from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst time before the Tribunal since the matter was restored to the file of the AO, prayed for allowing the appeal. Contra, the learned DR relied on the order of the CIT(A) and submitted that there is no specific direction. Therefore, the AO was correct in grant of depreciation on goodwill and not on Customer Relationship Rights. 8. We heard the rival submissions and perused the material on record. The sole disputed issue raised by the assessee in respect of granting of depreciation on Customer Relationship Rights which is in the nature of non-compete fee. The learned AR s contention that the Tribunal has directed the AO by order dated 18/4/2017 in MP with directions as under: 5. Having considered the rival submissions as well as careful perusal of the record, we find that while deciding the issue in para 6 of the impugned order, the Tribunal has duly given the reference of the judgment of Hon ble Supreme Court in the case of CIT vs. Smsifs Securities Ltd. Therefore, while setting aside the issue to the record of the AO on the additional ground of claim of depreciation on intangibles including goodwill, it was directed that the AO decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customer Relationships 67.491 Goodwill 25.563 Total value of assets taken over (Net) 423.335 Thus it is clear that the excess amount paid by the assessee over and above the value assigned to the various assets had been assigned to two intangibles namely customer relationship and goodwill . The assessee did not claim any depreciation on the value of ₹ 2.55 Crores assigned to the goodwill and therefore the same was not an issue before the authorities below. The assessee claimed depreciation in respect of the amount of ₹ 6.74 Crores which was assigned to customer relationship (intangible). The assessee took a plea that this amount was paid as non-compete fees as the seller has expressed, agreed and undertook not to participate or engage in any jurisdiction as a owner or partner or as shareholder or in any capacity in the business of contract manufacturing services which was transferred to the assessee. Thus the learned Authorized Representative has referred to the Article 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 302 and submitted that in view of the said judgment of the Hon'ble Supreme Court, goodwill eligible for depreciation as per the Section 31(1)(ii) of the Act. Since the assessee did not claim depreciation on goodwill in the return of income and even not made any claim before the CIT (Appeals). Therefore, the issue of allowing depreciation on goodwill has not been examined by the authorities below. We found that the co-ordinate bench of the Tribunal based on the findings of the AO, in the above paragraph of the decision, has observed that the claim of the assessee is required to be considered by treating the said payment as goodwill. We found strength in the submissions of the learned AR on the claim of depreciation on Customer Relationship Rights supported with observations of the Co-ordinate bench and following the judicial discipline, we set aside the order of the CIT(A) and direct the AO to grant depreciation on Customer Relationship Rights treating the same as Goodwill and allow the grounds of appeal of the assessee. 11. For the assessment years 2010-11 and 2011-12 similar grounds of appeal are raised. For the parity of reasons given by us w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
