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TMI Blog2012 (4) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The main issue involved in this appeal as raised in ground No. 2 relates to the assessee's claim for depreciation on technical knowhow and right to use trademark. 4. The assessee in the present case is a company which is engaged in the business of manufacturing and selling of meters, transducers and other related accessories. The return of income for the year under consideration was filed by it on 30-10-2005 declaring a loss of ₹ 4,82,00,910/-. During the course of assessment proceedings, it was noticed by the AO that the assessee has taken over the business of M/s Asia Brows Breweries Ltd. (ABB), Bangalore as a going concern by an agreement dated 01-04-2003. Clause 2.1.2 of the said agreement gave the details of the assets transferred to the assessee while clause 2.1.3 indicated the property, rights and assets of the going concern which were not transferred to the assessee. The liabilities of the said business were also taken over by the assessee excluding the short term borrowings belonging to ABB group. The book value of the assets taken over by the assessee as per the balance sheet of M/s ABB as on 31-03-2003 was ₹ 14,42,67,527/-. After taking over, the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance made by the AO on account of its claim for depreciation on technical knowhow and right to use trademarks and after considering the submissions made by the assessee as well as the material available on record before him including the purchase agreement, the learned CIT(Appeals) allowed the claim of the assessee for the following reasons given in paragraph No. 2.3 to 2.4 of his impugned order : "2.3 It is noted by the undersigned and as already stated above, the appellant had acquired the aggregate assets worth 0.10 crores against the actual consideration of 40.74 crores. As such, the appellant had paid a consideration which was more than the assets as appearing in the balance sheet of the seller and acquired by them. The natural question would therefore arise as to why such an amount of consideration in excess of the assets acquired was paid by the appellant. In this connection, the undersigned finds that the written agreement dated 1.4.2003 itself stipulates that the appellant had also purchased all the commercial rights belonging and registered in the name of the seller. The relevant clause of the said agreement, clause 2.12 was reproduced by the AO at para 6.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble law to be transferred, correspondence and other documents, records and files relating exclusively to the Transferred Business (other than know how) (and copies of any such documents relating primarily, but not exclusively not the Transferred Business), and any rights thereto owned by the Asset Seller, other than organization documents, tax records (other than tax records with respect to VAT that are required by applicable law to be transferred) and minute books of the Asset Seller: provided, however, that the Asset Seller may retain electronic or paper copies of all such books of account and records referenced above; and i) The goodwill of the Asset Seller in connection with the Transferred Business carried on by it together with the exclusive right (so far as the Asset Seller can grant the same) for the Purchaser to represent itself as carrying on the Transferred Business in continuation of and in succession to the Asset Seller." It is noted in the abovementioned sub-clause (e) that it is clearly mentioned that the appellant had acquired all knowhow in the possession of the seller and used in the transferred business. The sub-clause (d) also transfers all the registered inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased or acquired any intangibles such as technical knowhow, trademark etc. In this regard, he invited our attention to the relevant clauses of the agreement as well as the details given on page No. 139 to show that technical knowhow was very much there possessed by ABB but the value thereof had become Nil after claiming depreciation. He submitted that ABB had a trademark of "Alfa" for its meters and the assessee continued to use the same trademark after acquisition of the business. He submitted that ABB was having license to use the said trademark and the same was sub-licensed to the assessee. He submitted that the excess consideration of ₹ 30 crores thus was clearly paid by the assessee for acquisition of intangibles and what can be disputed at the most is the bifurcation of the said value among the different intangibles. He contended hat even if such bifurcation is varied, it will not make any difference as far as assessee's claim for depreciation is concerned since even the goodwill is now held to be entitled to depreciation in various judicial pronouncements. In support of this contention, he relied inter alia, on the decision of Delhi Bench of ITAT in the case of Hindust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee were transferred to the assessee as per the purchase agreement and the AO, in our opinion, was factually incorrect to say that these intangibles were not indicated in the list of assets transferred to the assessee as per the purchase agreement. In support of the Revenue's case on this issue, the learned DR has submitted before us that these intangibles were not appearing in the balance sheet of ABB as on 31-03-2003. However, as pointed out by the learned counsel for the assessee from the schedule given on page No. 139, technical knowhow for energy meters was acquired by ABB at ₹ 32,56,128/- but the value thereof had come down to Nil on 31-03-2003 as a result of depreciation claimed thereon. Even otherwise, if these intangibles represented self generated assets of the transferor, the same cannot and need not reflect in the balance sheet of the transferor. As submitted by the learned counsel for the assessee, the meters were being manufactured by ABB under the trade name "Alfa" and even after the transfer of business, the assessee company continued to use the said trademark which clearly shows that right to use trademark was given by ABB to the assessee. Having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of ₹ 66,34,889/- recovered against the said provision in the year under consideration was added by him to the total income of the assessee on protective basis. 11. The matter was carried before the learned CIT(Appeals) in an appeal filed by the assessee and after considering the rival submissions and perusing the relevant material on record, the learned CIT(Appeals) deleted the addition made by the AO on account of recovery against bad debts on protective basis in the year under consideration for the following reasons given in paragraph No. 1.7 to 1.10 of his impugned order: "1.7 The undersigned has carefully perused through the rival contentions. It is noted by the undersigned that the appellant had acquired the business for an aggregate consideration of 40.74 crores. This fact is not disputed by the AO. The said consideration was far more than the value of the assets acquired by the appellant from the seller. The appellant also furnished a copy of the valuation report from M/s Anmol Sekhri on record which showed that various assets and liabilities were quoted at a value less than its fair value or amount recoverable. Accordingly, the liabilities were increased by app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard the arguments of both the sides on this issue and also perused the relevant material on record. It is observed that the assets and liabilities of the going concern of ABB taken over by the assessee were revalued by it after acquisition and in this process, additional provision for doubtful debts was made by the assessee in its books of account on the basis of its own evaluation. The said provision, however, was not claimed as deduction in the year in which the same was made i.e. assessment year 2004-05 and this being so, we are in agreement with the learned CIT(Appeals) that recovery against the said provision cannot give rise to any income in the hands of the assessee which can be brought to tax in the year under consideration even on protective basis. It was just the recovery of money due to the assessee and such recovery cannot be treated as income of the assessee by any stretch of imagination. We, therefore, uphold the impugned order of the learned CIT(Appeals) deleting the addition made by the AO on this issue on protective basis and dismiss ground No. 1 of the Revenue's appeal. 13. Now we shall take up the appeals of the Revenue being ITA Nos. 4415, 4436 & 4437/Mum/2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that both the additions made by the AO to the total income of the assessee as per the normal computation and to the book profit computed u/s 115JB by the AO on account of provision made for doubtful debts and disallowance of depreciation on technical knowhow and right to use trademarks in assessment year 2004-05 have been deleted by the learned CIT(Appeals) following the order of his predecessor for assessment year 2005-06 wherein similar issues were decided in favour of the assessee. Since the said order of the learned CIT(Appeals) for assessment year 2005-06 giving relief to the assessee on similar issues have been upheld by us while disposing of the appeal of the Revenue for assessment year 2005-06 in the foregoing portion of this order, we follow our decision rendered in assessment year 2005-06 and uphold the impugned order of the learned CIT(Appeals) giving relief to the assessee on similar issues in the assessment year 2004-05. 16. As regards the appeals of the Revenue for assessment years 2006-07 and 2007-08, it is observed that the solitary issue involved t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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