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TMI Blog2021 (6) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as the Act ] dated 29.03.2016. 2. Grievances raised by the assessee are as follows: 01. The order of assessment is contrary to the facts and prejudicial to the assessee. 02. On appreciation of the facts and circumstances of the case and law, the additions made by the Learned Assessing Officer and confirmed by the Learned Commissioner of Income Tax (Appeals) are contrary to law and based on erroneous understanding of the facts. 03. On appreciation of the facts and circumstances of the case and law the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer in disallowing depreciation claimed by the appellant company to the tune of Rs. 1,06,00,847/- on intangible assets purchased by the appellant company. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the facts and law and deserves to be deleted. 04. The appellant craves to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings. 05. The appellant humbly prays that the appeal be allowed in toto. 3. When this appeal was called out for hearing, learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of Mitsu Industries was only Rs. 7,19,85,974. It was explained that the Mitsu industries are not a related party under section 40A(2)(b) of the Act and the assessee has acquired profit earning apparatus from Mitsu Industries Ltd. which cannot be based on book value of tangible assets debited in the books of seller. The assessee company has acquired international product registration as well as domestic registration approval and license and manufacturing and process of know-how, intellectual properties and other intangible assets such as commercial rights, registration and license for which composite consideration has been paid on mutual discussion and consent from both parties which in turn based on so many factors such as market value and tangible and intangible assets acquired from Mitsu Industries Ltd. The assessee company has repeated again and again that most of the payments are for intangible assets of manufacturing process of know-how and Registration and Commercial rights. We further find that Mitsu Ltd. is not related company under section 40A(2)(b). The assessee has acquired the Lmidachloropid business of Mitsu Limited as slump sale basis for a total consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was not a related concerns as per the provision of Section 40(A)(2)(b) of the Income-tax Act, 1961 as the point of sales. The learned counsel submitted that assets acquired under slump sale were capitalized in books of account as per generally accepted accounting principles in a slump sale several assets are purchased for a consolidated price and price is paid for the entire business as a whole. Hence, value to individual assets cannot be assigned directly. The valuation of intangible assets and marketing rights have been done in accordance with the Accounting Standard-10 (AS-10) issued by the Institute of Chartered Accountants of India (ICAI) the company has assigned the values to the various assets on a fair basis. The payments made for acquisition of lmidachloropid products business pursuant to transfer of Business Transfer Agreement and intangible assets was allocated on the basis of valuation report from independent Valuer M/s. Bansi S. Mehta Co. who had assigned the value of individual assets in accordance with AS-10. This valuation of items are placed at Paper Book Page No. 105 to 111. We are of the view that depreciation on intangible assets is allowable as per Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t admissibility of depreciation of trademark is not contingent upon its registration in the name of the assessee inasmuch as description of intangible assets is Part B of depreciation schedule describe the same merely of knowhow patents copyright, trademark licenses franchises or any other business or commercial rights of similar nature. Further the Hon`ble Jurisdictional High Court of Gujarat in the case of Pr. CIT v. Swastik Industries [2016] 68 taxmann.com 329 (Gujarat) held that payment of compensation made by the assessee-firm to retiring partner was to be treated as goodwill and , since , goodwill is an asset under Explanation 3 (b) to section 32 (1), assessee`s claim for depreciation on said payment was to be allowed. 118. We further observed that the Seller company has sold and transferred various assets under a Business Transfer Agreement for which valuable consideration has been paid by the appellant company. The AO has not given any factual finding as regards her observation that the assessee company could not justify in any logical and convincing way the basis on which such huge payment was made to acquire what the appellant company terms intangible assets bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2019 dated 22.04.2019, therefore respectfully following the decision of the Hon ble High Court the above ground is allowed in favour of the assessee. 4.We also note that the said issue is also covered by the judgement of the Hon'ble Gujarat High Court in assessee s own case in Tax Appeal No.166/2019 (M/s. Bayer Vapi Pvt. Ltd.,) order dated 24.04.2019, wherein it was held as follows: 5.5 Being aggrieved, the assessee filed appeal before the Tribunal. The Tribunal after considering the facts and evidence on record held as under : 117. Thus, we are of the view that the lumpsum consideration was for all rights such as manufacturing rights, marketing rights, other commercial rights, intellectual properties and other assets of the seller relating to development, manufacturing process, registration, use, sale marketing and distribution of products apart from tangible assets such as Land, Building and other assets. We further note that M/s. Mitsu Limited was not a related concerns as per the provision of Section 40(A)(2)(b) of the Income-tax Act, 1961 as the point of sales. The Learned counsel submitted that assets acquired under slump sale were capitalized in books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goodwill is an asset under Explanation 3(b) to section 32(1) and, thus, it is eligible for depreciation. In the case of CIT v. Techno Shares Stock Ltd. [2010) 193 Taxman 248(SC). The Hon'ble Supreme Court held that right of membership to BSE was a business or commercial right which gave a non defaulting containing and continuing member a right to access the exchange and to participate therein in that sense it was a license or akin to a license in terms of section 32(1)(ii). Such right vested in the exchange only on default /demise in terms of Rules and Bye Laws of the BSE, as they stood at the relevant time. However, it should not be understood to mean that every 'business or commercial right' would constitute a license or a franchise in terms of section 32(l) (ii) of the Act. Further reliance is placed in the case of M/s. Trio Elevators Company (India ) Ltd. v. ACIT Circle 8 Ahmedabad [2016] 67 taxmann.com 348 (Ahmedabad Trib) wherein it was held that admissibility of depreciation of trademark is not contingent upon its registration in the name of the assessee inasmuch as description of intangible assets is Part-B of depreciation schedule describe the same merely of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights on which depreciation has been, claimed at Rs. of Rs.2,29,30,000 on which depreciation is very much allowable under section 32(1)(ii) of the Act. In the light of above backdrop, and facts of the case and considering the same in totality, we are inclined to agree with the assessee that the A0 and Ld. CIT(A) were not justified is disallowing depredation claimed by the appellant. company to the tune of Rs.2,25,14,448 on intangible assets and Rs.2,29,30,000 on marketing rights purchased by the assessee company. The AO is therefore, directed to allow depreciation on intangible assets as marketing rights as claimed by the assessee. In view of these facts and circumstances, the grounds of appeal no 16 to 19 of the appeal are therefore, allowed. 5.6 In view of the aforesaid findings of fact, arrived at by the Tribunal holding that the assessee having purchased various assets under the business transfer agreement by way of slump sale and further that Mitsu Industries Ltd. was not a related concern as per the provisions of section 40A(2)(b) of the Act at the point of sale, depreciation under section 32 of the Act is allowable to the assessee company both on the intangible assets a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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