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TMI Blog2022 (8) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... sposed of by this common order. 2. The common grievance of the assessee in both the appeals is that the disallowance made by the Ld. Assessing Officer ( AO ) of depreciation on goodwill amounting to Rs. 1,16,51,168/- and Rs. 87,38,376/- claimed by the assessee under section 32(1)(ii) of the Income Tax Act, 1961 (the Act ) in AY 2014-15 and 2015-16 respectively has been confirmed by the Ld. CIT(A) holding that goodwill does not qualify as business or commercial rights as envisaged under section 32(1)(ii) of the Act and all the grounds of appeal relate thereto. 3. The assessee is a company which operates as a wholly owned subsidiary of Geodis International S.A., France. It is engaged in the business of freight forwarding operation. 4. The Ld. AO noticed that the assessee company claimed depreciation on goodwill of Rs. 1,16,51,168/- and Rs. 87,38,376/- in AY 2014-15 and 2015-16 respectively. On query, the assessee submitted that the Geodis group entered into Master Asset Purchase Agreement dated December 1, 2008 with International Business Machine (IBM) to acquire its logistics division world-wide. Pursuant to such agreement, the company had entered into an acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice that assessee had filed appeal against the order dated 20.04.2018 of the Ld. CIT(A)-4 for AY 2013-14 before the Tribunal and the Tribunal in its order dated 10.01.2022 (copy at pages 70-95 of Paper Book), following the Tribunal s order in ITA No. 483/Del/2017 dated 17.03.2021 for AY 2012-13 directed the Ld. AO to allow depreciation on goodwill after recording the following findings:- 9. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. following the orders of his predecessor disallowed the claim of depreciation on goodwill. We find the Ld. CIT(A) upheld the action of the A.O, the reasons of which, have already been reproduced in the preceding paragraph. We find the issue stands decided in favour of the assessee by the consistent decisions of the Tribunal for the A.Ys. 2010-11, 2011-12 and 2012-13. We find the Tribunal in ITA.No.483/Del./2017 order dated 17.03.2021 for the A.Y. 2012-13 has allowed the claim of depreciation on goodwill by observing as under: 8. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to IBM India, the value of workforce does not facilitate the smooth carrying on of the business of the assessee and the supplier contracts forming part of the acquisition agreement have expired in the previous year relevant to the assessment year under consideration. According to the AO, the assessee has not acquired any business during the year and, hence, there is no question of making payment over and above for any commercial or business rights as defined under Explanation 3 to section 32(1). Further, the purchase price is not verifiable from any calculation or valuation report. According to the AO, there is decline in the business receipts even after paying so much on account of goodwill and, therefore, there is no justification for the payment of such amount. Further, it is also the case of the AO that as per the provisions of law, no depreciation is allowable on goodwill and the legislature provides that depreciation should be allowed on all other intangible assets other than goodwill. 41. We find, the Hon ble Delhi High Court in the case of Areva T D India Ltd. vs. DCIT, 345 ITR 421 has decided an identical issue in favour of the assessee. In that case, the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. The AO, however, held that depreciation in terms of Section 32(l)(ii) of the Act was not, in law, available on goodwill. The CIT(A) and the ITAT approved the reasoning of the AO thereby holding disallowance of depreciation on the amount described as goodwill. It was thus argued on behalf of the assessee Company that Section 32(l)(ii) would mean rights similar in nature as the specified assets, viz., intangible, valuable and capable of being transferred and that such assets were eligible for depreciation. On behalf of the respondent it was argued that applying the doctrine of noscitur sociis the expression any other business or commercial rights of similar nature used in Explanation 3(b) to Section 32(1) has to take colour from the preceding words knowhow, patents, copyrights, trademarks, licenses, franchises . It was urged that the Supreme Court had clearly held in Techno Shares and Stocks Ltd. (supra) that Our judgment should not be understood to mean that every business or commercial right would constitute a licence or a franchise in terms of section 32(l)(ii) of 1961 Act . 13. In the present case, applying the principle of ejusdem generis, which provides th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd. (supra) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a license or akin to a license which is one of the items falling in Section 32(l)(ii) of the Act. 14. In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of business or commercial rights of similar nature specified in Section 32(1 )(ii) of the Act and were accordingly eligible for depreciation under that Section. 15. In view of the above, it is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation under Section 32(l)(ii) of the Act. In the circumstances, the substantial question of law is decided in the affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside. 44. We fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Special bench in affirmative by holding, in principle, that depreciation is available on genuine goodwill. 46. The various other decisions relied on by the Id. Counsel for the assessee also support his case to the proposition that depreciation is allowable on goodwill. 47. We further find the allegation of the AO that the year-wise revenue from logistic services to IBM India is showing a declining trend is also incorrect. A perusal of the chart at para 32 of this order shows that there is, in fact, increase of revenue from IBM. 48. In view of the above discussion and relying on the decisions cited (supra), we hold that the assessee is entitled to depreciation on goodwill. The ground raised by the assessee is accordingly allowed. 25. Respectfully following the findings of the co-ordinate bench, we direct the Assessing Officer to allow claim of depreciation of good will. This ground is, accordingly, allowed. In the present appeal, the issue is identical to that of earlier years and no distinguishing facts pointed out by the Revenue. The DRP has not at all considered the aspect of depreciation on goodwill in correct context as there is a fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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