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TMI Blog2020 (1) TMI 1637X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.11,44,77,378/-, merely because the amount was shown in the balance sheet under the compendious heading of goodwill. (ii) The CIT failed to appreciate that- (a) The note No.3 on financial statements which formed part of the audited accounts clearly stated that the business comprised the television and press advertisement expenses data monitoring business alongwith its assets, know, intangibles, goodwill, customers, marketing, sales and distribution capabilities, employees and other interest. Therefore, the balance amount from the consideration paid after deducting fixed assets, debtors and current liabilities represented know-how, intangibles and goodwill, out of which, the know-how and intangibles were eligible for depreciation at 25% as per I.T. Rules. (b) Even as per definition of "Acquired Assets" as per the purchase agreement and the annexure thereto, the Appellant had purchased also the know-how and intangibles from the Vendors in addition to goodwill and the Appellant should have allowed depreciation on the 2/3rd value of the consideration taken by the Appellant or in any event such amount as determined by the A.O. (c) Depreciation was allowable even on the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be determined at the time of hearing. 3. During the course of the assessment proceedings the assessee company vide its letter dated 31.01.2006 furnished with the A.O the bifurcated details of the aforesaid payment of Rs.11,44,77,378/-, therein claiming viz. (i) that, 1/3rd of the payment was paid for the cost of goodwill: Rs.3,81,59,126/-; and (ii) the balance 2/3rd of the payment was paid for the cost of "know-how" and "intangibles" of the "Adex Business": Rs.7,63,18,252/-. On the basis of the aforesaid bifurcated details, it was the claim of the assessee that depreciation be allowed @ 25% on the cost of the "know-how" and "intangibles" which were acquired by the assessee from M/s A.C. Nielson ORG - Marg Research Pvt. ltd. However, the A.O was not persuaded to subscribe to the aforesaid claim of the assessee. It was observed by the A.O that the assessee had not provided any basis for attributing 1/3rd of the total payment of Rs.11,44,378/- towards cost of "goodwill" and the remainder 2/3rd of the aforesaid amount towards cost of "know-how" and "intangibles". Rather, it was observed by the A.O that no such bifurcated details were discernible from the business transfer "agreement" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.11,44,77,378/- in excess of the value of the "net assets" as "goodwill" and capitalised the same as such in its "books of account". Observing, that as no depreciation was allowable on "goodwill", the CIT(A) did not find any infirmity in the declining of the assesses claim of depreciation by the A.O and upheld his view. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As observed by us hereinabove, we are restricting ourselves to the adjudication of the "Ground of appeal No. III" which had inadvertently remained omitted to be adjudicated upon by the Tribunal while disposing off the appeal of the assessee, vide its order passed in ITA No. 6035/Mum/2009, dated 20.03.2017 for A.Y 2003-04. As observed by us hereinabove, the assessee company on acquisition of "Adex Business" of M/s A.C. Nielson ORG-Marg Research Pvt. Ltd had made a payment of Rs.11,44,77,378/- over and above the value of the "net assets" of the business so acquired. On a perusal of the "financial statements" of the assessee company, it was gathered by the A.O, that the auditor of the assessee company had capitalised the excess payment of Rs.11,44,77,378/- [Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the declining of the assesses claim of depreciation by the A.O. The CIT(A) while concluding as hereinabove, had observed as under: "3.4 I have considered the submissions of the appellant and have gone through the business transfer agreement dated 17.9.09 between the appellant and M/s ORG. As per this agreement, the appellant acquired Adex Business' which was being carried on by MIs ORG. In accordance with this agreement, the appellant acquired certain assets which have been defined as Acquired assets" in the agreement. The details of these acquired assets is as per Schedule 1 of the agreement. These assets are fixed assets, receivables, client list, self generated softwares and marketing sales network, historical datas and intellectual property and general know how with respect to operating the business. The appellant has given lumpsum consideration of Rs.12,10,31,250/-. There is no bifurcation of the consideration paid by the appellant towards various assets. In the agreement, only the value of fixed assets and receivables of the Adex Business is mentioned. Therefore, excess amount paid by the appellant over and above the net assets of Adex Business is to be treated as good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee that the aforesaid excess payment of Rs. 11,44,77,378/- was paid towards viz. (i). 1/3rd of the amount was paid for cost of goodwill: Rs.3,81,59,126/-; and (ii) the balance 2/3rd of the amount was paid for the cost of "know-how" and "intangible assets" of the "Adex Business": Rs.7,63,18,252/-, but the said claim was declined by the lower authorities, for the reason, that no basis for such allocation could be gathered from the business transfer "agreement", dated 17.09.2002. In the backdrop of the fact that the auditor of the assessee company had capitalised the excess payment of Rs.11,44,77,378/- [Rs.12,10,31,250/- (-) Rs.65,53,872/-] as "goodwill" in the schedule of "fixed assets", the CIT(A) being of the view that no depreciation was allowable on "goodwill" had upheld the declining of the assesses claim of depreciation on the excess payment of Rs. 11,44,77,378/- 8. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to subscribe to the view taken by the lower authorities. As observed by us hereinabove, the assesses claim for depreciation on the excess payment of Rs. 11,44,77,378/-was declined by the A.O, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Apex Court did not find any infirmity with the view taken by the lower authorities which had approved the claim of the assessee that the difference between the cost of the assets and the amount paid constituted "goodwill" which the assessee company had acquired in the process of amalgamation. In sum and substance, the Hon'ble Apex Court had approved the assesses claim for depreciation on "goodwill". Also, the Hon'ble Apex Court had not found any infirmity with the view taken by the lower authorities that the excess consideration paid by the assessee over and above the value of "net asset's acquired of the amalgamating company i.e. M/s YSN Shares & Securities Pvt. Ltd. was to be considered as the value of "goodwill" arising on amalgamation. 10. On the basis of our aforesaid observations, we find, that the assesees claim of depreciation on "goodwill" in the case before us falls within the four corners of the judgement of the Hon'ble Supreme Court in the case of CIT, Kolkata Vs. Smifs Securities Limited (2012) 348 ITR 302(S.C). As is discernible from the financial statements of the assessee company before us, the excess consideration of Rs. 11,44,77,378/- paid by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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