9911796707
TMI Blog2025 (2) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... question arises for allowance of depreciation on the block of assets, which includes intangible assets in the present case. Therefore, the other two conditions for the applicability of the provisions of section 50 of the Act are not satisfied in the present case.
Section 50 of the Act has no applicability to the facts of the present case. Thus, we find merits in the submissions of the assessee in treating the capital gains as long term capital gains and offering the same to tax accordingly.
The findings of the lower authorities in taxing the capital gains accrued to the assessee on the transfer of trademarks, i.e. "Coldarin" and "Raricap", as short term capital gains are quashed. As a result, grounds raised in assessee's appeal are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... city charges payable; Levy of excessive interest under section 234B of the Act amounting to INR 92,14,092 7. ought to have directed the learned AO to delete the levy of interest under section 234B of the Act; Levy of excessive interest under section 234C of the Act amounting to INR 22,56,331 8. ought to have directed the learned AO to delete the levy of interest under section 234C of the Act;" Levy of interest under section 234D of the Act amounting to INR 1,66,921 9. ought to have directed the learned AO to delete the levy of interest under section 234D of the Act; The above grounds are distinct and separate and without prejudice to each other. The Appellant craves leave to add, amend, delete, rectify, substitute and modify any of the aforesaid grounds or add a new Tribunal or grounds at any time before or at the time of hearing before the Hon'ble Income Tax Appellate Tribunal." 3. Ground no.1, raised in assessee's appeal, is general in nature. Therefore, the same needs no separate adjudication. 4. The issue arising in grounds no.2 and 3, raised in assessee's appeal, pertains to the applicability of the provisions of section 50 of the Act. 5. The brief facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act, after taking into consideration the accounting policies adopted by the assessee, held that expenses incurred by the assessee for the acquisition of both trademarks a capital expenses and allowance granted to absorb such expenditure is depreciation and nothing else. The AO further held that the nomenclature used by the assessee does not change the real character of the allowance. Accordingly, the AO held that the capital gains accrued from the transfer of both trademarks fall within the ambit of the provisions of section 50 of the Act, as the assessee has availed depreciation in respect of the cost of acquisition of these trademarks. Consequently, the capital gains accrued to the assessee amounting to INR 24,27,39,058 on the transfer of the trademarks were subjected to tax as short-term capital gains. 7. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 8. We have considered the submissions of both sides and perused the material available on record. The assessee purchased the trademark "Raricap" from Ethnor Ltd vide agreement dated 29/07/1992 for a consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trademarks were considered as long-term capital gains. 10. Thus, in order to decide the issue at hand, at the outset, it is relevant to note the provisions of section 50 of the Act, which reads as follows: - "Special provision for computation of capital gains in case of depreciable assets. 50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :-- (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :-- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt provisions of section 32 of the Act, which deals with the depreciation of capital assets. From the perusal of section 32 of the Act, it is evident that the same deals with the depreciation of both, tangible assets, such as buildings, machinery, plants of furniture, and intangible assets, such as know-how, patents, copyrights, trademarks, licences, franchises, or any other business or commercial rights of similar nature, owned wholly or partly by the assessee and used for the purpose of the business or profession. We further find that prior to the amendment of the Act by the Finance (No. 2) Act, 1998, the relevant provisions of section 32(1) of the Act read as follows:- "Depreciation. 32. (1) In respect of depreciation of buildings, machinery, plant or furniture owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed--" 15. Thus, it is evident that prior to the aforesaid amendment, the provisions of section 32(1) only dealt with the depreciation of tangible assets. However, after the amendment by the Finance (No. 2) Act, 1998, with effect from 01/04/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is evident that only after the amendment by the Finance (No. 2) Act, 1998, depreciation is granted on the intangible assets. Further, it is pertinent to note that such depreciation is available only with respect to the intangible assets which were acquired on or after 01/04/1998 and were owned and used for the purpose of the business or profession by the assessee. Before considering the facts of the case vis-à-vis the aforesaid provisions of the Act, it is also relevant to note the provisions of section 2(11) of the Act, which deals with the meaning of the term "block of assets". From the perusal of the provisions of section 2(11) of the Act, we find that the said provisions were also amended by the Finance (No. 2) Act, 1998, with effect from 01/04/1999, and prior to the amendment read as follows: - "(11)"block of assets" means a group of assets falling within a class of assets, being buildings, machinery, plant or furniture, in respect of which the same percentage of depreciation is prescribed;" 18. Therefore, it is only after the amendment by the Finance (No. 2) Act, 1998, with effect from 01/04/1999, that the term "block of assets" includes within its ambi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
