ASST. COMMISSIONER OF INCOME-TAX 6(1)(2), MUMBAI, MUMBAI V. FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD., MUMBAI

ITA 2727/MUM/2024

AI Insights

The case involves the Assistant Commissioner of Income Tax, Mumbai, appealing against the order of the Commissioner of Income Tax (Appeals) which allowed the claims of depreciation on goodwill and launch expenses made by Franklin Templeton Asset Management for the Assessment Year 2015-16. The primary legal issues were whether the depreciation on goodwill and the launch expenses were allowable under the Income Tax Act, 1961. The tribunal considered previous rulings and the consistency of the facts in deciding the appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 27268 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 22-07-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 14-05-2024
• Other Referred Cases: ITA Nos. 2943 and 413 dated 8th February, 2005 and 8th December, 2006 respectively
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL SANT
• Assessee Lawyers: ANISH THACKER; LEKH MEHTA
• Keywords: Revenue expenditure; Depreciation; Capital expenditure
• Section: 37; 144C

Judgement Text

" Page | 1 ITA No.2727/M/2024 A Y : 2015–16 ACIT, Mumbai Versus Franklin Templeton Asset Mangement IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SUNIL KUMAR SINGH, JM ITA No.2727/MUM/2024 Vs . A.Y.2015-16 Asst Commissioner of Income Tax, Circle 6(1)(2), Mumbai Franklin Templeton Asset Management (I) Pvt. Ltd., One International Centre, Tower 2, 12th 13th Floor, Senapati bapat Marg, Elphinstone (W), Delisle Road, S.O., Mumbai 400013 (Appellant) (Respondent) PAN AAACT 1609B Assessee by Shri Anish Thacker & Lekh Mehta Revenue by Shri Anil Sant- Addl., CIT(DR), Date of hearing 22nd July, 2024 Date of pronouncement 07th October, 2024 O R D E R PER PRASHANT MAHARISHI, AM: 1. ITA No. 2727/M/2024 is filed by the Assistant Commissioner of Income Tax-6 (1) (2), Mumbai (the learned Assessing Officer against the appellate order passed by the Commissioner of Income Tax (A) – 56, Mumbai (the learned CIT – A) for Assessment Year 2015 – 16 dated 21/3/2024 wherein the appeal filed by the assessee against the assessment order passed Page | 2 ITA No.2727/M/2024 A Y : 2015–16 ACIT, Mumbai Versus Franklin Templeton Asset Mangement under section 143 (3) read with section 144C of the income tax Act, 1961 (the act) dated 18/12/2018 passed by the Deputy Commissioner of Income Tax Circle – 6 (3) (1), Mumbai (the learned Assessing Officer) was partly allowed. 2. The learned AO aggrieved with that order has preferred this appeal raising 2 is of appeal. The first ground of appeal is with respect to the depreciation of goodwill of Rs. 19,607,917/– allowed by the learned CIT – A which was disallowed by the learned AO stop second issue is with respect to the claim of the expenditure under the head launch expenses of Rs.76,317,661/– claimed by the assessee as allowable under section 37 (1) of the act whereas the learned Assessing Officer held that same is a one- time expense generating advantage for future years and therefore it is a capital expenditure which was allowed by the learned CIT – A. 3. The brief fact of the case shows that assessee is an asset management company of Franklin Templeton mutual fund and is engaged in the business of managing scheme of the above mutual fund including providing transfer agency services and portfolio management services. Assessee filed its return of income on 27/11/2015 declaring total income of Rs. 185,03,68,510/–. The assessment was passed under section 143 (3 by the learned assessing officer Page | 3 ITA No.2727/M/2024 A Y : 2015–16 ACIT, Mumbai Versus Franklin Templeton Asset Mangement computing the total income of the assessee at Rs. 1,946,294,080 and he disallowed the claim of depreciation on goodwill and launch expenses amounting to Rs.19,607,917/– and Rs. 76,317,661/–. 4. On appeal before the learned CIT – A both the above deduction was allowed to the assessee. Therefore, the learned assessing officer is aggrieved and is in appeal. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. 5. The learned Authorized Representative submitted a paper book stating that the first issue is with respect to the disallowance of depreciation on goodwill which is covered in favour of the assessee by the decision of the coordinate benches for several earlier years and, therefore, same is covered in favour of the assessee. Therefore, there is no infirmity in the order of the learned CIT – A in deleting the above disallowance. With respect to the second issue of the disallowance of launch expenses is submitted that identical issue is considered by the coordinate benches in assessee’s own case for earlier years and same were held to be revenue in nature. Even the Hon'ble Bombay High Court did not admit the appeal of the revenue on this issue for Assessment Years 1997- 98 and 1998 – 99 and, therefore, now this Page | 4 ITA No.2727/M/2024 A Y : 2015–16 ACIT, Mumbai Versus Franklin Templeton Asset Mangement issue is squarely covered in favour of the assessee. Thus, the issues are squarely covered in favour of the assessee. 6. We have carefully considered the rival contention and perused the orders of the learned lower authorities along with the paper book filed by the assessee wherein several judicial precedents in case of the assessee itself are relied upon on both the issues. 7. We find that the first issue relates to the allowable depreciation on goodwill amounting to Rs.19,607,917/–. It is agreed by the parties that the above issue is covered by the decision of the coordinate bench in assessee’s own case for Assessment Years 2005 – 06, 2010 – 11 and 2011 – 12 as well as for Assessment Year 2016 – 17 wherein it has been held that the depreciation on goodwill is an allowable claim of the assessee. There is no change in the facts and circumstances of the case and therefore we find that ground number 1 is squarely covered against the learned assessing officer and in favour of the assessee. Accordingly, Ground No. 1 is dismissed. 8. Ground No. 2 is with respect to the issue whether the launch expenses incurred by the assessee are capital expenditure or revenue expenditure. The claim of the assessee is those expenses are revenue in nature, the claim of the learned AO is that those expenditure Page | 5 ITA No.2727/M/2024 A Y : 2015–16 ACIT, Mumbai Versus Franklin Templeton Asset Mangement are capital in nature as it gives a benefit to the assessee for future years. This issue has already been decided in case of the assessee by the coordinate bench for Assessment Year 1997 – 98 and 98 – 99 in ITA Nos. 2943 and 413 dated 8th February, 2005 and 8th December, 2006 respectively. Furthermore, the orders were challenged by the learned assessing officer before the honourable High Court and Department and appeal has not been admitted by the honourable High Court. This evidence are placed in the paper book at page Nos. 105 – 115 which are not controverted. Therefore, at present this issue is also squarely covered in favour of the assessee. Accordingly Ground No. 2 of the appeal of the learned Assessing Officer is also dismissed. 9. In the result appeal filed by the learned AO is dismissed. Order pronounced in the open court on 07/10/2024. Sd/- Sd/- Sd/- Sd/- (SUNIL KUMAR SINGH) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 07.10.2024 Dragon Copy of the Order forwarded to : Page | 6 ITA No.2727/M/2024 A Y : 2015–16 ACIT, Mumbai Versus Franklin Templeton Asset Mangement The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai "