M/s. Premier Book Co., New Delhi V. ACIT, New Delhi

CO 210/DEL/2015

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3466 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 25-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: B K ANAND
• Keywords: Depreciation
• Section: 32; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6774/DEL./2014 (ASSESSMENT YEAR : 2010-11) ACIT, CIRCLE 52 (1), VS. M/S. PREMIER BOOK CO., NEW DELHI. 4792/23, ANSARI ROAD, DARYA GANJ, NEW DELHI 110 002. (PAN : AAEFP8468R) CO NO.210/DEL/2015 (IN ITA NO.6774/DEL./2014) (ASSESSMENT YEAR : 2010-11) M/S. PREMIER BOOK CO., VS. ACIT, CIRCLE 52 (1), 4792/23, ANSARI ROAD, NEW DELHI. DARYA GANJ, NEW DELHI 110 002. (PAN : AAEFP8468R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.K. ANAND, CA REVENUE BY : SMT. PARAMITA TRIPATHY, CIT DR DATE OF HEARING : 19.09.2017 DATE OF ORDER : 21.09.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : ITA NO.6774/DEL./2014 CO NO.210/DEL/2015 2 THE AFORESAID APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSIO N. 2. THE APPELLANT, ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE 52 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE ASSESSEE COMPANY), BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE T HE IMPUGNED ORDER DATED 02.09.2014 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-XXV, NEW DELHI QUA THE ASSESSMENT YEAR 20 10-11 ON THE GROUNDS INTER ALIA THAT :- 1. THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.34,14,614/- WITHOUT APPRECIATING THAT DEPRECIATION ON GOODWILL IS NOT ALLOWABLE AS PER TH E PROVISION OF SECTION 32(1)(II) OF THE INCOME TAX AC T. 2. THE CIT (A) HAS ERRED IN DELETING THE ADDITION WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE PAYMENTS MADE WERE NOT FOR GOODWILL BUT ONLY FOR ACQUIRING COPYRIGHTS OF THE BOOK TITLES. 3. THE OBJECTOR, M/S. PREMIER BOOK CO., BY FILING T HE PRESENT CROSS OBJECTIONS CHALLENGED THE ASSESSMENT ORDER DA TED 05.03.2013 PASSED BY THE ASSESSING OFFICER QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUNDS INTER ALIA THAT :- THAT THE LEARNED CIT (APPEALS) ERRED IN NOT HOLDING THAT ON THE FACTS OF THE CASE THE WITHDRAWA L OF CLAIM OF DEPRECIATION BY THE A.O. WAS NOT A PRIM A FACIE MISTAKE APPARENT ON THE FACE OF THE RECORD TH AT COULD BE RECTIFIED U/S 154 OF THE ACT. ITA NO.6774/DEL./2014 CO NO.210/DEL/2015 3 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : INITIALLY ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE INCOME-TAX ACT, 1961 (FOR SH ORT THE ACT) BY MAKING AN ADDITION OF RS.5,41,406/- TO THE TOTAL IN COME OF THE ASSESSEE AT RS.3,66,46,031/-. SUBSEQUENTLY, AO ISS UED A NOTICE U/S 154 OF THE ACT TO SHOW CAUSE THE ASSESSEE AS TO WHY THE DEPRECIATION CLAIMED IN RESPECT OF GOODWILL AMOUNTI NG TO RS.34,14,614/- BE NOT WITHDRAWN, TO WHICH THE ASSES SEE FILED A COMPREHENSIVE REPLY. AO, BEING DIS-SATISFIED WITH THE EXPLANATION FILED BY THE ASSESSEE, INVOKED PROVISIONS CONTAINED U/S 32(1)(II) OF THE ACT AND DISALLOWED THE DEPRECIATION AMOUNTING T O RS.34,14,614/- ON THE GROUND THAT GOODWILL IN COPYR IGHTS OR GOODWILL WAS NOT ELIGIBLE FOR DEPRECIATION AND MADE ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSEE. 5. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION OF RS. 34,14,614/-. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE T HE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT (A) AND THE ASSESSEE IMPUGNED THE ASSESSMENT ORDER . 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.6774/DEL./2014 CO NO.210/DEL/2015 4 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. TO THE SHOW-CAUSE NOTICE ISSUED BY THE AO U/S 15 4 OF THE ACT, THE ASSESSEE SUBMITTED REPLY AS UNDER :- 'IN THE PRESENT CASE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008-09 WHEN THERE WAS A SETTLEMENT WITH THE LEGAL HEIRS OF A FORMER PARTNER , BESIDE WHAT 'WHAT WAS PAID TO THEM AS CREDIT AMOUNT TO THE ACCOUNT OF THE FORMER PARTNER, THE ASSESSEE WAS ALSO REQUIRED TO PAY TENANCY RIGHTS IN RESPECT OF PREMISES OCCUPIED BY THE FIRM FOR THE PURPOSE 0 ITS BUSINESS. FURTHER AS PUBLISHERS OF BOOKS AUTHOR SOME RENOWNED TEACHERS AND PROFESSORS THERE COPYRIGHTS IN RESPECT OF SUCH AS WHICH THE ASSESSEE THE ACQUIRED AS EXCLUSIVE USER THEREOF. THE ASSESSEE FIRM HAD TO PAY TO THE SAID LEGAL HEIRS RS.2,08,12,886 TOWARDS SUCH COPYRIGHTS IT ACQUIRED IN RESPECT OF THESE BOOKS (WHICH TITLES TH E ASSESSEE IS SINCE PUBLISHING). NO DOUBT THE DESCRIPTION OF SUCH COPYRIGHTS IN THE BOOKS OF THE ASSESSEE IS 'PAYMENTS FOR GOODWILL COPYRIGHTS', IT IS NOTHING OTHER THAN COST OF TITLES. IT IS NOT A TRAD E NAME GOODWILL ARISING AS DIFFERENTIAL IN CASE OF MERGERS REPRESENTING DIFFERENCE BETWEEN ASSETS AND LIABILITIES OF AN ACQUIRED BUSINESS. COST OF COPYRI GHTS OR ANY SUCH SIMILAR ASSETS (PUBLISHING RIGHTS) IS W ELL WITHIN THE PREVIEW OF 'INTANGIBLE ASSETS' AS COVERE D BY SECTION 32 OF THE ACT.' 8. LD. CIT (A), AFTER CONSIDERING THE PLEAS RAISED BY THE ASSESSEE, DELETED THE ADDITION MADE BY THE AO ON TH E GROUND THAT THE ASSESSEE HAS WRONGLY USED THE WORD GOODWILL WHI CH WAS ACTUALLY A TRANSACTION EXECUTED BY THE ASSESSEE IN RESPECT OF PAYMENT TOWARDS COPYRIGHT ACQUISITION ON WHICH DEPR ECIATION WAS ITA NO.6774/DEL./2014 CO NO.210/DEL/2015 5 CLAIMED U/S 32(1)(II) OF THE ACT. WHEN WE EXAMINE THE REPLY FILED BY THE ASSESSEE BEFORE THE AO THE ASSESSEE HAS SPEC IFICALLY USED THE WORD PAYMENT FOR GOODWILL IN BOOKS COPYRIGHT WHICH IS NOTHING OTHER THAN COST OF TITLES OF THE BOOKS AND IT IS NOT A TRADE NAME GOODWILL OR AMOUNT ARISING OUT OF DIFFERENTIAL IN CASE OF MERGERS REPRESENTING DIFFERENCE BETWEEN ASSETS AND LIABILITIES OF ACQUIRED BUSINESS AND AS SUCH ARE NOT INTANGIBLE AS SETS COVERED U/S 32 OF THE ACT. 9. SO, WHEN IT IS NOT IN DISPUTE THAT ASSESSEE HAS ACQUIRED EXCLUSIVE USER AS PUBLISHERS OF BOOKS AUTHORED BY S OME RENOWNED TEACHERS AND PROFESSORS BY MAKING PAYMENT TO THEIR LEGAL HEIRS TO THE TUNE OF RS.2,08,12,886/- TOWARDS SUCH COPYRIGHT S, THERE IS NO QUESTION OF DISALLOWING THE DEPRECIATION CLAIMED BY THE ASSESSEE. SO, THE AO HAS MERELY DENIED THE DEPRECIATION BECAU SE WORD GOODWILL WAS PREFIXED BEFORE WORD COPYRIGHT WHICH I S NOT SUSTAINABLE IN THE EYES OF LAW. 10. HONBLE APEX COURT IN JUDGMENT CITED AS CIT, KOLKATA VS. SMIFS SECURITIES LTD. (2012) 24 TAXMANN.COM 222 ( SC) EVEN ALLOWED THE DEPRECIATION ON GOODWILL U/S 32 BY MAKI NG FOLLOWING OBSERVATIONS :- I. SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIATION - ALLOWANCE/RATE OF - ASSESSMENT YEAR 2003-04 - WHETHER 'GOODWILL' IS AN ASSET UNDER ITA NO.6774/DEL./2014 CO NO.210/DEL/2015 6 EXPLANATION 3(B) TO SECTION 32(1) - HELD, YES - DURING RELEVANT ASSESSMENT YEAR, ONE 'Y' LTD. AMALGAMATED WITH ASSESSEE-COMPANY - ACCORDING TO ASSESSEE, EXCESS CONSIDERATION PAID BY IT OVER VALU E OF NET ASSETS ACQUIRED OF 'Y' LTD. AMOUNTED TO GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED - AUTHORITIES BELOW RECORDED A FINDING THAT ASSETS AN D LIABILITIES OF 'Y' LTD. WERE TRANSFERRED TO ASSESSE E FOR A CONSIDERATION; THAT DIFFERENCE BETWEEN COST OF AN ASSET AND AMOUNT PAID CONSTITUTED GOODWILL AND THAT ASSESSEE-COMPANY IN PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN FORM OF GOODWILL BECAUS E OF WHICH MARKET WORTH OF ASSESSEE-COMPANY STOOD INCREASED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - WHETHER SINCE REVENUE COULD NOT REBUT FACTUAL FINDINGS RECORDED BY AUTHORITIES BELOW, IMPUGNED ORDER PASSED BY THEM WAS TO BE UPHELD - HELD, YES [PARA 8] [IN FAVOUR OF ASSESSEE] 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE FI ND NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASS ED BY LD. CIT (A), HENCE THE PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. HOWEVER, CROSS OBJECTIONS BEARING CO NO.210/DEL/2015 FILED BY THE ASSESSEE STANDS DISMIS SED HAVING BEEN WITHDRAWN. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF SEPTEMBER, 2017. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 21 ST DAY OF SEPTEMBER, 2017 TS ITA NO.6774/DEL./2014 CO NO.210/DEL/2015 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-40, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.