AI Insights
The case involves Vishal Personal Care (P) Ltd, which claimed depreciation on intangible assets and goodwill following a business takeover. The Assessing Officer initially rejected these claims, viewing them as attempts to reduce tax liability through a colorable device. However, the CIT (A) reversed this decision, allowing the depreciation claims based on precedents set by the Supreme Court. The Revenue appealed to the Tribunal, which found the CIT (A)'s order insufficiently detailed and remanded the case for a comprehensive re-evaluation.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 128937 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 2 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-08-2023
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
DB-A
Next Hearing Date
08-08-2023
Assessment Year
2013-2014
Appeal Filed On
12-05-2019
Judgement Text
ITA 747 of 2019 Vishan Personal Care P Ltd Page 1 of 6 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri K. Narasimha Chary, Judicial Member ITA No.747/Hyd/2019 Assessment Year: 2013-14 Dy. CIT Circle 17(2) Hyderabad Vs. Vishal Personal Care (P) Ltd, Hyderabad PAN:AADCV9905H (Appellant) (Respondent) Assessee by : Shri M Chandramouleshwara Rao, CA Revenue by: Shri Shakeer Ahmed, DR Date of hearing: 09/08/2023 Date of pronouncement: 09/08/2023 ORDER Per R.K. Panda, Vice-President This appeal filed by the Revenue is directed against the order dated 05.02.2019 of the learned CIT (A)-1, Hyderabad, relating to A.Y.2013-14. 2. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of cosmetic herbals for internal and external use. It filed its return of income on 28.09.2013 admitting loss of (-) Rs.7,96,58,427/-. The case was selected for scrutiny through CASS. Statutory notices u/s 143(2) & 142(1) were issued and served on the assessee to which the AR of the assessee appeared before the Assessing Officer and filed the requisite details. ITA 747 of 2019 Vishan Personal Care P Ltd Page 2 of 6 3. During the course of assessement proceedings, the Assessing Officer noted that the assessee has claimed depreciation of Rs.1,76,57,248/- on intangible asset, comprising of brand value of Rs.7,06,28,993/-. On being asked by the Assessing Officer to justify the claim, the assessee filed a note on the addition to intangible assets which has been reproduced by the Assessing Officer in the body of the order and which reads as under: “"During the year the assessee company has taken Over all the assets and liabilities including intangible assets from Vishal industries. The intangible assets comprising brand value of Rs.7,06,28,993/- and goodwill Rs.25,00,000/. The assets and liabilities statement together with the agreement with the above party is enclosed herewith. The assessee company claimed depreciation @ 25% on Rs.7,06,28,993/- in accordance with Part B Rule 5 of the I T Rules, 1962. Similarly in the case of Good Will, the assessee company claimed depreciation @ 25%. Considering the above provisions of 1T Act as well as judicial pronouncements the assessee company is eligible to claim depreciation @ 25% of intangible asset.” 4. The assessee also filed a copy of the business take over agreement dated 31.3.2013, copy of minutes of Board meeting of the assessee in Schedule I, signed by one Director by name Smt. Sunanda and copy of statement of assets and identified liabilities in Schedule II, signed by proprietor of M/s. Vishal Industries. Relying on various decisions, it was argued that the assessee is entitled to claim depreciation u/s 32(1) on account of intangible assets. 5. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and rejected the claim of depreciation of Rs.1,76,57,238/- on brand value by observing as under: ITA 747 of 2019 Vishan Personal Care P Ltd Page 3 of 6 6. Similarly, the Assessing Officer made addition of Rs.6,25,000/- being depreciation claimed on goodwill of Rs.25,00,000/- on the ground that the same is a colourable device adopted by the assessee company in order to reduce tax liability. 7. In appeal, the learned CIT (A) allowed the claim of depreciation on intangible assets by observing as under: “6.3 I have carefully considered the facts of the case, assessment order and the submissions of the appellant. The details and case laws furnished by the appellant is verified. Respectfully following the Supreme Court’s decision in the case of CIT vs. Smifs Securities Ltd (S.C) 2012: 248 ITR 302, the appellant is eligible for depreciation on intangible assets i.e. brand value. Hence the addition made by the Assessing Officer is deleted”. 7.1 So far as depreciation on goodwill is concerned, the learned CIT (A) allowed the claim of the assessee by observing as under: ITA 747 of 2019 Vishan Personal Care P Ltd Page 4 of 6 “7.3 I have carefully considered the facts of the case, assessment order and the submission of the appellant. The goodwill of 25% was paid and also keeping in view of the case laws relied b the appellant as supra, the submissions of the appellant is accepted and the appellant is eligible for depreciation on this goodwill. Therefore, the addition made by the Assessing Officer is deleted”. 8. Aggrieved with such order of the learned CIT (A) the Revenue is in appeal before the Tribunal by raising the following revised grounds: 9. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. A perusal of the order of the CIT (A) shows that she has allowed the claim of depreciation on intangible assets in a very sketchy, cryptic and non-speaking order without addressing the various issues raised by the Assessing Officer, details of which have been ITA 747 of 2019 Vishan Personal Care P Ltd Page 5 of 6 reproduced in the preceding paragraph. Similar is the case on allowability of depreciation on goodwill. A perusal of the assessment order shows that the Assessing Officer, while rejecting the claim of depreciation on intangible assets, has stated that the so-called business takeover agreement is a self-generated agreement. He has categorically mentioned that the copy of the Board meeting of the assessee company in Schedule-1 is signed only by single Director by name Smt. Sunanda and no other person has signed and there is no witness. Accordingly, the Assessing Officer held the resolution to be a not valid one. Similarly, the Assessing Officer has further observed that the figures mentioned in the statement of assets and identified liability in Schedule-II singed by Shri Pawan Kumar Ladha and his wife Smt. Sunanda are not at all matching with the figures available with the income tax record for the year ending 31.3.2012 in the case of Vishal Industries Ltd, Hyderabad, a proprietary concern which has been taken over by the company. The Assessing Officer relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Mc Donald has categorically held that the business take over agreement is nothing but a colourable device adopted by the assessee company in order to reduce its tax liability. However, the order of the learned CIT (A) is completely silent on this issue and the learned CIT (A) has not at all addressed any of the points raised by the Assessing Officer while disallowing depreciation claimed on the intangible assets. Similar is the case on the issue of depreciation on goodwill. Under these circumstances and considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT (A) with a direction to pass a speaking order on the issue of depreciation on intangible assets and depreciation on goodwill by addressing the issues raised by ITA 747 of 2019 Vishan Personal Care P Ltd Page 6 of 6 the Assessing Officer. Needless to say, the CIT (A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes. 10. In the result, appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the Open Court at the time of hearing itself i.e. on 9 th August, 2023. Sd/- Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER (R.K. PANDA) VICE-PRESIDENT Hyderabad, dated 9 th August, 2023 Vinodan/sps Copy to: S.No Addresses 1 Dy. CIT, 17(2) 9 th Floor, Signature Towers, Kondapur, Hyderabad 500084 2 M/s. Vishal Personal Care (P) Ltd., Moin Court No.6-2-46, 4 th Floor, AC Guards Road Lakdikapul, Hyderabad 500004 3 Pr. CIT-1, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order
