DCIT, Kolkata V. Stewart & Mackertich Wealth Management Ltd., Kolkata

ITA 1063/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74995 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 20-09-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2010
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: SAMIT KR JENA ACA
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1063/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. STEWA RT & MACKERTICH WEALTH CIRCLE-10, KOLKATA. MANAGEMENT LTD. (PAN: AADCS7513E) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 29.01.2014 DATE OF PRONOUNCEMENT: 31.01.2014 FOR THE APPELLANT: SHRI KALYAN NATH, JCIT, SR. D R FOR THE RESPONDENT: SHRI SAMIT KR. JENA, ACA $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XII, KOLKATA IN APPEAL NO.711/XII/CIR-10/07-08 DATED 29.02.2010. ASSESSME NT WAS FRAMED BY DCIT, CIRCLE-10, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 30.10. 2009. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) IN ALLOWING DEPRECIATION ON GOODWILL. FOR THIS, REVENUE HAS RA ISED FOLLOWING GROUND NOS. 1 AND 2: 1.UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHETHER LD. CIT(A), KOL WAS CORRECT IN HOLDING THAT DEPRECIATION WAS ALLOWABLE ON GOODWILL CREATED AT THE TIME OF THE AMALGAMATION OF THE ASSESSEE ITH M/S. YSN SHARES & SECURITIES (P) LTD. INSPITE O THE FIFTH PROVISO TO SUB-SECTION (I) OF SEC. 32 OF THE I. T. ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A), KOL, WAS CORRECT IN HOLDING THAT GOODWILL CREATED AT THE TIM E OF AMALGAMATION COMPANIES BEING A PAYMENT MADE IN ANTICIPATION OF FUTURE INCOME AS ST ATED IN ACCOUNTING STANDARD-14 OF THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA WAS AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION ALLOWANCE U/S. 32 OF THE I. T. ACT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON GOODWILL, AN INTANGIBLE ASSET THAT HAS ARISEN FROM THE BOOKS OF THE ASSESSEE COMP ANY, WHICH WAS DEPRECIATED @ 25% ON 2 ITA NO.1063/K/2010 M/S. STEWART & MACKERTICH WEALTH MANAGEMNT LTD. AY:2007-08 WDV METHOD FOR THE I. T. PURPOSES. THE AO DISALLOW ED THE SAME BY OBSERVING THAT IN THE INSTANT CASE CREATION OF GOODWILL IS NOT ACCEPTABLE BECAUSE NO BUSINESS IS BEING CARRIED IN THE NAME OF YSN SHARE & SECURITIES PVT. LTD. AS IT CEAS ED TO EXIST AFTER AMALGAMATION. THE ASSESSEE CONTENDED THAT IN ACCORDANCE WITH THE SCHE ME OF AMALGAMATION OF YSN SHARE & SECURITIES PVT. LTD. AND THE ASSESSEE SMIFS SECURIT IES LTD., DULY SANCTIONED BY HONBLE BOMBAY HIGH COURT AND CALCUTTA HIGH COURT, WITH RET ROSPECTIVE EFFECT FROM 01.04.1988, ASSETS AND LIABILITIES OF YSN SHARES & SECURITIES PVT. LTD . WERE TRANSFERRED TO AND VESTED IN THE ASSESSEE COMPANY AND ALSO GOODWILL. THE ASSESSEE C LAIMED DEPRECIATION ON THE SAME. AGGRIEVED AGAINST THE DISALLOWANCE, ASSESSEE PREFER RED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (2012) 348 ITR 302 (SC). THE ISSUE BEFORE HONBLE SUPREME COURT IS AS UNDER: WHETHER GOODWILL IS AN ASSET WITHIN THE MEANING OF SECTION 32 OF THE INCOME TAX ACT, 1961, AND WHETHER DEPRECIATION ON GOODWILL IS ALL OWABLE UNDER THE SAID SECTION? AND HONBLE SUPREME HAS ANSWERED THE SAME AS UNDER: EXPLANATION 3 STATES THAT THE EXPRESSION 'ASSET' S HALL MEAN AN INTANGIBLE ASSET, BEING KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES , FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. A READING THE WORDS 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WOULD FALL UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE'. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STR ICTLY APPLY WHILE INTERPRETING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT 'GOOD WILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. IN THE PRE SENT CASE, THE ASSESSING OFFICER, AS A MATTER OF FACT, CAME TO THE CONCLUSION THAT NO AMOU NT WAS ACTUALLY PAID ON ACCOUNT OF GOODWILL. THIS IS A FACTUAL FINDING. THE COMMISSIO NER OF INCOME-TAX (APPEALS) ('THE CIT(A)', FOR SHORT) HAS COME TO THE CONCLUSION THA T THE AUTHORISED REPRESENTATIVES HAD FILED COPIES OF THE ORDERS OF THE HIGH COURT ORDER ING AMALGAMATION OF THE ABOVE TWO COMPANIES ; THAT THE ASSETS AND LIABILITIES OF M/S. YSN SHARES AND SECURITIES P. LTD. WERE TRANSFERRED TO THE ASSESSEE FOR A CONSIDERATION ; T HAT THE DIFFERENCE BETWEEN THE COST OF AN ASSET AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT THE ASSESSEE-COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIG HT IN THE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WORTH OF THE ASSESSEE-COMPANY STO OD INCREASED. THIS FINDING HAS ALSO BEEN UPHELD BY THE INCOME-TAX APPELLATE TRIBUNAL (' THE ITAT', FOR SHORT). WE SEE NO REASON TO INTERFERE WITH THE FACTUAL FINDING. ONE MORE ASPECT WHICH NEEDS TO BE MENTIONED IS THAT , AGAINST THE DECISION OF THE INCOME- TAX APPELLATE TRIBUNAL, THE REVENUE HAD PREFERRED A N APPEAL TO THE HIGH COURT IN WHICH IT HAD RAISED ONLY THE QUESTION AS TO WHETHER GOODWILL IS AN ASSET UNDER SECTION 32 OF THE ACT. 3 ITA NO.1063/K/2010 M/S. STEWART & MACKERTICH WEALTH MANAGEMNT LTD. AY:2007-08 IN THE CIRCUMSTANCES, BEFORE THE HIGH COURT, THE RE VENUE DID NOT FILE AN APPEAL ON THE FINDING OF FACT REFERRED TO HEREINABOVE. FOR THE AFORESTATED REASONS, WE ANSWER QUESTION NO. (B) ALSO IN FAVOUR OF THE ASSESSEE. QUESTION NO. (C). AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE, WE UPHOLD THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMIS SED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3: 3. WHETHER UNDER THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, LD, CIT(A), KOL WAS CORRECT IN DELETING THE ADDITION OF RS.1,96,511/- U NDER FOREIGN TRAVEL THROUGH THE ASSESSEES BUSINESS IS SHARE BROKING WHICH DOES NOT NECESSITATE FOREIGN TRAVEL. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STATED THAT TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 IN ITA NO. 1568/K/2006 DATED 18.05.2007 HAS ALLOWED THE CLAIM EXACTLY ON SIMILAR CIRCUMSTANCES VIDE PARA 6.2 AND 7 AS UNDER: 6.2. WHILE CONSIDERING THE NEXT ISSUE OF DISALLOWA NCE RELATING TO FOREIGN TRAVEL EXPENSES OF RS.25,94,048/-, THE CIT(A) HAS CONSIDER ED THE SAME IN THE LIGHT OF THE HONBLE BOMBAY HIGH COURTS DECISION RENDERED IN TH E CASE OF BRALCO METAL INDUSTRIES LTD. VS. CIT REPORTED IN 206 ITR 477 AND ANOTHER DE CISION OF THE SAME HIGH COURT RENDERED IN THE CASE OF ADDL. CIT VS. BUCKU WOLF NE W INDIA ENGINEERING WORKS LTD. REPORTED N 157 ITR 721 AND ANALYSING THE UNDISPUTED FACTUAL ASPECTS AND MATERIALS PRODUCED BY THE ASSESSEE, HAS COME TO THE CONCLUSIO N THAT THE CLAIM OF THE ASSESSEE IS FAIRLY COVERED BY THE DECISION OF THE HONBLE BOMBA Y HIGH COURT STATED SUPRA AND IN THAT VIEW OF THE MATTER, HE DELETED THE DISALLOWANC E MADE BY THE AO. 7. ON CAREFUL ANALYSIS OF THE FINDINGS OF THE LD. C IT(A), IT IS FOUND THAT THE DECISIONS REACHED BY THE CIT(A) ON THE DIFFERENT IS SUES RAISED BY THE DEPARTMENT IN THIS APPEAL ARE IN THE LINE OF THE RESPECTIVE JUDICIAL P RONOUNCEMENTS THAT WERE CITED BY THE CIT(A), WHILE CONSIDERING THE RESPECTIVE ISSUES AND NOTED IN THE IMPUGNED ORDER. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE C IT(A)S FINDING ON THE ISSUES RAISED BY THE DEPARTMENT IS NOT AT ALL INFIRM IN ANY WAY R EQUIRING INTERFERENCE. HENCE, WE HEREBY UPHOLD THE SAME AS THEY ARE IN ACCORDANCE WI TH VARIOUS JURIDICAL PRONOUNCEMENTS STATED IN THE RESPECTIVE PORTIONS OF THE IMPUGNED ORDER RELATING TO THE RESPECTIVE ISSUES AND HENCE WE HEREBY UPHOLD THE SA ME BY FINDING THE ISSUES RAISED BY THE DEPARTMENT AS DEVOID OF MERITS. 4 ITA NO.1063/K/2010 M/S. STEWART & MACKERTICH WEALTH MANAGEMNT LTD. AY:2007-08 7. AS THE ISSUE IS SQUARELY COVERED IN ASSESSEES O WN CASE AND FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL, WHICH IS NOT DISPUTED BY REVENUE , WE CONFIRM THE ORDER OF CIT(A). THIS ISSUE OF REVENUES APPEAL IS ALSO DISMISSED. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.01.2 014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31ST JANUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-10, KOLKATA. 2 ./,- / RESPONDENT M/S. STEWART & MACKERTICH WEALTH MAN AGEMENT LTD., VAIBHAV 5 TH FLOOR, 4, LEE ROAD, KOLKATA-700 020. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .