ST. ANGELOS COMPUTERS LTD, MUMBAI V. ACIT 9(3), MUMBAI

ITA 138/MUM/2011

• Counselvise Citation: 13819914 RSA 2011
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 11-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2011
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: VIPUL B JOSHI; S E DASTUR SH NIRAJ SHETH
• Keywords: Depreciation; Valuation report
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & MS. SUSHMA CHOWLA , J M ./ I TA NO. 6874/ MUM/20 1 1 ( / ASSESSMENT YEAR : 200 8 - 2009 ) ST. ANGELOS COMPUTERS LTD., 6 TH FLOOR, JYOTI PLAZA, ABOVE TATA MOTORS, S.V.ROAD, KANDIVALI(W), MUMBAI - 67 VS. ITO - 9(3)(2), MUMBAI ./ ./ PAN/GIR NO. : A A ECS 9697 J ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO S . 133 TO 138 / MUM/20 11 ( / ASSESSMENT YEAR :200 2 - 03 TO 2007 - 08 ) ST. ANGELOS COMPUTERS LTD., 6 TH FLOOR, JYOTI PLAZA, ABOVE TATA MOTORS, S.V.ROAD, KANDIVALI(W), MUM BAI - 67 VS. DCIT - 9(3), MUMBAI ./ ./ PAN/GIR NO. : A AECS 9697 J ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI S.E.DASTUR, SH.NIRAJ SHETH & VIPUL B JOSHI /REVENUE BY : SHRI NEIL PHILIP / DATE OF HEARING : 0 9 /0 6 / 2015 / DATE OF PRONOUNCEMENT 22/07 /2015 / O R D E R PER BENCH : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEA RS 2002 - 03 TO 2008 - 09, IN THE MATTER OF ORDER PASSED U/S.143(3)/143(3) R.W.S.147 OF THE ACT. ITA NO S . 6874, 133 - 138 /1 1 2 2. COMMON GRIEVANCE OF ASSESSEE IN ALL THE YEARS PERTAINS TO DISALLOWANCE OF CLAIM OF DEPRECIATION ON GOODWILL U/S.32(1)(II) OF THE I.T.ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY , DURING THE A.Y.2002 - 03, HAD T AKEN THE ENTIR E BUSINESS AS A GOING CONCERN OF M/ S. ST . ANGELO'S COMPUTERS, WHICH WAS CARRYING ON THE ACTIVITY OF IMPARTING PROFESSIONAL COMPUTE R TRAINING SINCE 1991 AT MUMBAI FROM 14 DIFFERENT CENTRES. THE BUSINESS WAS ACQUIRED FOR A LUMPSUM CON SIDERATION OF RS. 5,25,00,000/ - . THE AS S ESSEE ATTRIBUTED RS.4,85,00,000/ - TOWARDS GOODWILL AND BUSINESS KNOWHOW . THE VALUE OF CONSIDERATION WAS DETERMINE D ON THE BASIS OF VALUATION MADE BY THE M/ S UTTAM ABUWALA & CO.. THE VALUATION REPORT INDICATES THE CONTENTS OF THE COMPUTER DISKETTE IN ELECTRONIC FORM RELATING TO THE OPERATIONS AND OTHER INFORMATION PROVIDED BY THE MANAGEMENT SIGNIFYING THE VALUE OF THE NAME/BRAND OF ST. ANGELO'S AND OTHER KNOW-HOW IN THE FIELD OF COMPUTER EDUCATION, TRAINED INSTRUCTORS, BOOKS, COURSE MATERIAL DEVELOPED FOR PROVIDING TRAINING IN COMPUTER APPLICATIONS, WORKING PATTERN, EDUCATION METHODOLOGY ETC. WHICH BASICALLY WAS DEVELO PED OVER A PERIOD OF TIME WITH THE OBJECT OF ENSURING THE BEST QUALITY TRAINING IN COMPUTER APPLICATION . IN THE RETURN OF INCOME ASSESSEE CLAIMED DEPRECIATION ON GOOD - WILL. THE AO DECLINED ASSESSEES CLAIM OF DEPRECIATION ON THE GOODWILL ON THE PLEA TH AT GOOD - WILL IS NOT AN INTANGIBLE ASSET FOR DEPRECIATION U/S.32(1)(II) . BY THE IMPUGNED ORDER, THE ITA NO S . 6874, 133 - 138 /1 1 3 CIT(A) CONFIRMED THE DISALLOWANCE OF CLAIM OF DEPRECIATION ON GOOD - WILL AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. SHRI S.E.DASTUR, LEARNE D SENIOR COUNSEL PLACED ON RECORD ORDER OF THE HON BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD., 348 ITR 0302 , WHEREIN IT WAS HELD THAT PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRETING THE EXPRESSION OF GOODWILL, WHICH FIND S PLACE IN EXPLANATION 3(B) TO SECTION 362(1) . ACCORDINGLY IT WAS HELD THAT GOODWILL IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT, THEREFORE, ELIGIBLE FOR CLAIM OF DEPRECIATION. LD. AR ALSO PLACED RELIANCE ON THE FOLLOWING DECISION WHER EIN GOODWILL WAS ACCEPTED AS AN ASSET ELIGIBLE FOR CLAIM OF DEPRECIATION : - I) TYSSENKRUPP ELEVATOR (INDIA) (P) LTD., 167 TTJ 131(DEL); II) WORLDWIDE MEDIA PVT. LTD., 30 ITR (TRIB) 181; III) M/S PPG ASIAN PAINTS PVT. LTD., ITA NO.2919/MUM/2013, DATED 15 - 4 - 15 IV) M/S TOYO ENGINEERING INDIA LIMITED, ITA NO.3279/MUM/2008, DATED 13 - 10 - 2014; V) BIRLA GLOBAL ASSET FINANCE CO. LTD., 221 TAXMAN 176(BOMBAY); VI) KEC INTERNATIONAL LTD., ORDER DATED 7 - 2 - 2013(BOMBAY HIGH COURT) 5. ON THE OTHER HAND, LD. CIT DR RELIE D ON THE ORDERS OF AUTHORITIES BELOW. 6 . WE HAVE CAREFULLY GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA) AND DECISION OF HONBLE BOMBAY HIGH COURT AS WELL AS DECISION OF COORDINATE BENCH OF THE TRIBUNAL CITE D AT BAR. THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA) , HELD AS UNDER : - THE ASSESSING OFFICER HELD THAT GOODWILL WAS NOT AN ASSET FALLING UNDER EXPLANATION 3 TO SECTION 32(1) OF THE INCOME TAX ACT, 1961 ['ACT', FOR SHORT]. ITA NO S . 6874, 133 - 138 /1 1 4 WE Q UOTE HEREINBELOW EXPLANATION 3 TO SECTION 32(1) OF THE ACT: 'EXPLANATION 3. -- FOR THE PURPOSES OF THIS SUB - SECTION, THE EXPRESSIONS 'ASSETS' AND 'BLOCK OF ASSETS' SHALL MEAN -- [A] TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PLANT OR FURNITURE; [B] INT ANGIBLE ASSETS, BEING KNOW - HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE.' EXPLANATION 3 STATES THAT THE EXPRESSION 'ASSET' SHALL 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 UN DER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE'. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRETING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3 B) TO SE CTIO N 32 ( 1) OF TH E ACT. : THE CO ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S PPG ASIAN PAINTS PVT. LTD (SUPRA), HELD AS UNDER : - IN VIEW OF THE CATEGORICAL FINDING OF THE HON'BLE SUPR E ME COURT THAT THE GOODWILL ALSO. FALLS UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE' AND THUS WOULD BE AN ASSET UNDER EXPLANATION 3(B) TO. SECTION 32( 1) OF THE ACT, WE ACCORDINGLY HOLD THAT THE ASSESSEE IS ENTITLED TO. THE CLAI M OF DEPRECIATION ON GO ODWILL. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 7 . AS THE FACTS AND CIRCUMSTANCE OF THE CASE IN ALL THE YEARS UNDER CONSIDERATION ARE SAME, FOLLOWING THE SAME REASONING, WE DIRECT THE AO TO ALLOW ASSESSEES CLA IM OF DEPRECIATION ON GOOD - WILL IN ALL THE YEARS UNDER CONSIDERATION. 8 . IN THE RESULT, ALL APPEAL S OF THE ASSESSEE ARE ALLOWED IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 22/07 / 201 5 . SD/ - SD/ - ( ) ( SUSHMA CHOWLA ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 22/07 /201 5 . . /PKM , . / PS ITA NO S . 6874, 133 - 138 /1 1 5 / COPY OF TH E ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY/