JM FINANCIAL SECURITIES P. LTD, MUMBAI V. ASST CIT 4(3), MUMBAI

ITA 1411/MUM/2012

• Counselvise Citation: 141119914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 01-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Depreciation; Valuation report; Revised return
• Section: 32; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.1411/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2005-06 M/S. JM FINANCIAL SECURITIES PRIVATE LTD., 141, MAKERS CHAMBERS III, NARIMAN, MUMBAI 400021 ! ! ! ! / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX-4(3), MUMBAI. # ./ $% ./ PAN/GIR NO. : AAACJ 5976B ( #& / APPELLANT ) .. ( '(#& / RESPONDENT ) #& ) / APPELLANT BY: DR. K.SHIVARAM '(#& * ) / RESPONDENT BY : SHRI PANKAJ KUMAR ! * + / DATE OF HEARING : 01/08/2013 ,-' * + / DATE OF PRONOUNCEMENT : 01/08/2013 . / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-9, MUMBAI DATED 7/12/2011 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL READ AS UNDER: A) DISALLOWANCE OF DEPRECIATION ON INTANGIBLES - R S. 23,73,047/- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI [CIT(A)] ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE ASS ISTANT COMMISSIONER OF INCOME TAX- 4(3), MUMBAI (AO) DISALLOWING THE APPELLANTS CLAIM OF DEPRECIATION ON INTANGIBLES AMOUNTING TO RS. 23,73,047/-. . / ITA NO.1411/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2005-06 2 2) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE INTANGIBLES ASSETS REPRESENTED ASSETS ON WHICH THE APPELLANT WAS ENTITLED TO DEPRE CIATION U/S. 32(L)(II). HENCE, THE DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSETS W AS NOT JUSTIFIED. 3) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF DEP RECIATION ON INTANGIBLE ASSETS OF RS. 23,73,047/- AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. B) DISALLOWANCE OF EXPENSES U/S. 40(A)(IA) ON ACCOU NT OF DELAYED PAYMENT OF TDS AMOUNTING TO RS. 26,609/- 4) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN SUSTAINING THE DISALLOWANCE OF RS. 26,609/- BEING THE EXPENSES ON WHICH TDS WAS DEDUCT ED AND PAID AFTER THE END OF FINANCIAL YEAR BUT BEFORE THE DUE DATE OF FILING TH E RETURN OF INCOME. 5) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF EXP ENSES AMOUNTING TO RS. 26,609/- , BEING THE EXPENSES ON WHICH THE TDS WAS PAID BEFO RE THE DUE DATE OF FILING OF RETURN OF INCOME MAY BE DELETED. 2. IT WAS SUBMITTED LD. AR THAT GROUND NO.1 IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDER OF THE TRIBUNAL, WHE REIN VIDE ORDER DATED 19/4/2013 IN ITA NO.4289 & 4290/MUM/2011 IN RESPECT OF ASSESSMENT YEAR 2004-05 AND 2007-08, IT WAS HELD THAT DEPRECIATION ON GOODWILL IS ALLOWABLE AS CLAIMED BY THE ASSESSEE. REFERENCE WAS MADE TO THE FOLLOWING OBSERVATIONS: 2. THE ASSESSEE HAS RAISED 4 SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 RELATES TO DISALLOWANCE OF DEPRECIATION ON INTANGIBLES TO THE TUNE OF RS. 3 1,64,063/-. 3. IT IS THE CONTENTION OF THE ASSESSEE THAT WITH T HE AMENDMENT U/S. 32, GOODWILL IS PART OF THE INTANGIBLE ASSETS AND THEREFORE ELIGIBL E FOR DEPRECIATION AS PROVIDED FOR INTANGIBLE ASSETS. THE ISSUE HAS BEEN ELABORATELY D ISCUSSED BY THE AO FROM PARA-4 ONWARDS IN HIS ASSESSMENT ORDER. THE AO OBSERVED TH AT THE ASSESSEE HAS CLAIMED DEPRECIATION ON INTANGIBLE ASSETS WHICH INCLUDES DE PRECIATION OF RS. 11,86,523/- ON MEMBERSHIP CARD AND THE BALANCE ON GOODWILL. THE AO DISALLOWED THE DEPRECIATION OF RS. 43,50,586/- AS CLAIMED ON THE SAID INTANGIBL E ASSETS. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C 1T(A). THE LD. CIT(A) THOUGH ALLOWED THE DEPRECIATION ON NSE MEMBERSHIP CARD TO THE OF RS.11,86,523/- , HOWEVER , WAS NOT CONVINCED WITH THE CLAIM OF DEPR ECIATION ON GOODWILL. THE LD. CIT(A) WAS OF THE OPINION THAT THE DEPRECIATION ON THE GOODWILL IS NOT ALLOWABLE AS PER THE PROVISIONS OF SEC. 32(I)(II) OF THE ACT. TH E LD. CIT(A) ALSO DISCARDED THE VALUATION REPORT SUBMITTED BY THE ASSESSEE TO JUSTI FY ITS CLAIM. IN THE OPINION OF THE LD. CIT(A), THE ASSESSEE HAS SHOWN INTANGIBLE ASSET S IN THE BALANCE SHEET WHICH WERE ACQUIRED FOR A LUMP-SUM CONSIDERATION AND NO S EPARATE BREAKUP WAS AVAILABLE FOR THE PRICE OF EACH ASSET. ACCORDING TO THE LD. C IT(A), AS THE BUSINESS WAS ACQUIRED BY PAYING LUMP-SUM CONSIDERATION AS GOING CONCERN A ND AS THERE APPEARS NO ITEM- . / ITA NO.1411/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2005-06 3 WISED PURCHASE, THEREFORE, THE BIFURCATION GIVEN BY WAY OF VALUATION REPORT OBTAINED AFTER ASSESSMENT HAS BEEN COMPLETED IS OF NO USE AN D ACCORDINGLY DISALLOWED THE DEPRECIATION CLAIMED AT RS. 31 ,64,063/-. 5. AGGRIEVED BY THIS FINDING OF LD. C1T(A), ASSESSE E IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE PRECEDING ASSESSMENT YEAR, THE ASSESSEE WAS ALLOWED DEPRECIATION ON INTA NGIBLE ASSET. TO SUBSTANTIATE, THE LD. COUNSEL DREW OUR ATTENTION TO PAGE-198 OF T HE PAPER BOOK WHICH IS REVISED RETURN OF INCOME FOR PREVIOUS YEAR ENDED 3 1.3.2000 RELEVANT TO ASSESSMENT YEAR 2000-01 AND POINTED OUT THAT THE ASSESSEE HAS BEEN ALLOWED DEPRECIATION U/S, 32 AT RS.1,42,67,228/-. FURTHER, DRAWING OUR ATTENTION TO PAGE-200, THE LD. COUNSEL SUBMITTED THAT IT CONTAINS PARTICULARS OF DEPRECIAT ION ALLOWABLE AS PER THE I.T. ACT THE LD. COUNSEL POINTED OUT IN ITEM NO. 4 WHICH IS INTANGIBLE ASSETS, THE COST/WDV OF WHICH AS ON 1.4.1999 HAS BEEN SHOWN AT RS. 5.50 CRORES ON WHICH DEPRECIATION HAS BEEN CLAIMED AT RS. 1,37,50,000/-. THE LD. COUN SEL FURTHER DREW OUR ATTENTION TO PAGE-202 TO 210 OF THE PAPER BOO AND SUBMITTED T HAT IT IS THE COPY OF THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT PERT AINING TO A.Y. 2000-01. FT IS THE SAY OF THE COUNSEL THAT IN THIS ASSESSMENT, THE AO HAS DISALLOWED THE DEPRECIATION ON STOCK EXCHANGE MEMBERSHIP CARD. THE LD. COUNSEL FURTHER SUBMITTED THAT POST AMENDMENT TO SEC. 32, DEPRECIATION ON GOODWILL IS A LLOWED AT THE RATE PREVAILING FOR INTANGIBLE ASSET. 7. PER CONTRA, THE ID. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THAT POST AMENDME NT TO SEC. 32(U), DEPRECIATION ON INTANGIBLE ASSETS ARE ALLOWED. IT IS ALSO A SETTLED LAW THE GOODWILL IS AN INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIATION AS DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SMIFS SECURITIES LTD. 348 ITR 302 (SC). R ESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT, WE DIRECT THE AO TO ALLOW DEPRECIATION ON GOODWILL AS CLAIMED BY THE ASSESSEE. GROUND NO. 1 IS ACCORDINGL Y ALLOWED. 3. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES, SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, RESPECTFULLY FOLLOWING THE AFOREMENTIONED ORDER OF THE TRIBUNAL WE DIRECT THE AO TO ALLOW DEPRECIATION ON GOODWILL AS CLAIMED BY THE ASSESSEE. GROUND NO.1 I S ALLOWED. 4. APROPOS GROUND NO.2, ON THE BASIS OF NOTE IN THE AUDIT REPORT AO HAD FOUND THAT TDS OF RS.1389/- IN RESPECT OF PAYMENT O F RS.26,609/- WAS DEPOSITED ON 31/5/2005, INSTEAD OF PAYING THE SAME ON THE D UE DATE WHICH WAS 7/1/2005 AND THUS DISALLOWANCE WAS MADE. LD. CIT(A) SUSTAIN ED THE DISALLOWANCE. 5. BEFORE US IT WAS PLEADED BY LD. AR THAT AMENDME NT TO THE PROVISIONS OF SECTION 40(A)(IA) IS RETROSPECTIVE IN NATURE AND IF THE PAYMENT IS MADE BEFORE THE . / ITA NO.1411/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2005-06 4 DUE DATE OF FILING THE RETURN DISALLOWANCE CANNOT BE MADE. FOR THIS PURPOSE LD. AR HAS RELIED UPON THE FOLLOWING DECISIONS: (1) ITO VS. ANIL KUMAR & CO. (2013) 354 ITR 170(KA RN) (2) SHANTI LOGISTICS (P) LTD. VS. ACIT (2013) 208 TAXMAN 41(MAD) (3) MR.PIYUSH C. MEHTA VS. ACIT (2012) 52 SOT 27 ( MUM) (4) BANSAL PARIVAJAN (INDIA) (P) LTD. VS. ITO (2013 ) 9 ITR (TRIB) 565 (MUM) 6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. SINCE PAYMENT IN THE PRESENT CASE WERE MADE BEFORE DUE DATE OF FILING TH E RETURN, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISIONS WE DELETE THE DISALLOW ANCE AND THIS GROUND OF APPEAL IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 01/08/2013 . * ,-' / 0!1 01/08/2013 - * 2 3 SD/- SD/- ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 0! DATED 01/08/2013 . . . . * ** * '+45 '+45 '+45 '+45 65'+ 65'+ 65'+ 65'+ / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '(#& / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 582 '+! , , / DR, ITAT, MUMBAI 6. 2 9 / GUARD FILE. .! .! .! .! / BY ORDER, (5+ '+ //TRUE COPY// : :: : / ; ; ; ; $ $ $ $ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ! . ./ VM , SR. PS