The DCIT(OSD)Circle-8, Ahmedabad V. M/s. Zydus Wellness Ltd., Ahmedabad

ITA 1959/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9678 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Keywords: Capital asset; Depreciation; Business expenditure; Revised return
• Section: 143(3); 142(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM & SHRI MANISH BORAD, AM. ITA NO.1959/AHD/2013 ASST. YEAR: 2010-11 DCIT (OSD), CIRCLE-8, AHMEDABAD. VS. M/S ZYDUS WELLNESS LTD., ZYDUS TOWER, SATELLITE CROSS ROAD, AHMEDABAD. APPELLANT RESPONDENT PAN AAACC 7740G APPELLANT BY SHRI R. I. PATEL, CIT, DR RESPONDENT BY SHRI M. M. PATEL WITH JIGAR M. PATAL ARS DATE OF HEARING: 6/12/2016 DATE OF PRONOUNCEMENT: 23/12/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF REVENUE FOR ASST. YEAR 2010-11 IS D IRECTED AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATE D 27.05.2013, VIDE APPEAL NO.CIT(A)-XIV/DCIT.CIR.8(OSD)/283/2012- 13, ARISING OUT OF ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT T HE ACT) FRAMED ON 31.01.2013 BY DCIT (OSD), CIRCLE-8, AHMEDABAD. REV ENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 2 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.87,959/- MADE ON ACCOUNT OF FOREIGN EXPENSES. 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,,236/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. 3) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,09,600/- MADE ON ACCOUNT OF TREATING THE TRADE MARK EXPENSES AS CAPITAL EXPENSES. 4) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2, 23,307/- MADE OUT OF SALES PROMOTION EXPENSES MADE U7S.40(A)(IA) OF THE ACT. 5) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWA NCE OF RS. 1,05,468/- MADE ON ACCOUNT OF DEPRECIATION ON NON-COMPETE FEES . 6). THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI V, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE, AMOUNTING TO RS.7,19,01,743/ - ON ACCOUNT OF DEPRECIATION ON GOODWILL ARISING ON AMALGAMATION, W HICH WAS NEVER CLAIMED IN THE RETURN OF INCOME FILED BY THE ASSESS EE. 7). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD OUGHT TO HAV E UPHELD THE ORDER OF THE ASSESSING QFFICER. 8). IT IS THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME- TAX (APPEALS)-XIV, AHMEDABAD MAY BE SET-A-SIDE.-AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF NEUTRACEUTICALS AND TRADING IN LOW CALORIE AND COSM ECUETICALS PRODUCTS. ASSESSEE DISCLOSED TOTAL INCOME OF RS.71, 60,49,078/- IN THE RETURN OF INCOME FILED ON 16.9.2010. CASE WAS S ELECTED FOR SCRUTINY ASSESSMENT. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND NECESSARY DETAILS WERE CALLED FOR AND DU LY SUPPLIED BY THE ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 3 ASSESSEE. INCOME WAS ASSESSED AT RS.71,66,21,650/- AFTER MAKING VARIOUS ADDITIONS MAINLY RELATING TO DISALLOWANCE O F EXPENDITURE UNDER VARIOUS HEADS TOTALING TO RS.5,72,570/-. ASSESSING OFFICER ALSO DENIED ASSESSEES CLAIM OF DEPRECIATION ON GOOD-WILL MADE BY WAY OF FILING REVISED COMPUTATION OF INCOME DURING ASSESSMENT PRO CEEDINGS POST JUDGMENT OF HON. SUPREME COURT IN THE CASE OF CIT V S.SMIFS SECURITIES LTD. REPORTED AT 348 ITR 302 (SC). 3. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE LD. CIT (A) AGAINST ALL THE ADDITIONS EXCEPT THE ADDITIONS TOWARDS DONATION OF RS.11,000/- AND DISALLOWANCE U/S 40(A)(IA) OF THE ACT OF RS.24 ,000/-. LD. CIT(A) ALLOWED ASSESSEES APPEAL BY DELETING THE DISALLOWA NCE AND ALSO ALLOWING ASSESSEES CLAIM OF DEPRECIATION ON GOODWI LL OF RS.7,19,01,743/-. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL.. 5. FIRST WE TAKE UP GROUND NOS.1,3 & 4 RAISED BY TH E REVENUE AGAINST THE ORDER OF LD. CIT(A) DELETING THE ADDITI ONS ON ACCOUNT OF FOREIGN TRAVEL EXPENSES OF RS.87,959/-, OF TRADE MA RK EXPENSES OF RS.1,09,600/- AND DISALLOWANCES UNDER SECTION 40(A) (IA) OF THE ACT OF RS.2,23,307/- INCURRED TOWARDS SALES PROMOTION. 6. AT THE OUTSET LD. AR SUBMITTED THAT SIMILAR TYPE S OF GROUNDS RAISED IN THE CASE OF ASSESSEE FOR ASST. YEAR 2009- 10 HAVE BEEN ADJUDICATED BY THE TRIBUNAL AND HAVE BEEN DECIDED I N FAVOUR OF ASSESSEE. ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 4 7. LD. DR COULD NOT CONTROVERT THE SUBMISSIONS MADE BY LD. AR. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS AND MATERIAL PLACED BEFORE US. WE OBSERVE THAT LD. ASSE SSING OFFICER DISALLOWED FOREIGN TRAVEL EXPENSES OF RS.87,959/- D UE TO FAILURE ON THE PART OF ASSESSEE TO PRODUCE THE DETAILS OF PERS ONS/PARTIES TO WHOM THEY WERE MADE ABROAD FOR BUSINESS PROMOTION. LD. ASSESSING OFFICER ALSO DISALLOWED RS.1,09,600/- TREATING THEM AS CAPITAL IN NATURE AND DISALLOWED OF RS.2,23,307/- U/S 40(A)(IA ) OF THE ACT AS THE ASSESSEE FAILED TO DEDUCT TDS. FURTHER WE OBSERVE T HAT SIMILAR ISSUES HAVE BEEN DECIDED IN FAVOUR OF ASSESSEE FOR ASST. YEAR 2009- 10 BY THE TRIBUNAL IN ITA NO.1674/AHD/2012 VIDE ITS ORDER DATED 6.4.2016. 9. CO-ORDINATE BENCH VIDE ORDER DATED 6.4.2016 IN A SSESSEES OWN CASE FOR ASST. YEAR 2009-10 DELETED THE DISALLO WANCE ON FOREIGN TRAVEL EXPENSES BY OBSERVING AS UNDER :- 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HA D GIVEN A FINDING THAT THE ASSESSEE HAD FURNISHED COMPETE DETAILS OF EMPLOYEES WHO HAD TRAVELLED ABROAD, DURATION OF VISIT, COUNTRIES VISITED, NATURE AND AM OUNT OF EXPENSES AND PURPOSE OF TRAVEL. HE HAS ALSO NOTED THAT THE EVIDENCES PLA CED ON RECORD INCLUDE THE CORRESPONDENCES MADE WITH THE TRAVEL AGENTS AND THE EXPENSES WERE REASONABLE AS COMPARED TO THE TOTAL TURNOVER OF THE COMPANY. B EFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FI NDING OF LD. CIT(A). WE, THUS, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 5 10. WE FURTHER FIND THAT THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 6.4.2016 HAS DELETED THE DISALLOWANCE ON ACCOUNT OF TRADE MARK EXPENDITURE BY OBSERVING AS FOLLOWS :- 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION ON ACCOUNT OF WEB DESIGNING CHARGES HAS GIVEN A FINDING THAT NO ASSET HAS BEEN CREATED BUT WEB DESIGNING IS ONLY A TOOL FOR FACILITATING THE BUSINESS OF THE AS SESSEE AS IT PROVIDES THE MEANS FOR MANAGING THE INFORMATION ABOUT THE ASSESSEE. WITH R ESPECT TO TRADE MARK EXPENSES, HE HAS GIVEN A FINDING THAT THE EXPENSES DID NOT CREATE ANY ASSET OR RESULT INTO ANY ADVANTAGE OF ENDURING NATURE AND TH E EXPENSES WERE ONLY INCURRED TO AVOID FUTURE LITIGATION AND THEREFORE, EXPENSES WERE REVENUE IN NATURE. WITH RESPECT TO SURVEY EXPENSES, HE HAS GIVEN A FINDING THAT THE EXPENSES HAVE BEEN INCURRED TO IMPROVE EFFICIENCY OF THE BUSINESS BY F INDING OUT CUSTOMERS PREFERENCES FOR SUGAR SUBSTITUTE, MARKET RESEARCH F OR ITS PRODUCT, EVALUATION OF ITS PRODUCT AND THE EXPENSES ARE NECESSARY IN LINE OF T HE BUSINESS. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDING OF LD. CIT(A). WE, THUS, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 11. SIMILARLY WITH REGARD TO THE ISSUE OF DISALLOWA NCE FOR NON- DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT ON SALES PROMOTION EXPENSES, WE FIND THAT CO-ORDINATE BENCH VIDE ITS O RDER DATED 6.4.2016 HELD THAT THE ITEMS THAT WERE PURCHASED BY THE ASSESSEE WERE FOR SALES PROMOTION AND WERE IN THE NATURE OF READY GOODS AND ONLY LOGO OF THE COMPANY WAS PRINTED ON THE ITEMS A ND THE EXPENDITURE WAS NOT IN THE NATURE LIABLE FOR DEDUCT ION AT SOURCE. WHILE DECIDING SO THE CO-ORDINATE BENCH OBSERVED AS FOLLOWS :- 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HA D NOTED THAT THE ITEMS THAT WERE PURCHASED BY THE ASSESSEE WERE FOR SALES PROMOTION, WERE IN THE NATURE OF READY GOODS AND ONLY LOGO OF THE COMPANY WAS PRINTED ON T HE ITEMS AND THE LOGO WAS ADDED TO PROMOTE THE BUSINESS. HE HAS FURTHER DISTI NGUISHED THE DECISION OF ITAT, PUNE BENCH IN CASE OF BDA LIMITED VS. ITO 84 ITD 442, WHICH WAS RELIED UPON BY THE A.O. REVENUE HAS NOT BROUGHT ANY MATERI AL ON RECORD TO CONTROVERT THE FINDING OF LD. CIT(A) NOR HAS PLACED ANY CONTRA RY BINDING DECISION. WE, THUS, ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 6 FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 12. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIN ATE BENCH DT.6.4.2016 FOR ASST. YEAR 2009-10 IN ASSESSEES OW N CASE, WE FIND THAT GROUND NOS.1,3 & 4 RAISED BY THE REVENUE ARE L IABLE TO BE DISMISSED AS THEY ALSO RELATE TO FOREIGN TRAVEL EXP ENSES, TRADE MARK EXPENSES AND DISALLOWANCE U/S 40(A)(IA) OF THE ACT FOR SALES PROMOTION EXPENSES. FURTHER REVENUE IS UNABLE TO RE BUT THE CONTENTIONS OF LD. AR AND TO DIFFERENTIATE THE FACT S OF THE YEAR UNDER APPEAL WITH THOSE FOR ASST. YEAR 2009-10. THUS WE F IND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND DISMISS THESE THREE GROUNDS. 13. GROUND NO.5 READS AS UNDER :- 5). THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI V, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWA NCE OF RS. 1,05,468/- MADE ON ACCOUNT OF DEPRECIATION ON NON-COMPETE FEES . 14. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSM ENT DENIED THE CLAIM OF DEPRECIATION OF RS.1,05,468/- MADE BY ASSE SSEE ON THE W.D.V. OF INTANGIBLE ASSET OF RS.4,21,875/-. ASSESS EE CARRIED THE MATTER BEFORE LD. CIT(A). THE SAME WAS DECIDED IN F AVOUR OF ASSESSEE BY FOLLOWING THE DECISION OF CO-ORDINATE B ENCH, PUNE IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. [135 ITD 69(P UNE)] DATED 18.01.2012. 15. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 16. LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER O F ASSESSING OFFICER AND ALSO RELIED ON THE JUDGMENT OF HON. DEL HI HIGH COURT IN ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 7 THE CASE OF SHARP BUSINESS SYSTEM VS. CIT-III (2012 ) 27 TAXMANN.COM 50 (DELHI) WHEREIN HON. COURT DECIDED A SIMILAR ISSUE IN FAVOUR OF REVENUE BY OBSERVING THAT IN THE CASE OF NON-COMPETITION AGREEMENT, ADVANTAGE IS A RESTRICTED ONE IN POINT O F TIME AND IT DOES NOT CONFER ANY EXCLUSIVE RIGHT TO CARRY ON PRIMARY BUSINESS ACTIVITY, THEREFORE, AMOUNT PAID AS NON-COMPETE FEE DOES NOT QUALITY FOR DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT. 17. ON THE OTHER HAND LD. AR SUBMITTED THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASST . YEAR 2009-10 AND THE SAME HAS BEEN DECIDED IN FAVOUR OF ASSESSEE VIDE ITS ORDER IN ITA NO.1674/AHD/2012 DATED 6.4.2016. FURTHER THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE HAS BEEN PRONOUNCED IN THE YEAR 2016 WHEREAS THE JUDGMENT OF HON. DELHI HIGH COURT IN THE CASE OF SHARP BUSINESS SYSTEM VS. CIT (SUPRA) WAS PRONOUNCE D IN NOVEMBER 5, 2012 AND THEREFORE, THE DECISION OF THE TRIBUNAL MAY PLEASE BE APPLIED FOR ON THE FACTS OF THE CASE; AS IT HAS BEEN DECIDED AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS B Y VARIOUS COURTS AT THE TIME OF PRONOUNCING THE ORDER. LD. AR ALSO S UBMITTED THAT ASSESSEES CLAIM OF DEPRECIATION ON THE INTANGIBLE VALUE OF NON- COMPETE FEES HAS BEEN ALLOWED FOR ASST. YEAR 2007-0 8 AND 2008-09. AS FAR AS ASST. YEAR 2009-10 IS CONCERNED, THE TRIB UNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THEREFORE, THE CLA IM OF DEPRECIATION MAY PLEASE BE ALLOWED ON THE NON-COMPETE FEES ON TH E PRINCIPLES OF CONSISTENCY. ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 8 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US AND GONE THROUGH THE FACTS AND LEG AL DECISION RELIED ON BY BOTH THE PARTIES. THROUGH THIS GROUND NO.5 RE VENUE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) DELETING TH E DISALLOWANCE OF RS.1,05,468/- MADE ON ACCOUNT OF DEPRECIATION ON NO N-COMPETE FEES. WE OBSERVE THAT ASSESSEE PAID A SUM OF RS.10,00,000 /- AS NON- COMPETE FEES DURING THE YEAR 2006 AND HAS CLAIMED D EPRECIATION @ 25% SINCE ASST. YEAR 2007-08. FOR THE YEAR UNDER AP PEAL ASSESSEE CLAIMED DEPRECIATION OF RS.1,05,468/- @ 25% ON W.D. V. OF NON- COMPETE FEES OF RS.4,21,875/-. LD. ASSESSING OFFICE R DENIED THE CLAIM OF DEPRECIATION AND ADDED BACK TO THE INCOME OF ASSESSEE. FURTHER WE OBSERVE THAT LD. CIT(A) HAS ALLOWED ASSE SSEES GROUND AND DELETED THE DISALLOWANCE OF RS.1,05,468/- ON AC COUNT OF NON- COMPETE FEES BY OBSERVING AS UNDER :- 6.3 DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS MADE BY MADE BY AR OF THE APPELLANT. I HAVE CAREFULLY PERUS ED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLA NT HAS SUBMITTED THAT NON- COMPETE FEE WAS CAPITALIZED AS AN INTANGIBLE ASSET IN F. Y. 2006-07 AND THE DEPRECIATION WAS ALLOWED IN THREE EARLIER ASSESSMEN T YEARS I. E. A. Y. 2007-08, 2008-09 & 2009-10. ACCORDINGLY, THE DEPRECIATION @ 25% WAS CLAIMED IN THIS YEAR ALSO. THE APPELLANT HAS ALSO RELIED ON THE DEC ISION OF CHENNAI BENCH IN THE CASE OF ITO VS. MEDICORP TECHNOLOGIES PVT. LTD. [12 2 TTJ 394 (CHE.)] WHEREIN IT WAS HELD THAT NON-COMPETE FEE WPS AN INTANGIBLE ASS ET AND WAS COVERED BY THE PROVISION OF SECTION 32 (1)( II) OF THE ACT. IT HAS FURTHER RELIED ON THE RECENT DECISION OF SERUM INSTITUTE OF INDIA LTD. [135 ITD 69(PUNE)] DA TED 18/01/2012 WHEREIN NON-COMPETE FEE WAS HELD TO BE AN INTANGIBL E ASSET AND THE NON- COMPETE RIGHT ACQUIRED BY THE COMPANY WAS HELD TO B E ELIGIBLE U/S. 32(1 )(II) OF THE ACT. THE A. O. ON THE OTHER HAND HAS RELIED ON THE JUDGMENT OF CHENNAI BENCH IN THE CASE OF SRIVATSAN SURVEYORS PVT. LTD. [32 SOT 268] WHEREIN IT WAS HELD THAT NO PRESCRIPTION FOR ALLOWANCE OF DEPR ECIATION IN RESPECT OF NON - COMPETE FEE WAS THERE. AFTER CONSIDERING THE REASONING GIVEN BY THE A. O. AND THAT OF THE APPELLANT, I AM INCLINED TO AGREE WITH THE SUBMISSION MADE BY TH E APPELLANT. THE ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 9 APPELLANT HAD PAID RS.10,00,000/- TO THE PROMOTER O F THE COMPANY WHICH WAS TAKEN OVER AS NON - COMPETE FEE. THE DECISION OF IT AT, PUNE BENCH AND CHENNAI BENCH RELIED BY THE APPELLANT APPEARS TO BE QUITE LOGICAL AS THE PAYMENT OF NON -COMPETE FEE TO ANOTHER PERSON TO RE DUCE THE COMPETITION, TENTAMOUNTS TO A RIGHT AND IS, THEREFORE, A CAPITAL ASSET WHICH IS INTANGIBLE IN NATURE. THIS ASSET IS ELIGIBLE FOR DEPRECIATION U/S . 32(1 )(II) OF THE ACT. FURTHER, THE CLAIM OF DEPRECIATION HAS BEEN ALLOWED IN EARLI ER TWO ASSESSMENT YEARS ALSO. RESPECTFULLY FOLLOWING THE DECISIONS GIVEN BY MY PREDECESSOR IN A. Y. 2009-10 VIDE ORDER DATED 28/05/2012, THE DISALLOWAN CE MADE BY THE A. O. IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACC ORDINGLY ALLOWED. 19. WE FURTHER OBSERVE THAT LD. DR HAS REFERRED AND RELIED ON THE JUDGMENT OF HON. DELHI HIGH COURT IN THE CASE OF SH ARP BUSINESS SYSTEM VS. CIT (SUPRA) WHEREIN HON. COURT HAS HELD THAT SINCE IN CASE OF NON-COMPETITION AGREEMENT ADVANTAGE IS A RE STRICTED ONE IN POINT OF TIME AND IT DOES NOT CONFER ANY EXCLUSIVE RIGHT TO CARRY ON PRIMARY BUSINESS ACTIVITY, SUCH AMOUNT PAID AS NON- COMPETE FEES DOES NOT QUALIFY FOR DEPRECIATION. 20. WE FURTHER OBSERVE THAT THE ISSUE RELATING TO D EPRECIATION RELATING TO NON-COMPETE FEES WAS ADJUDICATED BY THE CO-ORDINATE BENCH CHENNAI IN THE CASE OF ITO VS. MEDICORP TECH NOLOGIES PVT. LTD. [122 TTJ 394 (CHE.)] AND THE DECISION WAS HELD IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER :- THERE IS NO DISPUTE ON THE CAPITAL NATURE OF THE IM PUGNED 'NON-COMPETE FEE' IN VIEW OF THE REPORTED JUDGMENT OF THE SUPREME COURT IN CASE OF GUFFIC CHEM (P.) LTD. V. CIT [2011J 332 ITR 602, WHICH IS ADOPTED IN THE JUDGMEN T IN THE CASE OFHARI SHANKAR BHARTIA V. CIT [2011] 203 TAXMAN 6 (MAG.)/J5 TAXMAN N.COM 113 (CAL.). IN ANY CASE, BOTH THE PARTIES ACCEPTED THE FACT THAT THE SAID FE E IS CAPITAL IN NATURE. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CHENNAI BEN CH OF THE ITAT IN THE CASE OF ASSTT. CITV. REAL IMAGE TECH (P.) LTD. [2009] 177 T AXMAN 80 (MAG.) [PARA 13] FROM THE DECISION OF THE TRIBUNAL IN REAL IMAGE TEC H. (P.) LTD. (SUPRA), IT IS VIVID THAT THE, BY PAYMENT OF NON-COMPETE FEE TO ANOTHER PERSON TO REDUCE THE BUSINESS OR COMMERCIAL COMPETITION FOR A PERIOD, THE ASSESSEE A CQUIRES A RIGHT AND IT IS A CAPITAL ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 10 ASSET, WHICH IS A BUSINESS OR A COMMERCIAL RIGHT. S UCH RIGHTS ARE INTANGIBLE ONES AND THEY ARE COVERED BY THE PROVISIONS OF CLAUSE (II) O F SECTION 32(1). [PARA 14] IN SUCH CIRCUMSTANCES, THE ASSESSEE MUST WIN ON THI S ISSUE IN VIEW OF THE CITED RATIO IN THE CASE OF REAL IMAGE TECH. (P.) LTD. (SUPRA). FUR THER, IT IS A SETTLED ISSUE THAT THE NON-COMPETE FEE IS INTANGIBLE AND DEPRECIABLE ASSET .(PARA 15) 21. WE FURTHER OBSERVE THAT THE CO-ORDINATE BENCH P UNE IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. (SUPRA) HAS A LSO HELD THAT NON- COMPETE RIGHT ACQUIRED BY ASSESSEE COMPANY IS ELIGI BLE FOR DEPRECIATION, BY OBSERVING AS FOLLOWS :- THE WORDS 'BEING INTANGIBLE ASSETS' APPEAR IN CLAUS E (II) OF SECTION 32(1) BY WAY OF A NOMENCLATURE, TO CONTRADISTINGUISH THE ITEMS APPEAR ING IN CLAUSE (II) FROM THOSE APPEARING IN CLAUSE (I). ONE CAN ALSO SAY THAT CLAU SE (II) CONTAINS AN 'INCLUSIVE' DEFINITION OF 'INTANGIBLE ASSETS', FOR THE PURPOSE OF SECTION 32. [PARA 19] IT WAS AN ADMITTED FACT THAT THE PAYMENT OF RS. 2 C RORES WAS MADE BY THE ASSESSEE- COMPANY TO WARD OFF COMPETITION IN THE EXPORT BUSIN ESS WHICH WAS ACQUIRED BY IT FROM MS. THEREFORE, IT COULD BE SAFELY CONCLUDED, WITHOU T ANY FURTHER DISCUSSION, THAT - WHAT WAS ACQUIRED BY THE ASSESSEE BY PAYING THIS AM OUNT OFRS. 2 CRORES WAS A BUSINESS COMMERCIAL RIGHT. [PARA 21. 1] CONSEQUENTLY, IF THE BUSINESS/COMMERCIAL RIGHT OF A PATENT, COPYRIGHT, TRADE MARK, LICENSE AND FRANCHISE, FULFILS THE CONDITIONS OF 'B EING INTANGIBLE ASSET ', THEN SURELY THE IMPUGNED BUSINESS/COMMERCIAL RIGHT ACQUIRED BY THE ASSESSEE ALSO FULFILLED THAT CONDITION, BY WAY OF A LOGICAL COROLLARY. [PARA 29] THEREFORE, THE IMPUGNED 'NON-COMPETE RIGHT' ACQUIRE D BY THE ASSESSEE-COMPANY, WAS ELIGIBLE FOR DEPRECIATION UNDER CLAUSE (II) OF SECT ION 32(1). THE ORDER OF THE COMMISSIONER (APPEALS) WAS, ACCORDINGLY, UPHELD. [P ARA 31]. 22. FROM GOING THROUGH THE ABOVE JUDGMENT/DECISIONS , AS MENTIONED IN PARAGRAPHS 19,20 & 21 ABOVE WE FIND TH AT BOTH THE VIEWS I.E. ALLOWING/DISALLOWING EXIST AS REGARDS T HE ISSUE OF CLAIMING OF DEPRECIATION ON NON-COMPETE FEES. HOWEVER, IN TH E GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND LOOKING TO THE CONSIS TENCY OF ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 11 ALLOWABILITY OF DEPRECIATION ON NON-COMPETE FEES IN THE CASE OF ASSESSEE FOR ASST. YEAR 2007-08, 2008-09 AND FOR AS ST. YEAR 2009- 10 DECIDED BY THE CO-ORDINATE BENCH PRONOUNCED IN T HE YEAR 2016, WE ARE OF THE VIEW THAT ASSESSEES CLAIM OF DEPRECI ATION ON NON- COMPETE FEES HAS RIGHTLY BEEN ALLOWED BY LD. CIT(A) . WE THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A) AND WE UPHOLD THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 23. NOW WE TAKE UP GROUND NO.2 WHICH READS AS UNDE R :- 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,,236/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. 24. BRIEF FACTS RELATING TO THIS GROUND ARE THAT AS SESSEE DEBITED RS.11,236/- AS PRIOR PERIOD EXPENDITURE IN THE PROF IT AND LOSS ACCOUNT INCURRED TOWARDS CUSTODIAL FEES PAID TO CENTRAL DEP OSITORY SERVICES INDIA LTD. FOR F.Y. 2008-09. CLAIM OF ASSESSEE WAS THAT SINCE THE LIABILITY OF THE AMOUNT OF RS.11,236/- HAS BEEN CRY STALLIZED DURING THE FINANCIAL YEAR UNDER CONSIDERATION I.E. 2009-10 THE CLAIM SHOULD BE ALLOWED; WHEREAS LD. ASSESSING OFFICER DISALLOWED T REATING IT AS PRIOR PERIOD EXPENDITURE. 25. WE HAVE HEARD BOTH THE LD. REPRESENTATIVES AND GONE THROUGH THE MATERIAL RECORDS PLACED BEFORE US. WE OBSERVE THAT LD. CIT(A) HAS DELETED THIS DISALLOWANCE OF RS.11,236/- RELATI NG TO PRIOR PERIOD EXPENDITURE BY OBSERVING AS FOLLOWS :- ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 12 3.3 DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS MADE BY AR OF THE APPELLANT. THE FACT REMAINS THAT THE GENUINENESS OF EXPENDITURE HAS NOT BEEN DISPUTED. IT IS CONCLUDED BY THE AO THAT THE EXPENDITURE SHOULD HAVE BEEN CLAIMED IN A. Y, 2009- 10. HOWEVER, AS PER FACTS THERE IS NO POSTPONEMENT OF LIABILITY BY THE APPELLANT. HAVING NOT CLAIMED EXPENDITURE IN A. Y. 2009-10, THE APPELLANT HAS PAID MORE INCOME TAX IN A. Y. 2009-10. IN VIEW OF RATIO LAID DOWN BY HON' BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. NAGRI MILLS R EPORTED IN 33 ITR 681 (BOM), THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELETED AND THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 26. WE FURTHER OBSERVE THAT THERE IS NO DISPUTE TO THE FACT THAT AN AMOUNT OF RS.11,236/- WAS PAID TO CENTRAL DEPOSITOR Y SERVICES LTD. TOWARDS CUSTODIAL FEES PERTAINING TO THE PERIOD F.Y .2008-09. HOWEVER, AS SUBMITTED BY LD. AR THAT THE CUSTODIAL FEES IS LEGITIMATE BUSINESS EXPENDITURE AND THERE IS NO DISPUTE TO IT BEING A REVENUE IN NATURE. WE ARE, THEREFORE, OF THE VIEW THAT LIABILI TY OF THE ASSESSEE OF RS.11,236/- BEING CUSTODIAL FEES CRYSTALLIZED DURIN G THE F.Y.2009-10 AND THE SAME SHOULD NOT BE TREATED AS PRIOR PERIOD EXPENDITURE AS THERE IS NO POSTPONEMENT OF LIABILITY. WE, THEREFOR E, FIND NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT(A). ACCORDING LY, THIS GROUND OF REVENUE IS DISMISSED. 27. GROUND NO.6 READS AS UNDER :- 6). THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) -XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSE SSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE, AMOUNTING TO RS.7, 19,01,743/- ON ACCOUNT OF DEPRECIATION ON GOODWILL ARISING ON AMAL GAMATION, ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 13 WHICH WAS NEVER CLAIMED IN THE RETURN OF INCOME FIL ED BY THE ASSESSEE. 28. BRIEF FACTS RELATING TO THIS GROUND ARE THAT AT THE TIME OF FILING RETURN OF INCOME FOR ASST. YEAR 2010-11 ASSESSEE DI D NOT MAKE OF DEPRECIATION IN RESPECT OF GOODWILL. AFTER FILING THE RETURN OF INCOME AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS HON . SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (SUPRA), GAVE A LAND MARK JUDGMENT STATING THAT GOOD-WILL IS AN ASSET WITHIN THE MEANING OF SECTION 32 OF THE ACT AND DEPRECIATION ON GOOD- WILL IS ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. ON THE STRENGTH O F THE JUDGMENT OF HON. SUPREME COURT, BEING THE LAW OF THE LAND, ASSE SSEE VIDE ITS SUBMISSION DATED 20.12.2012 REVISED COMPUTATION OF INCOME MAKING A FRESH CLAIM THAT A SUM OF RS.7,19,01,743/- BE ALL OWED AS DEPRECIATION ON GOODWILL. HOWEVER, LD. ASSESSING OFFICER DENIED THE CLAIM FOR THE VERY REASON THAT ASSESSEE HAS NOT FIL ED REVISED RETURN OF INCOME FOR CLAIMING SUCH DEDUCTION AND THE ASSESSEE IS NOT PERMITTED TO CLAIM DEPRECIATION ON GOODWILL. 29. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. C IT(A) AND SUCCEEDED AS LD. CIT(A) ALLOWED THE ASSESSEES CLAI M OF DEPRECIATION ON GOODWILL AT RS.7,19,01,743/- BY OBSERVING AS F OLLOWS :- 7.3 DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS MADE BY MADE BY AR OF THE APPELLANT. THE CONTROVERS Y REGARDING ALLOWABILITY OF DEPRECIATION ON GOODWILL HAS RECENT LY BEEN SETTLED WITH THE JUDGMENT BY SUPREME COURT. IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 14 REPORTED AT 348 ITR 302 (SC) WHILE ALLOWING THE CLA IM OF DEPRECIATION ON GOODWILL IT WAS HELD AS UNDER: 'SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIAT ION -ALLOWANCE/RATE OF - ASSESSMENT YEAR 2003-04 - WHETHER 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) -HELD, YES - DURING RELEVANT ASSESSMENT YEAR, ONE Y LTD. AMALGAMATED WITH ASSESSEE-COMPANY - ACCORDING TO AS SESSES, EXCESS CONSIDERATION PAID BY IT OVER VALUE OF NET ASSETS A CQUIRED OF 'Y' LTD. AMOUNTED TO GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED - AUTHORITIES BELOW RECORDED A FINDING THAT ASSETS AND LIABILITIES OF ' Y' LTD. WERE TRANSFERRED TO ASSESSEE FOR A CONSIDERATION; THAT DIFFERENCE BETWE EN COST OF AN ASSET AND AMOUNT PAID CONSTITUTED GOODWILL AND THAT ASSESSEE- COMPANY IN PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN FORM O F GOODWILL BECAUSE OF WHICH MARKET WORTH OF ASSESSEE-COMPANY STOOD INCREA SED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - WHETHER SINCE REVENU E COULD NOT REBUT FACTUAL FINDINGS RECORDED BY AUTHORITIES BELOW, IMP UGNED ORDER PASSED BY THEM WAS TO BE UPHELD - HELD, YES [PARA 8] [IN FAVO UR OF ASSESSEE] II. SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPREC IATION -ALLOWANCE /RATE OF - WHETHER STOCK EXCHANGE MEMBERSHIP CARD IS AN ASSET ELIGIBLE FOR EPRECIATION UNDER SECTION 32 -. HELD, YES [PARA 1] [IN FAVOUR O F ASSESSEE]' THE CLAIM OF THE APPELLANT CAN BE ENTERTAINED BY CI T(A) IN VIEW OF HON'BLE BOMBAY HIGH COURT'S DECISION IN THE CASE OF CIT VS. PRUTHV I BROKERS AND SHAREHOLDERS [349 ITR 336 (BOM)]. IN VIEW OF SUPREME COURT'S DECISION IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (SUPRA), THE CONTENTION OF THE APPE LLANT IS ACCEPTED. THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ON GOODWILL ACCO RDINGLY. THE GROUND OF APPEAL IS ALLOWED. . : 30. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 31. LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDE R OF LD. ASSESSING OFFICER. 32. ON THE OTHER HAND LD. AR SUPPORTING THE ORDER OF LD. CIT(A) SUBMITTED THAT POST JUDGMENT OF HON. SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (SUPRA) IT IS UNDISPU TED THAT ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION ON GOODWILL. FURTH ER REASON FOR NOT CLAIMING THE IMPUGNED DEPRECIATION ON GOODWILL, T HE JUDGMENT OF ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 15 HON. APEX COURT WAS NOT AVAILABLE AT THE TIME OF FI LING RETURN OF INCOME FURTHER ASSESSEE MADE A RIGHTFUL CLAIM FOR ASST. YEAR 2010- 11 DURING THE COURSE OF ASSESSMENT PROCEEDINGS POST JUDGMENT OF HON. APEX COURT IN THE CASE OF CIT VS. SMIFS SECURI TIES LTD. LD. AR FURTHER SUBMITTED THAT THE MAIN REASON FOR DENIAL O F CLAIM BY LD. ASSESSING OFFICER THAT ASSESSEE HAS NOT FILED A REV ISED RETURN OF INCOME FOR CLAIMING THE DEPRECIATION, HOWEVER, HON. BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS AND SH AREHOLDERS (SUPRA) HAS BEEN HELD THAT AN ASSESSEE CAN RAISE SU CH CLAIM BEFORE THE APPELLATE AUTHORITIES. ALSO HON. BOMBAY HIGH CO URT REFERRED TO THE JUDGMENT OF HON. APEX COURT IN THE CASE OF NATI ONAL THERMAL POWER COMP. LTD. WHEREIN HON. APEX COURT HELD THAT THERE IS NO BAR TO THE POWER OF ASSESSING OFFICER TO ENTERTAIN A CL AIM OF DEDUCTION OTHERWISE THAN FILING OF REVISED RETURN. 33. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE AND GONE THROUGH THE LEGAL DECISIONS REFERRED AND RELIED ON BY BOTH THE PARTIES. THROUGH THIS GROUND REVENUE HAS ASSAILED THE ORDER OF LD. CIT(A) FOR ALLOWING ASSES SEES CLAIM OF DEPRECIATION ON GOOD-WILL OF RS.7,19,01,743/- WH ICH WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY WAY OF FILING REVISED COMPUTATION OF INCOME AND IGNORING THE FACT THAT RE VISED RETURN OF INCOME WAS NOT FILED. 34. WE OBSERVE THAT PURSUANT TO THE SCHEME OF ARRAN GEMENT APPROVED BY HON. GUJARAT HIGH COURT IN ASST. YEAR 2 008-09 I.E. ZYDUS WELLNESS LTD. ACQUIRED THE CONSUMER PRODUCTS DIVISION OF ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 16 CADILA HEALTHCARE LTD. INCLUDING THE BRANDS SUGAR- FREE AND EVER YOUTH AND RELATED INTANGIBLE ASSETS OF THE SAID BU SINESS, WHICH CAME TO BE ACCOUNTED FOR AS GOODWILL IN THE BOOKS OF A CCOUNTS OF ZYDUS WELLNESS LTD. THE VALUE OF THE SAID GOODWILL, ACQUI RED AT RS.28.76 CRORES, STOOD DULY REFLECTED IN THE ANNUAL ACCOUNTS OF THE COMPANY FOR F.Y.2008-09 AS THE EXCESS OF THE AGREEGATE FACE VALUE OF THE EQUITY SHARES ISSUED OVER THE EXCESS OF THE ASSETS AND LIABILITIES. AT THE TIME OF FILING OF RETURN INCOME IN ASST. YEAR 2 010-11 THE ISSUE OF CLAIMING OF DEPRECIATION ON GOODWILL WAS DEBATABLE AND UNCERTAIN. IT WAS ONLY AFTER THE JUDGMENT OF HON. SUPREME COURT I N THE CASE OF CIT VS. SMIFFS SECURITIES LTD. (SUPRA) WHEREIN HON. COURT HAD AN OCCASION TO DEAL WIH THE ISSUE OF CLAIMING DEPRECIA TION ON GOODWILL, SIMILAR TO THE CASE OF ASSESSEE WHEREIN GOODWILL WA S PAID ON ACCOUNT OF AMALGAMATION. HON. COURT HELD AS UNDER :- 'EXPLANATION 3 STATES THAT THE EXPRESSION 'ASSET' S HALL MEAN AN INTANGIBLE ASSET, BEING KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMA RKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMIL AR NATURE. A READING THE WORDS 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF S IMILAR NATURE' IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WOULD FALL UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NAT URE'. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRE TING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). IN THE CIRCU MSTANCES, WE ARE OF THE VIEW THAT 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. ' 35. SUBSEQUENT TO THE PRONOUNCEMENT OF THE JUDGMENT OF HON. APEX COURT IN THE CASE OF CIT VS. SMIFFS SECURITIES LTD. (SUPRA) ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 17 ASSESSEE PUT FORWARD ITS RIGHTFUL CLAIM FOR DEPRECI ATION OF RS.7,19,01,743/- BEING 25% VALUE OF ASSETS OF RS.28 .76 CRORES. ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL WAS DE NIED BY LD. ASSESSING OFFICER, HOWEVER, LD. CIT(A) ALLOWED ASSE SSEES CLAIM BY FOLLOWING THE JUDGMENT OF HON. APEX COURT IN THE CA SE OF CIT VS. SMIFS SECURITIES LTD. (SUPRA). 36. FURTHER WE ALSO OBSERVE THAT THE MAIN REASON FO R DENIAL OF DEDUCTION BY LD. ASSESSING OFFICER WAS THAT ASSESSE E HAS NOT FILED REVISED RETURN OF INCOME TO MAKE RIGHTFUL CLAIM. LD . AR TOOK US THROUGH THE JUDGMENT OF HON. BOMBAY HIGH COURT IN T HE CASE OF CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS 349 ITR 336 (B OM) WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT ASSESSING OFFICER IS BOUND TO ENTERTAIN RIGHTFUL CLAIM OF DEDUCTION MADE OTHERWIS E THAN BY FILING REVISED RETURN. WE FIND IT PERTINENT TO OBSERVE THE RATIO OF THE JUDGMENT OF HON. BOMBAY HIGH COURT IN THE CASE OF C IT VS. PRUTHVI BROKERS AND SHAREHOLDERS (SUPRA) WHEREIN FOLLOWING OBSERVATION WAS MADE :- 'A LONG LINE OF AUTHORITIES ESTABLISH CLEARLY THAT AN ASSESSEE IS ENTITLED TORAISE ADDITIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUB MISSIONS, BUT ALSO ADDITIONAL CLAIMS NOT MADE IN THE RETURN FILED BY IT. [PARA 10 ] IN JUTE CORPN. OF INDIA LTD. [1991] 187 ITR 688 FOR THE ASSESSMENT YEAR 1974-75 THE APPELLANT DID NOT CLAIM ANY DEDUCTION OF ITS LIABIL ITY TOWARDS PURCHASE TAX UNDER THE PROVISIONS OF THE BENGAL RAW JUTE TAXATION ACT, 194 1, AS IT ENTERTAINED A BELIEF THAT IT WAS NOT LIABLE TO PAY PURCHASE TAX UNDER THAT ACT. SUBSEQUENTLY, THE APPELLANT WAS ASSESSED TO PURCHASE TAX AND THE ORDER OF ASSESSMEN T WAS RECEIVED BY IT ON 23RD NOVEMBER, 1973. THE APPELLANT CHALLENGED THE SAME A ND OBTAINED A STAY ORDER. THE APPELLANT ALSO FILED AN APPEAL FROM THE ASSESSMENT ORDER UNDER THE INCOME TAX ACT. IT WAS ONLY DURING THE HEARING OF THE APPEAL THAT THE ASSESSEE CLAIMED AN ADDITIONAL DEDUCTION IN RESPECT OF ITS LIABILITY TO PURCHASE T AX. THE APPELLATE ASSISTANT ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 18 COMMISSIONER (AAC) PERMITTED IT TO RAISE THE CLAIM AND ALLOWED THE DEDUCTION. THE TRIBUNAL HELD THAT THE AAC HAD NO JURISDICTION TO E NTERTAIN THE ADDITIONAL GROUND OR TO GRANT RELIEF ON A GROUND WHICH HAD NOT BEEN RAIS ED BEFORE THE INCOME TAX OFFICER. THE TRIBUNAL ALSO REFUSED THE APPELLANT'S APPLICATI ON FOR MAKING A REFERENCE TO THE HIGH COURT. THE HIGH COURT UPHELD THE DECISION OF T HE TRIBUNAL AND REFUSED TO CALL FOR A STATEMENT OF CASE. IT IS IN THESE CIRCUMSTANC ES THAT THE APPELLANT FILED THE APPEAL BEFORE THE SUPREME COURT. THE SUPREME COURT HELD AS UNDER:- 5. IN CITV. KANPUR COAL SYNDICATE, A THREE JUDGE BENCH OF THIS COURT DISCUSSED THE SCOPE OF SECTION 31(3)(A) OF THE INCO ME TAX ACT, : 1922 WHICH IS ALMOST IDENTICAL TO SECTION 251(L)(A). THE COURT HE LD - ASUNDER: (ITR P. 229) 'IF AN APPEAL LIES, SECTION 31 OF THE ACT DESCRIBES THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER SEC TION 31(3)(A) IN DISPOSING OF SUCH AN APPEAL THE APPELLATE ASSISTANT COMMISSIONER MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; UNDER CLAUSE (B) THEREOF HE MAY SET AS IDE THE ASSESSMENT AND DIRECT THE INCOME TAX OFFICER TO , MAKE A FRESH ASSESSMENT. THE APPELLATE ASSISTANT COMMISSIONER HAS,THEREFORE, PLENARY POWER S IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS CO-TERMINUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOME-TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO,' 6. THE ABOVE OBSERVATIONS ARE SQUARELY A PPLICABLE TO THE INTERPRETATION OF SECTION 251(L)(A) OF THE ACT. THE DECLARATION OF LAWIS CLEAR THAT THE POWER OF THE APPELLATE ASSISTANT COMMISSIO NER IS CO-TERMINUS WITH THAT OF THE INCOME TAX OFFICER, IF THAT BE SO, THER E APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE AS SESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE INC OME TAX OFFICER. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DO ES NOT PLACE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELLATE POWER. E VEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST THE ORDER OF A SUBORDINATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR L IMITATIONS IF ANY PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STA TUTORY PROVISION THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON AND NONE WAS PLACED BEFORE US TO JUSTIFY CUR TAILMENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDE R OF ' ASSESSMENT PASSED BY THE INCOME TAX OFFICER.' ' ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 19 (B) IT IS CLEAR, THEREFORE, THAT AN ASSESSEE IS ENT ITLED TO RAISE NOT MERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES, BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THEM. THE APPELLATE AUTHOR ITIES HAVE THE DISCRETION WHETHER OR NOT TO PERMIT SUCH ADDITIONAL CLAIMS TO BE RAISE D. IT CANNOT, HOWEVER, BE SAID THAT THEY HAVE NO JURISDICTION TO CONSIDER THE SAME. THE Y HAVE THE JURISDICTION TO ENTERTAIN THE NEW CLAIM. THAT THEY MAY CHOOSE NOT TO EXERCISE THEIR JURISDICTION IN A GIVEN CASE IS ANOTHER MATTER. THE EXERCISE OF DISCRETION IS EN TIRELY DIFFERENT FROM THE EXISTENCE OF JURISDICTION. [PARA 11] FURTHER THE OBSERVATION OF THE SUPREME COURT IN THE CASE OF JUTE CORPN. OF INDIA LTD. (SUPRA) TO THE EFFECT 'IF THE GROUND SO RAISED COUL D NOT HAVE BEEN RAISED AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE : ASSESSMENT ORDER WAS MADE....' OR 'THAT THE GROUND BECAME AVAILABLE ON A CCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW,' DOES NOT CURTAIL THE AMBIT OF THE JURISDIC TION OF THE APPELLATE AUTHORITIES STIPULATED EARLIER. THEY DO NOT RESTRICT THE NEW/AD DITIONAL GROUNDS THAT MAY BE TAKEN BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITIES TO THOSE THAT WERE NOT AVAILABLE WHEN THE RETURN WAS FILED OR EVEN WHEN THE ASSESSMENT OR DER WAS MADE. THE APPELLATE AUTHORITIES, THEREFORE, HAVE JURISDICTION TO DEAL N OT MERELY WITH ADDITIONAL GROUNDS, WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRC UMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABLE WHEN THE RE TURN WAS FILED. THE FIRST PART VIZ., 'IF THE GROUND SO RAISED COULD NOT HAVE BEEN RAISED AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT ORDER WAS M ADE....' CLEARLY RELATE TO CASES WHERE THE GROUND WAS AVAILABLE WHEN THE RETURN WAS FILED AND THE ASSESSMENT ORDER WAS MADE BUT 'COULD NOT HAVE BEEN RAISED' AT THIS S TAGE. THE WORDS ARE 'COULD NOT HAVE BEEN RAISED' AND NOT 'WERE NOT IN EXISTENCE'. GROUNDS WHICH WERE NOT IN EXISTENCE WHEN THE RETURN WAS FILED OR WHEN THE ASS ESSMENT ORDER WAS MADE FALL WITHIN THE SECOND CATEGORY VIZ., WHERE 'THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF 'CIRCUMSTANCES OR LAW.'[PARAS 12 AND 13] : IT WAS THEN SUBMITTED BY MR. GUPTA THAT THE SUPREME COURT HAD TAKEN A DIFFERENT VIEW IN GOETZE (INDIA) LTD (SUPRA). WE ARE UNABLE TO AGR EE. THE DECISION WAS RENDERED BY A BENCH OF TWO LEARNED JUDGES AND EXPRESSLY REFERS TO THE JUDGMENT OF THE BENCH OF THREE LEARNED JUDGES IN NATIONAL THERMAL POWER COMP . LTD. (SUPRA). THE QUESTION BEFORE THE COURT WAS WHETHER THE APPELLANT-ASSESSEE COULD MAKE A CLAIM FOR DEDUCTION, OTHER THAN BY FILING A REVISED RETURN. A FTER THE RETURN WAS FILED, THE APPELLANT SOUGHT TO CLAIM A DEDUCTION BY WAY OF A L ETTER BEFORE THE ASSESSING OFFICER. THE CLAIM, THEREFORE, WAS NOT BEFORE THE APPELLATE AUTHORITIES. THE DEDUCTION WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THERE WAS NO PROVISION UNDER THE ACT TO MAKE AN AMENDMENT IN THE RETURN OF INCOM E BY MODIFYING AN APPLICATION AT THE ASSESSMENT STAGE WITHOUT REVISING THE RETURN. T HE COMMISSIONER OF INCOME-TAX (APPEALS) ALLOWED THE ASSESSEE'S APPEAL. THE TRIBUN AL, HOWEVER, ALLOWED THE DEPARTMENT'S APPEAL. IN THE SUPREME COURT, THE ASSE SSEE RELIED UPON THE JUDGMENT IN NATIONAL THERMAL POWER CO. LTD. (SUPRA) CONTENDING THAT IT WAS OPEN TO THE ASSESSEE TO RAISE THE POINTS OF LAW EVEN BEFORE THE TRIBUNAL . THE SUPREME COURT HELD:- ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 20 '4. THE DECISION IN QUESTION IS THAT THE POWER OF T HE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961, IS TO ENTERTAIN FO R THE FIRST TIME A POINT OF LAW PROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE O F LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NOT IN ANY WAY RELA TE TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN A > ; CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE CIRCUMSTANCES OF TH E CASE, WE DISMISS THE CIVIL APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE : ASSESSING AUTHORITY AND DOES NOT IMP INGE ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961. THERE SHALL BE NO ORDER AS TO COSTS.' (PARA 22) IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT HO LD ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFECT THAT E VEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE THE APPELL ATE AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN THIS JUDGMENT. (PARA - : 23)' THE APPELLANT, THEREFORE, PRAYS THAT IN ANY CASE, Y OUR HONOUR, AS THE FIRST APPELLATE AUTHORITY IS EMPOWERED TO ENTERT AIN THE APPELLANT'S CLAIM FOR DEPRECIATION ON GOODWILL, RESPECTFULLY FOLLOWING TH E RATIO OF THE APEX COURT IN THE CASE OF SMIJFS SECURITIES (SUPRA).' 37. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. APE X COURT IN THE CASE OF CIT VS. SMIFFS SECURITIES LTD. (SUPRA), AND THE JUDGMENT OF HON. BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTH VI BROKERS AND SHAREHOLDERS (SUPRA) WE ARE OF THE VIEW THAT LD. CI T(A) HAS RIGHTLY ALLOWED THE JUSTIFIABLE & CORRECT CLAIM OF DEPRECIA TION ON GOODWILL MADE BY THE ASSESSEE THROUGH REVISED COMPUTATION OF INCOME WITHOUT FILING REVISED RETURN OF INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS DISMISSED. ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 21 38. GROUND NO.7 & 8 ARE OF GENERAL NATURE, WHICH NE ED NOT BE ADJUDICATED. 39. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 23/12/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1959/AHD/2013 ASST. YEAR 2010-11 22 1. DATE OF DICTATION: 19/11/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 21/12/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 23/12/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: