The DCIT, Circle-5, Ahmedabad V. NetVision Web Technologies Pvt.Ltd., Ahmedabad

ITA 2394/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67612 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI G. C. GUPTA, VP AND SHRI ANIL CHATURVE DI, AM) ITA NO.2394/AHD/2010 (AY: 2008-09) THE D. C. I. T., CIRCLE-5, 2 ND FLOOR, C. U. SHAH CHAMBERS, ASHRAM ROAD, AHMEDABAD P. A. NO. AABCN 6164 G VS M/S. NETVISIIN WEB TECHNOLOGIES LTD., 401-402, S. K. HOUSE, DRIVE-IN ROAD, THALTEJ, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI O. P. BATHEJA, SR. DR RESPONDENT BY SHRI S. N. DIVATIA, AR DATE OF HEARING: 18-08-2013 DATE OF PRONOUNCEMENT: 23-08-2013 ORDER PER ANIL CHATURVEDI : THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-XI, AHMEDAB AD DATED 09 TH JUNE, 2010 FOR THE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS AS CULLED OUT FROM THE ORDERS OF THE AUTHORITIES BELOW ARE THAT THE ASSESSEE IS COMPANY ENGAGED IN T HE BUSINESS OF COMPUTER EDUCATION, SOFTWARE DEVELOPMENT AS WELL AS SALES AND ITS EXPORTS. THE ASSESSEE FILED ITS RETURN OF INCOME FO R THE ASSESSMENT YEAR 2008-09 ON 30-09-2008 DECLARING LOSS OF RS.80, 89,561/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 15-03 -2010 AND THE TOTAL LOSS WAS DETERMINED AT RS.12,67,420/-. AGGRIE VED BY THE ORDER OF THE LEARNED AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED ITA NO.2394/AHD/2010 (AY 2008-09) DCIT, CIR-5, AHMEDABAD VS M/S. NETVISION WEB TECHNO LOGIES LTD. 2 CIT(A). THE LEARNED CIT(A) VIDE ORDER DATED 09-06-2 010 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY TH E AFORESAID ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS NOW IN APPEAL B EFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- (1). THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF DEPRECIATION ON GOODWILL OF RS.67,66,083/-. 4. BEFORE US AT THE OUTSET, THE LEARNED AR SUBMITTE D THAT THE ISSUE IN THE PRESENT APPEAL IS WITH REGARD TO DEPRECIATIO N ON GOODWILL. HE FURTHER SUBMITTED THAT FACTS AND ISSUES INVOLVED IN THE APPEAL ARE IDENTICAL FOR THE ASSESSMENT YEAR 2007-08 AND THE I SSUE HAS ALREADY BEEN DECIDED IN ITS FAVOUR BY THE ITAT, AHMEDABAD A BENCH BY RELYING ON THE DECISION OF THE HONBLE APEX COURT I N THE CASE OF CIT VS SMIFS SECURITIES LTD. (2012) 252 CTR (SC) 233, V IDE ORDER DATED 14-12-2012 IN ITA NO.2241/AHD/2010 AND THEREFORE UR GED THAT FOLLOWING THE AFORESAID ORDER, THE ISSUE BE DECIDED IN ITS FAVOUR. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORD ER OF THE TRIBUNAL. THE LEARNED DR ON THE OTHER HAND RELIED ON THE ORDE R OF THE AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESS EE HAD CLAIMED DEPRECIATION OF RS.67,66,083/- ON THE AMOUNT OF GOO DWILL. THE LEARNED AO WAS OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO DEPRECIATION ON GOODWILL AS GOODWILL WAS NOT SPEC IFIED IN SECTION 32 AS INTANGIBLE ASSET FOR THE PURPOSE OF DEPRECIATION AND ACCORDINGLY DISALLOWED THE SAME. FURTHER, IT IS NOT IN DISPUTE THAT THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF THE ASSE SSMENT YEAR 2007- ITA NO.2394/AHD/2010 (AY 2008-09) DCIT, CIR-5, AHMEDABAD VS M/S. NETVISION WEB TECHNO LOGIES LTD. 3 08. WE FIND THAT OUR CO-ORDINATE BENCH ON IDENTICAL FACTS HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS U NDER: 8. ON PERUSAL OF THE RECORDS, WE FIND THAT ITAT AHM EDABAD B BENCH HAS RECENTLY DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE WHILE ADJUDICATING REVENUE S APPEAL IN ITA NO.1186/AHD/2011 ETC. IN THE CASE OF NET 4 NUT LTD. DATED 21-09- 2012 . THE RELEVANT PORTION OF THE ABOVE ORDER OF T HE TRIBUNAL IS EXTRACTED HEREIN UNDER FOR REFERENCE: 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL O N RECORD. THE LEARNED CIT(A) HAS GIVEN CATEGORICAL FINDINGS T HAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.1,87,81,830 /- ON DEVELOPMENT OF AVTAAR AND THE SAID SOFTWARE WAS REGISTERED AS TRADE MARK UNDER THE TRADE-MARK ACT,1 999 IN THE NAME OF THE ASSESSEE AND THE SAME WAS UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS AND IN VIE W OF THIS FACT, DEPRECIATION ON THIS SOFTWARE SHOULD BE ALLOW ED. FURTHER, SECTION 32 OF THE ACT CLEARLY SPECIFIES THAT DEPREC IATION SHALL BE ALLOWABLE ON ANY INTANGIBLE ASSETS. THE LEARNED AR HAS ALSO PLACED RELIANCE IN THE DECISION OF ITAT AHMEDABAD A BENCH IN THE CASE OF DICT VS M/S. BHAGAWATI BANGUET S AND HOTELS LTD. IN ITA NO.1312/AHD/2002 FOR AY 2007-08 ORDER DATED 28-02-2012. IN THIS CASE THE TRIBUNAL HAD DEC IDED THE ISSUE OF CLAIM OF DEPRECIATION ON INTANGIBLE ASSET IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT PORTION OF THE AFORESAID ORDER OF THE TRIBUNAL IS REPRODUCED H EREIN BELOW: 5.7. IN A NUT-SHELL, THE ASSESSEE, WITHOUT INTANGIB LE ASSETS IN THE SHAPE OF RIGHTS AND ENTITLEMENT OF COMMERCIAL R IGHTS OF THE ERSTWHILE ENTITIES, WOULD NOT HAVE PROSPERED OR IN A POSITION TO CARRY ON THE CATERING BUSINESS ONLY BY ACQUIRING TA NGIBLE ASSETS. BY ACQUIRING TANGIBLE AND INTANGIBLE ASSET S OF THE ERSTWHILE CONCERNS CITED SUPRA, THE ASSESSEE HAD PR OSPERED IN ITS BUSINESS BY POSTING SUBSTANTIAL TURNOVER AND PR OFITS WHICH IMPLICITLY EXHIBITS THAT THE ASSESSEE HAD, IN FACT, ACQUIRED INTANGIBLE ASSETS [BUSINESS AND COMMERCIAL RIGHTS] IN THE FORM OF GOODWILL. IN ESSENCE, THE INTANGIBLE ASSETS W ERE IN THE NATURE OF VALUABLE COMMERCIAL AND BUSINESS RIGHTS W HICH WERE TO BE USED IN EXPANDING THE ASSESSEES BUSINES S, RESULTING IN, HUGE TURNOVER AND PROFITS AS POINTED OUT SUPRA. 5.9. IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS AND A LSO IN ITA NO.2394/AHD/2010 (AY 2008-09) DCIT, CIR-5, AHMEDABAD VS M/S. NETVISION WEB TECHNO LOGIES LTD. 4 CONFORMITY WITH THE RULING OF VARIOUS JUDICIARIES, CHIEFLY, THE RULING OF THE HONBLE HIGH COURT OF KERALA REFERRED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUS TIFIED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEPRECIA TION ON INTANGIBLE ASSETS ACQUIRED BY IT. IT IS ORDERED AC CORDINGLY. WE MAKE IT VERY CLEAR THAT WE HAVE ARRIVED AT THIS ABO VE CONCLUSION FROM THE FACTS OF THIS CASE AS THE VALUA TION REPORT SUBMITTED BY THE APPELLANT HAS NOT BEEN SUCCESSFULL Y CHALLENGED BY THE REVENUE TO ESTABLISH THE TRANSACT ION TO BE SHAM. THEREFORE, WE CONSIDER THE PAYMENT MADE ON AC COUNT OF GOODWILL IS GENUINE AND REASONABLE SINCE IT IS A RRIVED BASED ON A REASONABLE VALUATION AND COMPUTATION. 5.2 IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIN D ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A). THEREFORE, THIS GROUND RAISED BY THE REVENUE IS DIS MISSED. 9. CONSIDERING THE ABOVE DISCUSSIONS AND IN VIEW OF THE FACT THAT THE LEARNED DR COULD NOT CONTROVERT THE SUBMISSION OF THE LEARNED AR BY ANY COGENT MATERIAL EVIDENCE, WE ARE OF THE O PINION THAT THE LEARNED CIT(A) WAS RIGHT IN ALLOWING ASSESSEES CLA IM OF DEPRECIATION ON GOOD WILL AMOUNTING TO RS.90,21,444/- AND HIS OR DER REQUIRES NO INTERFERENCE BY US. ACCORDINGLY, WE HEREBY DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS APPEAL. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF OU R CO-ORDINATE BENCH, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF THE LEARNED CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE R EVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-08-2013. SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (ANIL CHATURVEDI) ACCOUNTANT MEMBER LAKSHMIKANTA DEKA/- ITA NO.2394/AHD/2010 (AY 2008-09) DCIT, CIR-5, AHMEDABAD VS M/S. NETVISION WEB TECHNO LOGIES LTD. 5 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 1. DATE OF DICTATION: 20-08-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 20-08-13 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: 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: