Appeal details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 8013 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
11 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-03-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
I
Assessment Year
2007-2008
Appeal Filed On
08-04-2010
Judgement Text
1 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI J JJ J BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM & & & & SMT ASHA VIJAYARAGHAVAN, JM SMT ASHA VIJAYARAGHAVAN, JM SMT ASHA VIJAYARAGHAVAN, JM SMT ASHA VIJAYARAGHAVAN, JM ITA NO. 2705/MUM/2010 ITA NO. 2705/MUM/2010 ITA NO. 2705/MUM/2010 ITA NO. 2705/MUM/2010 (ASST YEAR 2007 (ASST YEAR 2007 (ASST YEAR 2007 (ASST YEAR 2007- -- -08) 08) 08) 08) INTIME SPECTRUM REGISTRY LTD (NOW KNOWN AS LINK INTIME INDIA P LTD) 13 PANNALAL SILK MILLS COMPOUND LBS MARG, MUMBAI 78 VS THE ASST COMMR OF INCOME TAX 10(3), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACI4998N AAACI4998N AAACI4998N AAACI4998N ASSESSEE BY SHRI SHRI FIROZE B AMDHYARUJINA/MR R DEVARAJAN REVENUE BY SHRI S K SINGH PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 2.2.2010 OF THE CIT(A) 22, MUMBAI RELATING TO AY 20 07-08. 2 IN GROUNDS OF APPEAL NO.1, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DISALLOWING DEPRECIATION OF RS. 2,73,015/ - ON GOODWILL. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN BUSINESS AS REGISTRAR AND SHARE TRANSFER AGENTS AND REGISTRAR OF ISSUES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 2,73,015/- ON ACCOUNT OF GOODWILL. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRECIATION ON GOODWILL SHOULD NOT BE DISALLOWED AS THE SAME IS NO T ALLOWABLE AS PER PROVISIONS 2 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) OF SEC. 32 OF THE I T ACT. THE ASSESSEE FILED WRIT TEN SUBMISSIONS AND CONTENDED THAT THE GOODWILL FALLS UNDER THE CLASSIFICATION OF ANY OTHER BUSINESS OR COMMERCIAL RIGHTS AND ACCORDINGLY, DEPRECIATION HAS BEEN CLAIMED. 2.2 HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE CLAIM OF T HE ASSESSEE ON ACCOUNT OF GOODWILL CLAIM HAS ALREADY BEEN DISALLOWED IN ASSE SSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 AND 2005-06 ON THE GROUND THAT THE GOODWILL HAS NOT BEEN SPECIFIED IN RESPECT OF DEPRECATION ON INTANG IBLE ASSETS AS MENTIONED IN SEC. 32(1)(II) OF THE ACT. THE CIT(A) HAS ALREADY CONFIRMED THE DISALLOWANCE IN THE PRECEDING YEAR. THE ASSESSING OFFICER ACCORDIN GLY, DISALLOWED THE CLAIM OF DEPRECATION ON GOODWILL. 2.3 IN APPEAL, THE CIT(A), FOLLOWING THE DECISION O F THE TRIBUNAL IN THE CASE OF R G KESWANI VS ACIT REPORTED IN 116 ITD 133 UPHELD THE ACTION OF THE ASSESSING OFFICER . 3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US. 4. THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO TH E ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2004-05 & 05-06 IN ASSESSEES O WN CASE VIDE ITA NOS.2285/MUM/2008 AND ITA NO.5592/MUM/2008 ORDER DA TED 4.3.2010 SUBMITTED THAT THE TRIBUNAL HAD RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER ON THE BASIS OF ADDITIONAL GROUND FILED BY THE ASSESSEE CONTENDING THAT COMPENSATION PAID FOR ACQUIRING BUSINESS BE ALLOWED AS REVENUE EXPENDITURE. 3 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) 4.1 REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS HINDUSTAN COCO COLA BEVERAGES P LTD REPORTED IN 331 ITR 192 (DEL), HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT GOODWILL IS A VALUABLE COMMERCIAL ASSET SIMILAR TO OTHER IN TANGIBLE ASSETS ELIGIBLE TO DEPRECIATION. 4.2 HE SUBMITTED THAT THE CIT(A) FOLLOWING THE DECI SION OF THE TRIBUNAL IN THE CASE OF R G KESWANI (SUPRA) HAS DISALLOWED THE CLA IM OF THE ASSESSEE. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF SKY LINE CATERS PVT LTD., VS ITO REPORTED IN 118 TTJ 344, HE SUBMITTED THAT THE TRIB UNAL IN THE SAID DECISION HAS ALLOWED THE DEPRECIATION ON GOODWILL. 4.3 REFERRING TO THE DECISION OF THE TRIBUNAL IN TH E CASE OF KOTAK FOREX BROKERAGE LTD VS ACIIT REPORTED IN 131 TTJ 404 HE S UBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT GOODWILL IS ALSO AN INTANGIBLE ASSET OF SIMILAR NATURE. SINCE THE ABOVE DECISION IS SUBSEQUENT TO THE DECISION RELIED ON BY THE CIT(A) AND SINCE THE HONBLE DELHI HIGH COURT HAS A LSO HELD THAT ASSESSEE IS ENTITLED TO DEPRECIATION ON GOODWILL; THEREFORE, T HE ORDER OF THE CIT(A) SHOULD BE SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE SHO ULD BE ALLOWED. 4.3 THE LD DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(A). 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECATION ON GOODWILL BY RELYING ON THE ORDER IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2004-05 & 2005-06. WE FIND, THE C IT(A), FOLLOWING THE ORDER 4 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) FOR ASSESSMENT YEARS 2004-05 & 2005-06 AND THE DEC ISION OF THE TRIBUNAL IN THE CASE OF R G KESWANI (SUPRA) REJECTED THE CLAIM OF T HE ASSESSEE. WE FIND WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEARS 2004-05 & 2005-06, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER, ON THE BASIS OF THE ADDITIONAL G ROUNDS RAISED BY THE ASSESSEE THAT THE PAYMENT MADE BY THE ASSESSEE AS COMPENSAT ION FOR ACQUIRING BUSINESS BE ALLOWED AS REVENUE EXPENDITURE, IN CASE DEPRECIA TION ON GOODWILL IS NOT ALLOWED. 6 WE FIND, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER ON THE BASIS OF THE ADDITIONAL GROUND RAISE D BY THE ASSESSEE. HOWEVER, DURING THIS YEAR, THERE IS NO ADDITIONAL GROUND RAI SED BY THE ASSESSEE AND THEREFORE, THE ISSUE HAS TO BE DECIDED AS TO WHET HER THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON GOODWILL OR NOT. 6.1 THERE IS NO DISPUTE TO THE FACT THAT THE TRIBUN AL IN THE CASE OF R G KESWANI (SUPRA) HAS HELD THAT GOODWILL IS NOT AN INTANGIBLE ASSET WITHIN THE MEANING OF SEC. 32(1)(II) AND HENCE, ACQUISITION COST OF GOOD WILL IS NOT ENTITLED TO DEPRECIATION. HOWEVER, IN THE SUBSEQUENT DECISION, THE TRIBUNAL IN THE CASE OF KOTAK FOREX BROKERAGE LTD (SUPRA), RELYING ON VARI OUS OTHER DECISIONS INCLUDING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUN AL IN THE CASE OF SKYLINES CATERS P LTD (SUPRA) HAS HELD THAT GOODWILL IS ALS O AN INTANGIBLE ASSET OF SIMILAR NATURE REFERRED TO IN CLAUSE (II) OF SEC. 32(1) AND THEREFORE, DEPRECATION IS ALLOWABLE ON THE SAME. SIMILAR VIEW HAS BEEN TAKEN IN VARIOUS OTHER DECISIONS OF THE DIFFERENT BENCHES OF THE TRIBUNAL, WHICH ARE AL READY MENTIONED IN THE ABOVE CITED DECISIONS. 5 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) 6.2 WE FIND, THE HONBLE DELHI HIGH COURT IN THE CA SE OF HINDUSTAN COCO COLA BEVERAGES P LTD (SUPRA) HAS DISMISSED THE APPEAL FI LED BY THE REVENUE WHEREIN THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT IN A 26 3 PROCEEDING IN WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION ON GOODWILL, WHIC H WAS ALLOWED BY THE ASSESSING OFFICER AND FOR WHICH THE CIT HAD ASS UMED JURISDICTION U/S 263. IN THE SAID DECISION, THE TRIBUNAL HAS TREATED THE GOO DWILL AS A VALUABLE COMMERCIAL ASSET SIMILAR TO OTHER INTANGIBLES MENTIONED IN THE DEFINITION OF THE BLOCK OF ASSET AND HENCE, ELIGIBLE TO DEPRECIATION. WE FIND, THE HONBLE HIGH COURT AT PAGE 209 HAS HELD AS UNDER: ON A SCRUTINY OF THE ORDER PASSED BY THE TRIBUNAL, IT IS CLEAR AS CRYSTAL THAT THE DEPRECIATION WAS CLAIMED ON GOODWI LL BY THE ASSESSEE ON ACCOUNT OF PAYMENT MADE FOR THE MARKETI NG AND TRADING REPUTATION, TRADE STYLE AND NAME, MARKETING AND DISTRIBUTION, TERRITORIAL KNOW-HOW, INCLUDING INFOR MATION OR CONSUMPTION PATTERNS AND HABITS OF CONSUMERS IN THE TERRITORY AND THE DIFFERENCE BETWEEN THE CONSIDERATION PAID FOR B USINESS AND VALUE OF TANGIBLE ASSETS. THE TRIBUNAL HAS TREATED THE SAME TO BE VALUABLE COMMERCIAL ASSET SIMILAR TO OTHER INTANGIB LES MENTIONED IN THE DEFINITION OF THE BLOCK OF ASSETS AND, HENCE , ELIGIBLE TO DEPRECIATION. IT HAS ALSO BEEN NOTED BY THE TRIBUNA L THAT THE SAID FACTS WERE STATED BY THE ASSESSEE IN THE AUDIT REPO RT AND THE AO HAD EXAMINED THE AUDIT REPORT AND ALSO MADE QUERIES AND ACCEPTED THE EXPLANATION PREFERRED BY THE ASSESSEE. THE ACCEPTANCE OF THE CLAIM OF THE ASSESSEE BY THE ASSE SSING OFFICER WOULD COME IN THE COMPARTMENT OF TAKING A PLAUSIBLE VIEW IN AS MUCH AS BASICALLY INTANGIBLE ASSETS ARE IDENTIFIABL E NON-MONETARY ASSETS THAT CANNOT BE SEEN OR TOUCHED OR PHYSICAL M EASURES WHICH ARE CREATED THROUGH TIME AND/OR EFFORT AND THAT ARE IDENTIFIABLE AS A SEPARATE ASSET. THEY CAN BE IN THE FORM OF COPYRI GHT, PATENTS, TRADEMARKS, GOODWILL, TRADE SECRETS, CUSTOMER LISTS , MARKETING RIGHTS, FRANCHISE, ETC. WHICH EITHER ARISE ON ACQUI SITION OR ARE INTERNALLY GENERATED. 7 IN VIEW OF THE ABOVE CITED LEGAL PROPOSITION, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED TO DEPRECATIO N ON GOODWILL. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 6 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) 8 IN GROUNDS OF APPEAL NO.2, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 14A AT RS. 1,85,617/- INSTEAD OF RS. 1,59,377/- OFFERED BY THE ASSESSEE. 8.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE HAS SHOWN DIVIDEND INCOME OF RS. 4,87,30/- WHICH WAS CLAIMED AS EXEMPT . HE NOTED THAT THE ASSESSEE HAS ON ITS OWN MADE DISALLOWANCE OF RS. 1, 59,377/- U/S 14A OF THE I T ACT. ACCORDING TO THE ASSESSING OFFICER, THE ASSE SSEE PRIMA FACIE HAS NOT PROPERLY COMPUTED THE EXPENSES ATTRIBUTABLE TO EXEM PT INCOME AS PER PROVISIONS OF SEC. 14A R.W.R 8D OF THE I T RULES. HE, ACCORDINGLY, RECOMPUTED THE DISALLOWANCE U/S 14A AT RS. 1,85,617/-. 8.2 IN APPEAL, THE CIT(A), FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT P L TD HELD THAT RULE 8D IS RETROSPECTIVE AND HENCE APPLICABLE FOR AY 2007-08 A LSO AND ACCORDINGLY, CONFIRMED THE ACTION OF THE AO. 9 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US. 10 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO TH E DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD VS ACIT REPORTED IN 328 ITR 81 SUBMITTED THAT RULE 8D IS PR OSPECTIVE AND NOT RETROSPECTIVE. SO FAR AS THE DISALLOWANCE OF EXPEN SES IS CONCERNED, HE SUBMITTED THAT THE ASSESSEE HAD MADE ACTUAL CLAIM ACCORDING T O WHICH DISALLOWANCE COMES TO RS. 1,59,377/-. THEREFORE, THE ORDER OF THE CIT( A) SHOULD BE SET ASIDE AND THE GROUND RAISED BE ACCEPTED. 7 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) 10.1 THE LD DR ON THE OTHER HAND, SUBMITTED THAT TH ERE IS NO DISPUTE IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF GODREJ & BOYCE MFG P LTD (SUPRA) THAT RULE 8D IS PROSPECTIVE AND NOT RET ROSPECTIVE. HOWEVER, REGARDING THE CLAIM MADE BY THE ASSESSEE, THE MATTE R MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. 11 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE DECISION CITED BEFORE US. IN VIEW OF THE DECISION OF THE JURISDICT IONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD (SUPRA) RULE 8D IS NOT RET ROSPECTIVE AND PROSPECTIVE. SINCE THE ASSESSMENT INVOLVED IN THE IMPUGNED CASE IS 2007-08; THEREFORE, RULE 8D, WHICH WAS INSERTED BY THE I T (FIFTH AMENDMENT) RULES 2008 W.E.F 24.3.2008 IS NOT APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR. HOWEVER, REGARDING THE QUANTIFICATION OF THE AMOUNT, WE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWE D FOR STATISTICAL PURPOSE. 12 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 23 RD , DAY OF MAR 2011. SD/- SD/- ( (( (SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED:23 MAR 2011 RAJ* 8 ITA NO. 2705/MUM/2010 (ASST YEAR 2007-08) COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI
