ACIT, CHENNAI V. M/s. Caplin Point Laboratories Ltd., CHENNAI

ITA 2829/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8085 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 29-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2829/MDS./2016 / ASSESSMENT YEAR : 2012-13 THE ACIT, CORPORATE CIRCLE 1(2), CHENNAI-34. VS. M/S.CAPLIN POINT LABORATORIES LTD., 3,LAKSHMANAN SREET, T.NAGAR,CHENNAI -17. [PAN AABCC 2667 F ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE / DATE OF HEARING : 26 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1 DATED 18.07.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. ITA NO.2829/16 :- 2 -: 2. THE MAIN GRIEVANCE OF THE REVENUE IS WITH REGAR D TO DELETION OF ADDITION OF DEPRECIATION ON GOOD WILL, WITHOUT A PPRECIATING THE FACT THAT THE CLAIM OF GOODWILL WAS NOT MADE IN THE RETU RN OF INCOME INSTEAD THE CLAIM WAS MADE DURING THE COURSE OF SCR UTINY PROCEEDINGS. 3. AFTER HEARING BOTH THE PARTIES, SIMILAR ISSUE C AME FOR CONSIDERATION IN ASSESSEE'S OWN CASE BEFORE THIS TR IBUNAL FOR ASSESSMENT YEAR 2010-11 IN ITA NO.529/MDS./2014 VID E ORDER DATED 25.11.2016 WHEREIN HELD AS FOLLOWS:- 8. ON THE OTHER HAND, THE LD. AR ARGUED THAT DEP RECIATION IS AN INTANGIBLE ASSET WHICH WAS ACQUIRED BY THE ASSESSEE -COMPANY FROM M/S MAY INDIA LABORATORIES LTD WHICH HAS RESULTED I N EXCESS PAYMENT OVER AND ABOVE THE VALUE OF FIXED ASSETS OF ` 584 L AKHS TOWARDS THE GOODWILL. AS PER THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT AND THE DELHI HIGH COURT CITED SUPRA, THE ASSESSEE-COMP ANY IS ELIGIBLE FOR DEPRECIATION ON GOODWILL. HE HAS ALSO RELIED ON THE DECISION OF THIS TRIBUNA IN THE CASE OF M/S HINDUJA FOUNDRIES LTD VS ACIT IN I.T.A.NOS.1590 TO 1593/MDS/2015, DATED 19.2.2016, W HEREIN ON IDENTICAL FACTS, THIS TRIBUNAL HAS HELD AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF APEX COURT I N SMIFS SECURITIES LTD. (SUPRA). IN THE CASE BEFORE APEX CO URT, THE ITA NO.2829/16 :- 3 -: ASSESSEE CLAIMED DEDUCTION TOWARDS DEPRECIATION ON GOODWILL. THE ASSESSEE CLAIMED THAT THE EXCESS CONSIDERATION PAID BY THE ASSESSEE OVER THE VALUE OF NET ASSET TO BE CONSIDER ED AS GOODWILL ARISING ON AMALGAMATION. HOWEVER, THE ASSESSING OFF ICER FOUND THAT THE GOODWILL IS NOT AN ASSET. HOWEVER, THE APE X COURT FOUND THAT THE ASSESSEE HAD ACQUIRED A CAPITAL RIGHT IN T HE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WORTH OF THE A SSESSEE- COMPANY STOOD INCREASED. IN THOSE CIRCUMSTANCES, TH E APEX COURT FOUND THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATIO N ON THE GOODWILL WHICH IS IN THE NATURE OF COMMERCIAL ASSET . IN THE CASE BEFORE US, IT IS NOT IN DISPUTE THAT THE ASSESSEE H AS PURCHASED DUCTRON CASTINGS UNIT FROM M/S ASHOK LEYLAND LTD. T HE ASSESSEE HAS PAID OVER THE VALUE OF NET ASSET TO THE EXTENT OF `147.57 LAKHS AND CLAIMED THE SAME AS COST OF THE GOODWILL. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE PAYMENT DOES NOT FALL WITHIN THE ME ANING OF KNOW-HOW, PATENT OR COPYRIGHT. THE ASSESSING OFFICE R HAS NOT CONSIDERED THE JUDGMENT OF APEX COURT IN SMIFS SECU RITIES LTD. (SUPRA). THE APEX COURT, AFTER CONSIDERING THE PROV ISIONS OF EXPLANATION 3 TO SECTION 32(1) OF THE ACT FOUND THA T THE WORD ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WILL FALL UNDER THE EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RI GHTS OF SIMILAR NATURE. IN VIEW OF THE ABOVE JUDGMENT OF APEX COUR T IN SMIFS SECURITIES LTD., WE ARE UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, WE SET ASIDE THE ORDERS O F THE LOWER AUTHORITIES. THE ASSESSING OFFICER IS DIRECTED TO A LLOW DEPRECIATION AT THE APPLICABLE RATE ON THE PAYMENT RELATABLE TO GOODWILL. 9. THE FACTS ARE IDENTICAL ON THE ABOVE ISSUE AND T HE LD. DR DID NOT BRING ANY OTHER JUDGMENT OF HON'BLE HIGH COURT OR A NY OTHER HIGHER FORUM TO CONTROVERT THE ABOVE DECISION. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE SAME IS CONFIRMED. GROUND NO.2 IS DISMISSED. THE ABOVE VIEW IS ALSO SUPPORTED BY THE JUDGEMENT O F SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD., REPORTE D IN [2012] 348 ITR ITA NO.2829/16 :- 4 -: 302 (SC) WHEREIN HELD THAT GOOD WILL IS AN ASSET UN DER EXPLANATION 3(B) TO SEC.32(1) OF THE ACT AND ASSESSEE IS ENTITLED FOR D EPRECIATION ON THE SAME. IN VIEW OF THE ABOVE, WE ARE INCLINED TO DISMISS TH E APPEAL OF REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 4. - 1 / CIT 2. / RESPONDENT 5. /23- 4 / DR 3. - 1-!' / CIT(A) 6. 3&-5 / GF