FUTURE MEDIA (INDIA) LTD, MUMBAI V. DCIT (OSD) 8(1), MUMBAI

ITA 4020/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0658 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4020/MUM/2015 ASSESSMENT YEAR: 2011-12 M/S. FUTURE MEDIA (INDIA) LTD. VS. DCIT (OSD) 8(1) GR. FLOOR, KNOWLEDGE HOUSE, AAYAKAR BHAVAN OPP. JOGESHWARI VIKROLI LINK RD. M.K. ROAD SHYAMNAGAR, JOGESHWARI (E) MUMBAI 400020 MUMBAI - 400060 PAN NO. AAACF9652Q (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. DINKLE HARIA, AR REVENUE BY: MS. ANUPAMA SINGLA, DR DATE OF HEARING : 17/0 4/2017 DATE OF PRONOUNCEMENT: 12/05/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2011-12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 16, MUMBAI AND ARISES OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: I. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-16 , MUMBAI, [(LD. CIT(A)] ERRED IN CONFIRMING THE ACTION OF T HE DEPUTY COMMISSIONER OF INCOME TAX (OSD) 8(1), MUMBAI [THE A.O.] IN DISALLOWING THE APPELLANTS CLAIM FOR DEPRECIATION ON INTANGIBLE ASSETS, AMOUNTING TO RS. 2,30,77,301/-. II. WHILE DOING SO, THE LD. CIT(A) ERRED IN SOLELY AND MECHANICALLY RELYING UPON THE EARLIER YEAR APPELLATE ORDER AND DISREGARD ING THE DETAILED SUBMISSIONS [ON FACT AS WELL AS IN LAW] MADE BY HIM . ITA NO. 4020/MUM/2015 2 III. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTA NCES OF THE CASE AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 3. THE ASSESSING OFFICER (A.O.) NOTICED THAT THE A SSESSEE HAD CLAIMED DEPRECIATION AMOUNTING TO RS. 2,30,77,301/- @ 25% ON OPENING WDV OF INTANGIBLE ASSET. THE ASSESSEE HAS P AID COMPENSATION OF RS. 25 CRORES TO M/S. PANTALOON RET AIL (I) LTD. (PRIL) FOR WHICH M/S. PRIL HAS GIVEN ADVERTISING RIGHTS TO THE ASSESSEE. AS PER PROVISIONS OF SECTION 32 OF ACT, DEPRECIATION I S ALLOWABLE TO THE OWNER OF THE ASSETS AND SINCE THE ASSESSEE-COMPANY IS NOT THE OWNER OF THE ASSET, DEPRECIATION ON THE SAME CANNOT BE AL LOWED. FURTHER, THE ASSIGNMENT OF ADVERTISEMENT RIGHTS DOES NOT FALL WI THIN THE PROVISIONS OF SECTION 32(1)(II) WHICH PROVIDES DEPR ECIATION ON INTANGIBLE ASSETS LIKE KNOW-HOW, PATENTS, COPY RIGH TS, TRADEMARKS, LICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE. THE A.O. NOTED THAT THE TERM ANY O THER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE HAS NOT BEEN D EFINED IN THE ACT. THEREFORE, THE A.O. DISALLOWED DEPRECIATION ON INTA NGIBLE ASSETS BEING ASSIGNMENT OF RIGHTS AS CLAIMED BY THE ASSESSEE AMO UNTING TO RS. 2,30,77,301/-. 4. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(A). WE FIND THAT THE LEARNED CIT(A) HAS FOLLOWED THE ORDER OF HIS PREDECESSOR-IN- OFFICE AN D DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE R ELIED ON THE ORDER OF THE ITAT F BENCH, MUMBAI IN THE ASSESSEE S OWN CASE FOR THE A.Y. 2007-08, 2008-09 [ITA NO. 1134 & 1135/MUM/ 2012] AND 2009-10 [ITA NO. 5404/MUM/2013]. ITA NO. 4020/MUM/2015 3 6. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT SIMILAR ISSUE AROS E BEFORE THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08, 2008-09 AND 2009-10. THE ISSUE THEREIN WAS THE DISALLOWANCE OF CLAIM OF DEPRECIATION ON INTANGIBLE ASSETS AMOUNTING TO RS. 3,12,50,000/-. THE TRIBUNAL HELD AS UNDER: 11. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE AFOREMENTIONED CLAUSES OF THE AGREEMENT, A PERUSAL OF THE STATEMEN T OF ACCOUNTS OF THE ASSESSEE SHOWS THAT THE ONLY SOURCE OF INCOME OF TH E ASSESSEE IS FROM ADVERTISEMENT. THEREFORE, IT CAN BE SAFELY CONCLUDE D THAT BY TAKING SUCH COMMERCIAL RIGHT FROM PRIL, THE ASSESSEE IS DOING I TS BUSINESS WHICH ALSO MEANS THAT THE ASSESSEES BUSINESS TOTALLY DEP ENDS ON THE ADVERTISEMENT RIGHT ACQUIRED FROM PRIL. BY ACQUIRIN G THIS COMMERCIAL RIGHT, THE ASSESSEE IS DOING ITS BUSINESS. THEREFOR E, IN THE LIGHT OF THE DECISIONS REFERRED TO ELSEWHERE, WE HAVE NO HESITAT ION TO HOLD THAT THE RIGHT ACQUIRED BY THE ASSESSEE IS AN INTANGIBLE ASS ET ELIGIBLE FOR DEPRECIATION. 11.1. IT IS CLEAR THAT THE ASSESSEE HAS PAID THE CO NSIDERATION FOR THE PURPOSE OF ITS BUSINESS IN THE FIELD OF ADVERTISING BY ACQUIRING THE RIGHTS AND OTHER ADVANTAGES ATTACHED TO THE ADVERTISEMENT SPACE. FOR THE SAKE OF COMPLETENESS, THE SPECIFIC WORDS USED IN SEC. 32 (1)(II) OF THE ACT REVEAL THE SIMILARITY IN THE SENSE THAT ALL THE INT ANGIBLE ASSETS SPECIFIED ARE TOOLS OF THE TRADE WHICH FACILITATE THE ASSESSE E CARRYING ON THE BUSINESS. THEREFORE, IN OUR CONSIDERED OPINION, THE EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE WOULD INCLUDE SUCH RIGHTS WHICH CAN BE USED AS A TOOL TO CARRY ON THE BUSINESS. IF THIS TEST IS APPLIED, THEN THE RIGHTS ACQUIRED BY THE AS SESSEE UNDER THE AGREEMENT WOULD FALL WITHIN THE EXPRESSION MENTIONE D ABOVE, SINCE THE RIGHT ACQUIRED BY THE ASSESSEE WAS USED BY IT AS A TOOL FOR ENHANCING ITS BUSINESS. THEREFORE, WE SET ASIDE THE FINDINGS OF T HE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON THE RIGHT SO ACQUIRED AS INTANGIBLE ASSET. ITA NO. 4020/MUM/2015 4 7.1 FACTS BEING SAME, WE FOLLOW THE ABOVE ORDER OF THE CO-ORDINATE BENCH. WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIRECT THE A.O. TO ALLOW THE ASSESSEES CLAIM OF DEPRECIATION ON INTANGIBLE ASSET AMOUNTING TO RS. 2,30,77,301/- 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/05/2017 SD/- SD/- (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 12/05/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI