Premier Book Co., New Delhi V. ACIT, New Delhi

ITA 4215/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5530 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 01-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 4215/DEL/2016 ASSESSMENT YEAR: 2012-13 PREMIER BOOK CO., 4792/23, DARYA GANJ, NEW DELHI. PAN: AAEFP8468R (APPELLANT) VS. ACIT, CIRCLE 52(1), NEW DELHI. (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. SURENDER PAL, SR. DR ORDER PER B.R.R. KUMAR, A.M.: ASSESSEE FILED THIS APPEAL ON 01.08.2016 AND THE C ASE HAS BEEN ADJOURNED ON VARIOUS OCCASIONS. ON 01.04.2019, THE CASE HAS B EEN ADJOURNED TO 03.06.2019. ON THE DESIGNATED DATE, NOBODY APPEARED ON BEHALF OF THE ASSESSEE. HENCE, THE CASE IS BEING DECIDED AFTER TAKING INTO CONSIDERATION THE FACTS AVAILABLE ON RECORD AND ON MERITS OF THE CASE. 2. THE BRIEF FACTS ARE THAT ON GOING THROUGH THE FI XED ASSETS SCHEDULE SUBMITTED BEFORE THE ASSESSING OFFICER, IT WAS NOTI CED THAT THE ASSESSEE HAS SHOWN TENANCY RIGHTS WORTH RS.12,18,164/- AND CLAIM ED DEPRECIATION OF RS.3,04,541/- ON IT. BEFORE ASSESSING OFFICER, IT W AS SUBMITTED THAT THE TENANCY DATE OF HEARING 03.06.2019 DATE OF PRONOUNCEMENT 03 .06.2019 ITA NO. 4215/DEL/2016 2 RIGHTS ARE INTANGIBLE ASSETS WELL COVERED U/S. 32(1 ) AND THUS IN ITS OPINION THE ASSESSEE, HAVING ACQUIRED THE INTEREST IN RESPECT O F THE TENANCY RIGHTS FROM THE LEGAL HEIRS OF THE DECEASED PARTNERS AFTER 01.04.19 98, IT HAS RIGHTS TO CLAIM DEPRECIATION ON SUCH INTANGIBLE ASSETS. THE ASSESSI NG OFFICER AND THE CIT(A) RELIED ON THE DECISIONS OF MUMBAI ITAT IN THE CASE OF M.M. NISSIM & CO. VS. ACIT (2007 18 SOT 274) AND IN THE CASE OF DABUR INDIA LT D. VS. ACIT (2013) 37 TAXMANN.COM 289, WHEREIN IT WAS HELD THAT NO DEPREC IATION IS PERMISSIBLE FOR TENANCY RIGHTS SINCE IT CANNOT BE CONSTITUTED AS IN TANGIBLE ASSET. THE RELEVANT PART OF THE ORDER OF THE ITAT IN THE CASE OF M.M. N ISSIM & CO. (SUPRA) IS REPRODUCED AS UNDER : THEREFORE, THE ONLY POINT TO BE LOOKED INTO WAS THA T WHETHER SECTION 32(1 )(A) DOES HAVE ANY APPLICATION ON THE ISSUE SO AS T O TREAT THE PREMIUM PAID BY THE ASSESSEE AS AN INTANGIBLE ASSET ELIGIBLE FOR DEPREC IATION. THE ARGUMENT OF THE ASSESSEE WAS THAT RIGHTS ACQUIRED BY THE ASSESSEE S HOULD BE HELD AS LICENSE. THE OTHER ITEMS LIKE KNOW-HOW, PATENTS, COPYRIGHTS, TRA DEMARKS, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS ARE FAR AWAY FR OM THE RIGHTS ACQUIRED BY THE ASSESSEE BY PAYING THE PREMIUM TO THE ERSTWHILE TEN ANTS. THE ONLY EXPRESSION WHICH DESERVES TO BE CONSIDERED IN THIS CONTEXT IS LICENSE. THE EXPRESSIONS KNOW- HOW, PATENTS, COPYRIGHTS, TRADE-MARKS, LICENSES, FR ANCHISES ARE FOLLOWED BY THE GENERAL WORDS OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE THEREFORE, IT IS NECESSARY TO READ AND UNDERSTAND TH E DIFFERENT EXPRESSIONS INCLUDING 'LICENCES' IN THE LIGHT OF THE EXPRESSION S FOLLOWING THEREAFTER THAT ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE. IT MEANS KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSE, FRANCHISE S, ETC., NEED TO BE SIMILAR IN NATURE PERTAINING TO BUSINESS OR COMMERCIAL RIGHTS. IT FOLLOWS THAT ALL THE ABOVE EXPRESSIONS ARE PLACED AT A SAME LEVEL WITH SIMILAR NATURE AND RELATING TO BUSINESS OR COMMERCIAL RIGHTS. IN THAT SENSE, THE EXPRESSION LICENSE CANNOT BE SINGLED OUT FROM BUSINESS OR COMMERCIAL NATURE OF RIGHTS AND HE LD AS A RIGHT REFERABLE TO TENANCY OF IMMOVABLE PROPERTY. IF ONE APPLIES THE P RINCIPLE OF EJUSDEM GENERIS, THE TERM LICENCES HAS TO BE READ IN THE COMPANY O F THE PRECEDING TERMS LIKE KNOW-HOW, PATENTS, COPYRIGHTS AND TRADEMARKS AND AL SO THE FOLLOWING WORDS ITA NO. 4215/DEL/2016 3 FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE. THE EJUSDEM GENERIS RULE IS THE RULE OF GENERIC WORDS F OLLOWING MORE SPECIFIC ONES. THE RULE IS THAT WHEN GENERAL WORDS FOLLOW SPECIFIC WOR DS OF THE SAME NATURE, THE GENERAL WORDS MUST BE CONFINED TO THE THINGS OF SAM E KIND OF THOSE SPECIFIC. THE SPECIFIC WORDS MUST FORM A DISTINCTIVE CATEGORY. THI S RULE REFLECTS AN ATTEMPT TO RECONCILE THE INCOMPATIBILITY BETWEEN THE SPECIFIC AND GENERAL WORDS. [PARA 9] IN SECTION 32(1)(II), THE EXPRESSION LICENCES' HAS BEEN PROVIDED IN THE COMPANY OF EXPRESSIONS LIKE KNOW-HOW, PATENTS, COPYRIGHTS, TRA DEMARKS, FRANCHISES WHICH ARE IN THE NATURE OF BUSINESS OR COMMERCIAL RIGHTS. THE TENANCY RIGHTS ACQUIRED BY THE ASSESSEE CANNOT BE EQUATED WITH THE LICENSE PROVIDE D UNDER SECTION 32 SO AS TO QUALIFY IT AS AN INTANGIBLE ASSET ELIGIBLE FOR DEPR ECIATION. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LOWER AUTHORITIE S WERE JUSTIFIED IN TREATING THE PREMIUM AMOUNT NOT ELIGIBLE FOR DEPRECIATION. [PARA 10] 3. FURTHER, THE OPERATIVE PART OF THE JUDGMENT IN T HE CASE OF DABUR INDIA LTD. IS AS UNDER : 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE EARLIER YEARS CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA NO.6050/MUM/2007 ETC. VID E ORDER DATED 09.04.2010, THE TRIBUNAL HAS UPHELD THE VIEW OF THE AUTHORITIES BELOW BY RELYING ON THE JUDGMENT OF THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT V. TECHNO SHARES & STOCKS LTD. [2010] 323 ITR 6 9/720091 184 TAXMAN 103 (BOM.). THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE HON'BLE SUPREME COURT HAS OVERRULED THIS JUDGME NT IN TECHNO SHARES & STOCKS LTD. V. CIT [2010] 327 ITR 323/193 TAXMAN 248 AND THE EFFECT OF SUCH REVERSAL IS THAT THE DEPRECIATION SHOULD NOW B E ALLOWED. IN CANVASSING SUCH A VIEW FOR THE GRANT OF DEPRECIATION, HE REFER RED TO THE PROVISIONS OF SECTION 32(1)(II) FOR BRINGING HOME THE POINT THAT THE TENANCY RIGHTS FALL WITHIN THE AMBIT OF THE EXPRESSION 'ANY OTHER BUSIN ESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' AS EMPLOYED IN DEFINING 'INTANGI BLE' ASSETS. AU CONTRAIRE, THE LD. DR RELIED ON THE IMPUGNED ORDER. 4. WE ARE NOT CONVINCED WITH THE CONTENTION ADVANC ED ON BEHALF OF THE ASSESSEE. THE MANIFEST REASON IS THE FOLLOWING DEFIN ITION OF THE TERM 'INTANGIBLE' ASSET GIVEN IN EXPLANATION (3) TO SECT ION 32(1) :- ITA NO. 4215/DEL/2016 4 '(B) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, CO PYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE'. 5. A BARE PERUSAL OF THE DEFINITION OF INTANGIBLE ASSETS ON WHICH DEPRECIATION IS AVAILABLE U/S 32 MAKES IT VIVID THA T THE INTANGIBLE ASSETS SO CLASSIFIED ARE KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE. WE ARE REMINDED OF THE RULE OF NOSTICUR A SOCIIS WHICH SIMPLY MEANS THAT THE GENERAL WORDS ASSOCIATED WITH THE SPECIFIC WORDS DR AW THEIR MEANING FROM THE COMPANY THEY KEEP. THIS RULE HAS BEEN QUOTED WIT H APPROVAL BY THE HON'BLE SUPREME COURT IN SEVERAL JUDGMENTS INCLUDIN G CIT V. VENKATESWARA HATCHERIES (P.) LTD. (1999) 237 ITR 174/103 TAXMAN 50 3 . STONECRAFT ENTERPRISES V. CIT (19991 237 ITR 131 (SC) AND ARAVINDA PARAMILA WORKS V. CIT (1999) 237 ITR 284/104 TAXMAN 109 (SC ). GOING BY THIS RULE, THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS ' AS EMPLOYED IN THE DEFINITION OF 'INTANGIBLE' ASSETS AS PER THE ABOVE EXPLANATION, MUST MEAN ONLY THE INTANGIBLE ASSETS SIMILAR TO THOSE WHICH P RECEDE IT, THAT IS, 'KNOW- HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FR ANCHISES'. THE FORMER CATEGORY OF INTANGIBLE ASSETS INCLUDES SUCH ASSETS WITH WHICH THE BUSINESS IS DIRECTLY CARRIED ON. IN OTHER WORDS, THESE ARE INTA NGIBLE ASSETS BY WHICH EITHER THE PERMISSION TO CARRY ON THE BUSINESS OR M ANUFACTURE IS RECEIVED OR ARE USED FOR THE MANUFACTURE OR THE SALE OF THE PRO DUCTS MANUFACTURED. SUCH INTANGIBLE ASSETS DIRECTLY FACILITATE THE PROF IT EARNING ACTIVITY. ON THE OTHER HAND, THE TENANCY RIGHTS HAVE NO SIGNIFICANCE WHATSOEVER EITHER WITH A RIGHT TO MANUFACTURE OR ACTUAL MANUFACTURE OF THE PRODUCTS OR THEIR SALE CARRYING BRAND NAME OR LOGO ETC. TENANCY RIGHTS SIM PLY PROVIDE A PLACE AT WHICH MANUFACTURING OR ADMINISTRATIVE ACTIVITY IS P ERUSED. A BUSINESSMAN CAN CARRY ON MANUFACTURING AT ANY PLACE BUT THE BUS INESS CANNOT BE CARRIED ON WITHOUT LICENCE, OR WITHOUT SPECIFIC KNOW-HOW, C OPY RIGHT, OR TRADE MARK ETC. REVERTING TO THE EXTANT CASE, ONLY AN INTANGIB LE ASSET OF THE NATURE OF KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES , FRANCHISES ETC. CAN BE BROUGHT WITHIN THE AMBIT OF 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT' . THE LEGISLATURE HAS MADE ITS INTENTION CRYSTAL CLEAR BY THE USE OF WORDS 'OF SIMILAR NATURE' IMMEDIATELY AFTER THE WORDS 'ANY OT HER BUSINESS OR COMMERCIAL RIGHTS'. THIS MAKES THE POSITION BEYOND ANY PALE OF DOUBT THA T 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS' WOULD ONLY BE SUCH WHICH ARE OF THE NATURE OF KNOW- ITA NO. 4215/DEL/2016 5 HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FR ANCHISES ETC. AS NOTICED SUPRA, THERE IS A VAST DIFFERENCE BETWEEN KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES ETC. ON ONE HAND AND TENANCY RIGHTS ON THE OTHER, WE ARE OF THE CONSIDERED OPINION THAT TENANC Y RIGHTS CANNOT BE CONSTRUED AS 'INTANGIBLE' ASSETS FALLING WITHIN THE MEANING OF EXPLANATION 3 TO SECTION 32(1). THE RELIANCE OF THE ID. DR ON THE JUDGMENT OF THE H ON'BLE SUPREME COURT IN TECHNO SHARES & STOCKS LTD. (SUPRA) IS OF NO CONSEQUENCE. IN THAT CASE THE QUESTION WAS WHETHER DEPRECIATION CAN BE GRANTED ON THE BOMBAY STOCK EXCHANGE MEMBERSHIP CARD. AS THE OWNER SHIP OF SUCH MEMBERSHIP CARD IS SINE QUA NON TO CONDUCT THE BUSI NESS ON THE FLOOR OF STOCK EXCHANGE, THE HON'BLE SUPREME COURT HELD IT T O BE AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION. SUCH MEMBERSHIP CARD IS A PERMISSION TO DO THE BUSINESS AS SHARE BROKER AKIN TO 'LICENCE' AND NOT A PLACE FOR CARRYING ON SUCH BUSINESS AKIN TO 'TENANCY RIGHT'. IN OUR CONSI DERED OPINION, THIS JUDGMENT DOES NOT ADVANCE THE CASE OF THE ASSESSEE ANY FURTHER. TO SUM UP, WE HOLD THAT SINCE THE TENANCY RIGHT CANNOT BE TREA TED AS AN INTANGIBLE ASSET, THERE IS NO QUESTION OF ALLOWING DEPRECIATIO N ON IT. WE, THEREFORE, APPROVE THE VIEW TAKEN BY THE AUTHORITIES BELOW ON THIS ISSUE. THIS GROUND FAILS. 4. SINCE THE TENANCY RIGHTS CANNOT BE TREATED AS IN TANGIBLE ASSETS, THERE IS NO QUESTION OF ALLOWING DEPRECIATION ON IT. AS A RESUL T, THE APPEAL OF THE ASSESSEE IS HEREBY DISMISSED AFTER DUE CONSIDERATION OF THE ISS UE BEFORE US. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/06/2019 SD/- SD/- (H.S. SIDHU) (B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: *AKS*