M/S. SUPREME TREVES PVT.LTD., MUMBAI V. THE DY.C.I.T.,10(2), MUMBAI

ITA 4549/MUM/2008

• Counselvise Citation: 454919914 RSA 2008
• Duration Of Justice: 7 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 04-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M KESHKAMAT
• Assessee Lawyers: M M GOLVALA
• Keywords: Depreciation
• Section: 43B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI E BENCH . . , , , BEFORE S/SH. A.D. JAIN,JUDICIAL MEMBER & R AJENDRA,ACCOUNTANT MEMBER /. ITA NO. 4549 /MUM/20 08 , / ASSESSMENT YEAR - 200 5 - 06 M/S. SUPREME TREVES PVT. LTD. C/O. KALYANIWALL A & MISTRY KALPATARU H ERITAGE, 5 TH FLOOR 127, MAHATMA GANDHI RD., FORT, MUMBAI - 400 001. PAN: AACCS 408 5 Q VS. THE DY. CIT - 10(2) 4 TH FLOOR, ROOM NO. 4 32 AAYAKAR BHAVAN, M.K. RD. MUMBAI - 400 020. ( / APPELLANT ) ( / RESPONDENT ) /. ITA NO. 7450 /MUM/201 0 , / ASSESSMENT YEAR - 200 6 - 07 M/S. SUPREME TREVES PVT. LTD. C/O. KALYANIWALLA & MISTRY ARMY & NAVY BLDG., 3 RD FLOOR 148, MAHATMA GANDHI RD., FORT, MUMBAI - 400 001. VS. THE DY. CIT - 10(2) 4 TH FLOOR, ROOM NO. 4 32 AAYAKAR BHAVAN, M.K. RD. MUMBAI - 400 020. /. ITA NO. 7462 /MU M/201 0 , / ASSESSMENT YEAR - 200 7 - 08 M/S. SUPREME TREVES PVT. LTD. C/O. KALYANIWALLA & MISTRY ARMY & NAVY BLDG., 3 RD FLOOR 148, MAHATMA GANDHI RD., FORT, MUMBAI - 400 001 . VS. THE DY. CIT - 10(2) 4 TH FLOOR, ROOM NO. 4 32 AAYAKAR BHAVAN, M.K. RD. MUMBAI - 400 020. /. ITA NO. 3140 /MUM/201 1 , / ASSESSMENT YEAR - 200 8 - 09 M/S. SUPREME TREVES PVT. LTD. C/O. KALYANIWALLA & MISTRY ARMY & NAVY BLDG., 3 RD FLOOR 148, MAHATMA GANDHI RD., FORT, MUMBAI - 400 001. VS. THE DY. CIT - 10(2) 4 TH F LOOR, ROOM NO. 4 32 AAYAKAR BHAVAN, M.K. RD. MUMBAI - 400 020. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI M M GOLVALA - (AR) / REVENUE BY : SHRI S.M. KESHKAMAT - (DR) / DATE OF HEARING : 04 - 08 - 2015 / DATE OF PRONOUNCEMENT : 04 - 08 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER BENCH - CHALLENGING THE ORDERS OF THE CIT (A) - 22,MUMBAI,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL FOR THE ABOVE MENTIO NED ASSESSMENT YEARS(AY.S.) 454 9STPL - SUPREME GROUP 2 ITA NO. 4549/MUM/2008,AY.2005 - 06 : 1. BOTH THE LOWER AUTHORITIES ERRED IN HOLDING T HAT DEPRECIATION ON GOODWILL OF RS.25,61,836/ - WAS NOT ALLOWABLE. 2. BOTH THE LOWER AUTHORITIES FAILED TO CONSIDER IN THEIR PROPER PERSPECTIVE AGREEMENT FOR PURCHASE OF BUSINESS DATED 17.11.2000 AND ASSIGNMENT OF GOODWILL DATED 1.12.2000. 3. THE LD. COMMISSIONER OF INCOME TAX(APPEALS)ERRED IN IGNORING THE DECISION OF THE BOMBAY TRIBUNAL IN THE CASE OF SKYLINE CATERERS P.LTD. VS. ITO (20 SOT 266)( MUM) CITED BEFORE HIM. 4. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) FAILED TO CONSIDER THE DETAILED MATERIAL LED BEFORE HIM TO DEMONSTRATE THE CHARACTER OF INTANGIBLE ASSETS/INTELLECTUAL PROPERTY RIGHTS PURCHASED BY THE APPELLANT. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEND, THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. ITA NO.7450/MUM/2010 - AY. - 2006 - 07 : 1. BOTH THE LOWER AUTHORITIES ERRED IN DENYING DEPR ECIATION ON GOODWILL AMOUNTING TO RS.19,21,377/ - . 2. BOTH THE LOWER AUTHORITIES FAILED T O CONSIDER THE NATURE OF ASSETS ACQUIRED BY THE APPELLANT WHILE DENYING DEPRECIATION. 3. BOTH THE LOWER AUTHORITIES FAILED TO CONSIDER THE ARGUMENT OF THE APPELLANT THAT GOODWILL HAD ALREADY ENTERED THE BLOCK OF ASSETS. 4. HAVING REGARD TO THE FACTS A ND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF LAW, THE APPELLANT SUBMITS THAT THE ASSESSIN G OFFICER BE DIRECTED TO ALLOW DEPRECIATION ON GOODWILL AMOUNTING TO RS.19,21 ,377/ - . 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT DELETING THE ADDITION OF RS.2,29,092/ - U/S.145A. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE SO DIRECTED. 6. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT NO DEDUCTION WOULD BE AVAILABLE UNDER SECTION 43B FOR PAYMENT OF EXCISE DUTY IN THE SUBSEQUENT YEAR. 7. THE ASSESSING OFFICER ERRED IN LEVYING INTEREST U/S.234B AMOUNTING TO RS.9,14,444/ - . 8. WITHOUT PREJUDICE TO THE FOREGOING, THE ASSESSING OFFICER ERRED IN COMPUTING INTEREST U/S.234B ERRONEOUSLY. THE ASSESSING OFFICER ERRED IN INVOKING THE EXPLANATION BELOW SECTION 140A WHILE COMPUTING THE SAID INTEREST U/S.234B. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEND, THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. ITA NO.74 62 /MUM/2010 - AY. - 200 7 - 0 8 : 1. BOTH THE LOWE R AUTHORITIES ERRED IN DENYING DEPR ECIATION ON GOODWILL AMOUNTING TO RS.14,41, 033/ - . 2. BOTH THE LOWER AUTHORITIES FAILED TO CONSIDER THE NATURE OF ASSETS ACQUIRED BY THE APPELLANT WHILE DENYING DEPRECIATION. 3. BOTH THE LOWER AUTHORITIES FAILED TO CON SIDER THE ARGUMENT OF THE APPELLANT THAT GOODWILL HAD ALREADY ENTERED THE BLOCK OF ASSETS. 4. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF LAW, THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEPRE CIATION ON GOODWILL AMOUNTING TO RS.14,41,033/ - . 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT DELETING THE ADDITION OF RS.6,42,419/ - U/S.145A. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE SO DIRECTED. 6. THE LEARNED COMMISS IONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT NO DEDUCTION WOULD BE AVAILABLE UNDER SECTION 43B FOR PAYMENT OF EXCISE DUTY IN THE SUBSEQUENT YEAR. 7. THE ASSESSING OFFICER ERRED IN LEVYING INTEREST U/S.234B AMOUNTING TO RS.2,53,466/ - AS AGAINST TH E CORRECT INTEREST OF RS.88,369/ - . ITA NO. 3140 /MUM/201 1 - AY. - 200 8 - 0 9 : 1. BOTH THE LOWER AUTHORITIES ERRED IN DENYING DEPR ECIATION ON GOODWILL AMOUNTING TO RS.10,80,775/ - . 454 9STPL - SUPREME GROUP 3 2. BOTH THE LOWER AUTHORITIES FAILED TO CONSIDER THE NATURE OF ASSETS ACQUIRED BY THE APPELLANT WHILE DENYING DEPRECIATION. 3. BOTH THE LOWER AUTHORITIES FAILED TO CONSIDER THE ARGUMENT OF THE APPELLANT THAT GOODWILL HAD ALREADY ENTERED THE BLOCK OF ASSETS. 4. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISI ONS OF LAW, THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEPRECIATION ON GOODWILL AMOUNTING TO RS.10,80,775/ - . 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT DELETING THE ADDITION OF RS.9,95,805/ - U/S.145A. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE SO DIRECTED. 6. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT NO DEDUCTION WOULD BE AVAILABLE UNDER SECTION 43B FOR PAYMENT OF EXCISE DUTY IN THE SUBSEQUENT YEAR. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEND, THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE INTERIOR TRIM PARTS AND OTHER OBJECTS. DETAILS OF DATES OF FILING OF RETURNS,INCOMES RETU RNED,DATES OF ASSESSMENT, ASSESSED INCOMES, DATES OF ORDERS OF THE CIT(A)CAN BE SUMMARISED AS UNDER : RETURN FILED ON RETURNED INCOME (RS.) ASSESSMENT DT. ASSESSED INCOME (RS.) DT. OF ORDERS OF CIT(A) 2 0 05 - 0 6 27/10/2005 10,260/ - 03/12/2007 NIL 08/05/2008 2006 - 07 17/11/2006 4,85,84,587/ - 08/12/2008 5,07,35,060/ - 03/08/2010 2007 - 08 22/10/2007 3,77,57,984/ - 27/11/2009 3,98,41,440/ - 03/08/2010 2008 - 09 26/09/2008 5,70,00,186/ - 08 - 12 - 2010 5,90,76,760/ - 22/02/2011 ITA NO. 4549/MUM/2008,AY.2005 - 06 : 2. EFFCTIV E GROUND OF APPEAL IS ABOUT DEPRECIATION ON G OODWILL.DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER(AO)FOUND THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON GOODWILL TREATING THE SAME AS BLOCK ELIGIBLE FOR DEPRECIATION @25%,AMOUNTING TO RS.25.61 LA KHS . THE AO WAS OF THE OPINION THAT GOODWILL WAS ELIGIBLE FOR DEPRECIATION U/S.32(1)OF THE ACT. HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRECIATION CLAIM ON GOODWILL SHOULD NOT BE DISALLOWED.THE ASSESSEE VIDE ITS LETTER DATED 26.11.2007 FILED EXPLAN ATION IN THAT REGARD AND ARGUED THAT GOODWILL WA S AN INTANGIBLE ASSET WHICH WAS ACQUIRED AT THE TIME OF PURCHASE OF BUSINESS OF MANUFACTURING AND MARKETING OF NON - WOVENS TRIM COMPONENTS AND THE ASSESSEE HAD PAID RS.1.9 4 CRORE VIDE AGREEMENT DATED 07.11.20 00,THAT T HE GOODWILL P URCHASED BY THE ASSESSEE AMOUNTED TO BUSINESS OR COMMERCIAL RIGHTS ,THAT T HE AMOUNT OF RS.1.94 CRORE WAS PAID FO R THE GOODWILL/ INTELLECTUAL PROPERTY RIGHTS WAS ENT ITLED TO DEPRECIATION U/S.32(1) OF THE ACT. AFTER CONSIDERING THE REPLY OF THE ASSESSEE ,THE AO HELD THAT T HE CLAIM OF THE ASSESSEE THAT IT ACQUIRED IN TELLECTUAL PROPERTY RIGHTS, GAIN ACCESS TO TRADE SECRETS AND OTHER CONFIDENTIAL A ND PROPRIETARY INFORMATION,KNOW - HOW, COMPUTER PROGRAMMES, FORMULAS AND METHODS ETC. WAS DEVOID OF TR UTH , THAT THE LUMPSUM PAYMENT OF RS.1,94,32, 000/ - WAS FOR GOODWILL AND IT HAD NOT ASSIGNED THE AMOUNT IN RESPECT OF ANY OTHER INTANGIBLE ASSET ,THAT THE BUNDLE OF SO CALLED RIGHTS WASS MERELY FICTIONAL AND IN FACT THE PAYMENT WAS MADE TOWARDS GOODW ILL WHIC H IS TIME AND AGAIN MENTIONED IN THE BUSINESS TRANSFER AGREEMENT ,THAT IT HAD ALWAYS TREATED THE PAY MENT OF RS. 1.94 CRORE AS A CONSIDER ATION FOR GOODWILL ONLY AND IT WA S ONLY IN THE COURSE OF ASSESSMENT PROCEEDINGS WHEN QUESTIONED ABOUT THE ELIGIBILITY OF D EPRECIATION ON THE GOODWILL IT CAME OUT WITH THE EXPLAN ATION THAT THE GOODWILL CONTAINED A BUNDLE OF OTHER RIGHTS ALSO ,THAT T HE EXPLANATION OF THE ASSESSEE WA S MERELY AN AFTER THOUGHT AS NO SPECIFIC AMOUNT HAD BEEN ASSIGNED TO THE INDIVI DUAL RIGHTS LIKE, T ECHNICAL - KNOW HOW,ETC. IN A BUSINESS TRANSFER AGREEMENT THE VALUABLE RIGHTS LIKE TRADE - MARK, TECHNICAL KNOW - HOW,PATENT, ETC. WERE PROPERLY DEFINED, DESCRIBE D AND ASSIGNED THE VALUE WHICH WA S PAID BY THE PURCHASER OF SUCH PROPERTY. HE REFERRED TO THE PROVISION S OF SECTION 32(1) OF THE 454 9STPL - SUPREME GROUP 4 ACT AND HELD THAT THAT GOODWILL WA S NOT ELIGI BLE FOR DEPRECIATION UNLESS IT WA S CLASSIFIED UNDER 'ANY OTHER BUSINESS OR COMM ERCIAL RIGHT OF SIMILAR NATURE, THAT A GOODWILL OF THE BUSINESS WA S THE WHOLE ADVANTAGE OF REPUTATION AND CONNECTION WITH THE CUSTOMERS WHICH MAY BE EXPLOITED THROUGH KNOW - HOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENCES AND FRANCHISES, ETC. 2.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS CONTENDED THAT THE GOODWILL WAS DEFINED IN THE AGREEMENT DATED 1.12.2000,THAT IN THAT AGREEMENT IT WAS STATED THAT THE WORD GOODWILL WOULD MEAN AND INCLUDE BUNDLE OF RIGHTS, THAT THE ASSESSEE HAD ACQUIRED THREE INTANGIBLE ASSETS NAMEL Y INTELLECT UAL PROPERTY RIGHTS, VALUABLE CUSTOMERS AND KEY TECHNICAL HUMAN RESOURCES, THAT DEPRECIATION WAS ALLOWABLE ON INTANGIBLE RIGHTS EMBEDDED IN THE TERM GOODWILL AS DEFINED IN THE AGREEMENT, THAT THE NOMENCLATURE GIVEN TO A TRANSACTION COULD NOT BE DECISIVE FOR DECI DING ALLOWABILITY OF OTHERWISE. THE ASSESSEE RELIED UPON THE CASES OF B.C. SRINIVAS S SETTY 124 ITR 294, S.C. CA MBATTA (41 ITR 500) AND SEETHALAKSHMI A AMMAL (51 ITR 317) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT THERE WAS NO MERIT IN THE SUBMISSION MADE BY IT THAT DEPRECIATION WAS ALLOWABLE ON GOODWILL, THAT NONE OF THE DECISIONS CITED BY THE ASSESSEE APPLIED TO THE FACTS OF THE CASE UNDER CONSIDERATION , THAT SUBMISSION OF THE ASSESSEE ABOUT INGREDIENTS OF T H E GOODWILL WAS NOT ACCEPTABLE, THAT THE GOODWILL WAS AN ASSET ON WHICH DEPRECIATION WAS NOT ALL OWABLE, THAT THE AO WAS JUSTIFIED IN DISALLOWING THE DEPRECIATION. FINALLY, HE UPHELD THE ORDER OF THE AO. 2.2 . BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT THE AO AND THE FAA HAD FAILED TO CONSIDER THE AGR EEMENT OF PURCHASE OF BUSINESS, DATED 17.11.2000 AND THE ASSIGNMENT OF GOODWILL DATED 1.12.2000 WHILE PASSING THE ASSESS MENT ORDER/DECIDING THE APPEAL, THAT IT HAD DEMONSTRATED THE CHARACTER OF INTANGIB LE ASSETS/INTELLECTUAL PROPERTY RIGHTS PURCHASED BY IT, ,THAT IN THE YEAR 2000 THE ASSESSEE BY WAY OF BACKWARD INTEGRATION ENTERED INTO AN AGREEMENT FOR SALE AND PURCHASE OF NEEDLE PUNCHED NON WOVEN FABRICS BUSINESS TOGETHER WITH ALL OPERATIONS FROM SUPREM E NON WOVEN PVT. LTD. ,THAT IT TOOK OVER ALL EMPLOYEES LICENCES, APPROVALS , INTELLECTUAL PROPERTY RIGHTS, GOODWILL AND NET CURRENT ASSETS FOR A CON SIDERATION OF RS.9,61,60,923/ - , THAT IT INCLU DED GOODWILL OF RS.1.94 CRORES, THAT IN THE AGREEMENT DT.1.12.2000 FO R ASSIGNMENT OF GOODWILL THE TERM GOODWILLWAS DEFINED, THAT DEPRECIATION WAS ALLOWABLE U/S. 32(1)(II) OF THE ACT ON CERTAIN I NTANGIBLE ASSETS LIKE KNOW HOW, PATENTS, LICENCES AND ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, THAT THE DEPRECIAT ION WAS ALL OW ABLE ONLY ON THE INTANGIBLE ASSETS THAT WERE ACQUIRED ON OR AFTER 1.4.1998 , THAT GOODWILL HAD BEEN ACQUIRED AT TH E TIME OF PURCHASE OF BUSINESS, THAT THE ASSESSEE HAD ACTUALLY PAID RS.1.94 CRORES FOR PURCHASE OF GOODWILL IN FY 2001 - 02, THAT THE A SSESSEE GAINED ACCESS TO TRADE SECRETS, OTHER CONFIDENTIAL AND PRO PRIETARY INFORMATION,KNOW - HOW, FORMULAS AND METHODS AND OTHER INTANGIBLE RIGH TS OF THE TRANSFERRED BUSINESS, THAT THE SELLER HAD AGREED TO SUPPLY THE ASSESSEE ITS CUSTOMERSLIST, SUPPLIERS LIST , PLANNED NEW PRODUCTS AND OTHER INFORMATION IN RELATI ON TO THE TRANSFERRED BUSINESS, THAT IN A WAY GAINED A RIGHT OF ESTOPPEL AGAINST SUPREME NON - WOVENS LTD., THAT THROUGH THE ACQUISITION THE ASSESSEE GOT ADVANTAGE OF HAVING ACCESS TO THE TECHNICAL PERSONNE L WHO HAD REQUISITE EXPERIENCE , THAT THE AO HAD STOPPED DISALLOWING DEPRECIATION FROM AY 2010 - 11.HE REFERRED TO PAGE NO.102 - 108 AND THE TRANSFER OF BUSINESS AGREEMENT AS WELL AS ASSIGNMENT OF GOODWILL. THE AR SPECIFICALLY REFERRED TO CLAUSE 1.1 OF THE AGREEM ENT DT.7.11.2000 (PG - 9) OF THE PAPER BOOK. HE RELIED UPON THE CASES OF SMIF S S ECURITIES LTD .(348 ITR 302); B. R AVINDRA PILLAI (332 ITR 531); A REVA T & D INDIA LTD. (345ITR 421 ) AND GODREJ AGROVET (ITA NO.6807/M/06 AND 6223/M/06) . DEPARTMENTAL REPRESEN T - ATIVE(DR ) SUPPORTED THE ORDER OF THE FAA . 2.3 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE BEFORE US. WE FIND THAT THE AO HAD DISALLOWED THE CLAIM OF DEPRECIATION ON GOODWILL AS HE WAS OF THE OPINION THAT THE GOODWILL WA S NOT ELIGI BLE FOR DEPRECIATION UNLESS IT WA S CLASSIFIED UNDER 'ANY OTHER BUSINESS 454 9STPL - SUPREME GROUP 5 OR COMM ERCIAL RIGHT OF SIMILAR NATURE .IT IS FOUND THAT IN THE AGREEMENT DATED 07.11.2000,IT WAS MENTIONED THAT THE BUSINESS TO BE TAKEN OVER BY THE ASSESSEE WOULD INCLUDE MANUFACTURING, MARKE TING, SALES,DISTRIBUTION AND DEVELOPMENT TOGETHER WITH ALL RELATED EMPLOYEES, LICENCES, APPROVALS,INTELLECTUAL PROPERTY RIGHTS ETC.(PG.9 - 10 OF THE PAPER BOOK).FROM THE ABOVE NARRATION IT IS CLEAR THAT THE ASSESSEE HAD ACQUIRED A BUNDLE OF RIGHTS.ON PAGE NO .43 OF THE PB.SCHEDULE - 1 IS GIVEN THAT GIVES DETAIL OF COMPUTATION OF CONSIDERATION WITH REGARD TO CLAUSE 2.2.OF THE AGREEMENT.IN THE SCHEDULE VALUE OF GOODWILL HAS BEEN MENTIONED AT 1,94, 32, 00 3/ - .SO,THE ASSESSEE HAD ACQUIRED GOODWILL AS WELL AS OTHER VA LUABLE RIGHTS.AS FAR AS QUESTION OF ALLOWABILITY OF DEPRECIATION IS CONCERNED IT IS FOUND THAT THE HONBLE APEX COURT HAS IN THE MATTER OF SMIFS SECURITIES LTD.(SUPRA)HELD THAT GOODWILL WAS AN ASSET U/S.32 OF THE ACT.WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER AND SAME READS AS UNDER: 10. EXPLANATION 3 STATES THAT THE EXPRESSION 'ASSET' SHALL MEAN AN INTANGIBLE ASSET, BEING KNOW - HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILA R NATURE. AREADING THE WORDS 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WOULD FALL UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE'. THE PRINCIPLE OF E JUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRETING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). 11. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. FOLLOWING THE AB OVE DECISION,WE HOLD THAT DEPRECIATION IS ALLOWABLE OF GOODWILL AS IT IS AN ASSET. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE . ITA NO.7450/MUM/2010 - AY. - 2006 - 07 : 3. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT DEPRECIATION ON GOODWILL.FOL LOWING OUR ORDER FOR EARLIER YEAR,SAID GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE . 4 . SECOND EFFECTIVE DEALS WITH ADDITION MADE BY THE AO INVOKING THE PROVISIONS OF SECTION 145A OF THE ACT. DU RING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD UNUTILIS ED CENVAT CREDIT OF RS.26.22 LACS AS ON 31.3.2006, THAT IT HAD FOLLOWED EXCLUSIVE METHOD OF ACCOUNT FOR EXCISE DUTY AND THE SAME WAS NOT INCLUD ED WHILE VALUING THE INVENTORY. HE DIRECTED THE ASSESSEE T O EXPLAIN AS TO WHY THE UNUTILIS ED C ENVAT CREDIT SHOULD NOT BE INCLUDED IN THE VALUE OF THE INVENTORY AS PER PROVISIONS OF S.145A OF THE ACT. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE , DT.17.11.2008 , THE AO HELD THAT THE PROVISIONS OF S.145A, INTRODUCED W.E.F. 1.4.1999, PROVIDED THAT THE ELEMENT OF EXCISE DUTY/MODVAT HAD TO BE INCLUDED IN VALUING THE INVENTORY. H E RELIED UPON SEVERAL DECISIONS AND CBDT CIRCULARS STATING THAT THE ADJUSTMENT IN RESPECT OF ELEMENT OF EXCISE DUTY/ MODVAT AND TO BE MADE IN THE VALUE OF THE CLOSING STOCK AS WELL AS OPENING STOCK. ACCORDINGLY HE WORKED OUT THE DIFFERENCE IN CLOSING AND OPENING STOCK OF RS.2.29 LACS AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE . 4.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA .BEFORE HIM, IT W AS ARGUED THAT THE ASSESSEE WAS FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNT FOR CENVAT, THAT VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR PURPOSE OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GA INS OF BUSINESS AND PROFESSION ,TH AT SECTION 145A REQUIRED ADJUSTMENTS TO BE MADE TO THE FIGURE OF PURCHASE AND SALE OF GOODS AND OPENING AND CLOSING INVENTORY SO AS TO INCLUDE CENVAT CREDIT COMPONENT THEREON,THAT THE AO HAD ONLY MADE ADJUSTMENT U/S.145A TO THE CENVAT AND HAD ADDED THE DI FFERENCE BETWEEN CLOSING AND OPENING BALANCE U/S.145A OF THE ACT,THAT THE SEC.145A REQUIRED ADJUSTMENT OF PURCHASES AND SALES ALSO, THAT THE AO HAD GROSSLY ERRED IN MAKING ADJUSTMENTS ONLY IN FIGURE OF OPENING AND CLOSING INVENTORY THUS LEAVING OUT ADJUS TMENT IN THE FIGURE OF PURCHASE AND SALES.THE ASSESSEE RELIED 454 9STPL - SUPREME GROUP 6 UPON THE CASES OF CABOT INDIA LTD.(ITA NO.04/MUM/2004),DATED 1.4.2008,NICHOLAS PIRAMAL LTD. (ITA 08/MUM/2009). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA HELD THAT THE ARGUMENT PUT FORTH BY THE APPELLANT WERE QUITE CONVINCING,THAT AO HAS TO MAKE ADJUSTMENT NOT ONLY IN OPENING AND CLOSING STOCK BUT ALSO IN VALUE OF PURCHASE AND SALE OF GOODS WITH THE AMOUNT OF CENVANT. HE RELIED UPON THE CASES OF MAHALAXRN I GLASS WORKS LTD.(318 ITR 116) AND MAHAVIR ALUMINIUM LTD.,(297ITR77) AND DIRECTED THE AO TO MAKE ADJUSTMENT IN OPENING STOCK, PURCHASE AND SALES AND CLOSING STOCK AND ARRIVE AT THE AMOUNT DISALLOWABLE IF ANY U/S. 145A OF IT ACT.HE C LARIFIED THAT NO DEDU CTION U/S. 43B WOULD BE AVAILABLE TO THE APPELLANT FOR PAYMENT OF THE DUTY IN THE SUBSEQUENT YEAR. 4.2. BEFORE US,THE AR STATED THAT THE AO WAS SUPPLIED A CHART SHOWING NIL IMPACT ON PROFIT IRRESPECTIVE OF METHOD OF ACCOUNTING,THAT FROM AY.2009 - 10 THE AO DID NOT MAKE THE ADDITION.HE RELIED UPON THE CASES OF INDO NIPPON CHEMICALS CO.LTD.(261ITR275),COBAT INDIA LTD.(ITA 2123 OF 2009).DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 4.3. WE HAVE PERUSED THE MATERIAL BEFORE US AND HEARD THE RIVAL SUBMISSIONS.WE F IND THAT THE ASSESSEE HAD SUBMITTED A CHART SHOWING THE IMPACT ON THE PROFIT BY ADOPTING BOTH THE METHODS,THAT FROM THE CHART IS EVIDENT THAT THE RESULTANT IMPACT WAS NIL.IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE FAA SHOULD HAVE ALLOWED THE AP PEAL FILED BY THE ASSESSEE .RESPECFULLY,FOLLOWING THE DECISION OF THE INDO NIPPON CHEMICALS LTD.(SUPRA),WE DECIDE EFFECTIVE GROUND NO.2 IN FAVOUR OF THE ASSESSEE . 5. GROUND NO.6 BECOMES INFRUCTOUS IN LIGHT OF OUR DECISION OF EFFECTIVE GROUND NO.2. 6. NEXT EFFECTIVE GROUND (GOA 7& 8)DEALS WITH LEVY OF INTEREST U/S.234 OF THE ACT AND IS CONSEQUENTIAL IN NATURE.IT STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.7462/MUM/2010 - AY. - 2007 - 08: 7. FIRST TWO EFFECTIVE GROUNDS PERTAIN TO DEPRECIATION ON GOODWILL AND A DDITION MADE U/S.145A OF THE ACT.FOLLWING OUR ORDERS FOR EARLIER YEARS WE DECIDE BOTH THE EFFECTIVE GROUNDS IN FAVOUR OF THE ASSESSEE.GROUND NO.6 IS INFRUCTOUS.GROUND NO.7 IS CONSEQUENTIAL IN NATURE. ITA NO.3140/MUM/2011 - AY. - 2008 - 09: 8. FOLLOWING OUR ORD ERS FOR EARLIER AY.S.,WE DECIDE BOTH THE EFFECTIVE GROUNDS OF APPEAL(GOA 1 - 5) IN FAVOUR OF THE ASSESSEE.GROUND NO.6 IS INFRUCTOUS. AS A RESULT,APPEAL S FILED BY THE ASSESSEE STAND ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH ,AUGUST,2015. 4 , , 2015 SD/ - SD/ - ( . . /A. D. JAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 04 . 08 . 2015 . . . JV . SR.PS. 454 9STPL - SUPREME GROUP 7 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.