P.D. WAREHOUSING CORPORAION, MUMBAI V. ADDL CIT RG 17(1), MUMBAI

ITA 488/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6361 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P N DEVADESAN
• Assessee Lawyers: R C JAIN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ITA NO.488/MUM/2010 : ASST.YEAR 2006-2007 M/S.P.D.WAREHOUSING CORPORATION GUPTA MILLS ESTATE, REAY ROAD MUMBAI 400 010 PA NO.AAAFP1508J. VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 17(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C.JAIN RESPONDENT BY : SHRI P.N.DEVADESAN O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 28.10.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. FIRST GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE U/S.36(1)(III) OF THE ACT. SHORN OFF UNNECESSARY DETAILS IT IS NOTED THA T SIMILAR DISALLOWANCE OF INTEREST WAS MADE IN ASSESSMENT YEAR 2004-2005 IN RESPECT OF FUNDS BORROWED FOR MAKING PAYMENT TO RETIRING PARTNERS. THE LEARNED CIT(A), FOLLOWING THE ORDER OF HIS PREDECESSOR, UPHELD THE DISALLOWANCE. THE LEARNED A.R. HAS PLACED ON RECORD A COPY OF THE ORDER PASSED BY THE TRIBUNAL IN THE IMM EDIATELY PRECEDING YEAR IN ITA NOS.2223 & 2224/MUM/2009. VIDE ORDER DATED 10.02.20 10, THE TRIBUNAL HAS ORDERED FOR THE DELETION OF THE DISALLOWANCE OF IN TEREST MADE AND SUSTAINED IN THE FIRST APPEAL. THE RELEVANT DISCUSSION IS ON PARAS 9 TO 14 OF THE TRIBUNAL ORDER. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE HAVING BEEN B ROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE PRECEDENT, WE OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND ORDER FOR THE DELETION OF THE DISALLOWANCE. 3. GROUND NO.2 IS AGAINST NOT ALLOWING DEPRECIATION OF RS.63,18,125 ON INTANGIBLE ASSET AS CLAIMED IN EARLIER YEARS AS WEL L AS THE YEAR IN QUESTION. THE FACTS ITA NO.488/MUM/2010 M/S.P.D.WAREHOUSING CORPORATION. 2 APROPOS THIS ISSUE ARE THAT THE ASSESSEE IN THE REV ISED RETURN CLAIMED DEPRECIATION OF RS.63,18,125 ON A SUM OF RS.4.50 CRORES PAID TO RET IRING PARTNERS, BY CLAIMING IT TO BE ACQUISITION OF SOME INTANGIBLE ASSET. THE ASSESS ING OFFICER, RELYING ON THE VIEW TAKEN BY HIM IN ASSESSMENT YEARS 2004-2005 AND 2005 -2006, REJECTED THIS CLAIM. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED T HAT THE TRIBUNAL UPHELD THE VIEW TAKEN BY THE AUTHORITIES BELOW ON THIS ISSUE I N THE AFORE-NOTED TRIBUNAL ORDER BY RELYING ON THE JUDGEMENT OF THE HONBLE BOMBAY H IGH COURT IN CIT VS. TECHNO SHARES AND STOCKS LTD. [(2010) 323 ITR 69 (BOM.)] . IT WAS CONTENDED THAT THE SAID JUDGEMENT HAS BEEN REVERSED BY THE HONBLE SUPREME COURT AND HENCE THE VIEW BE TAKEN IN ASSESSEES FAVOUR. 5. WE ARE NOT CONVINCED WITH THE SUBMISSION ADVANCE D ON BEHALF OF THE ASSESSEE FOR THE REASON THAT SECTION 32(1)(II) PROV IDES FOR DEPRECIATION ON KNOWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BE ING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1 ST DAY OF APRIL, 1998. THE HONBLE HIGH COURT IN TECHNO SHARES AND STOCKS LTD. (SUPRA) HAS HELD THAT NO DEPRECIATION IS ALLOWABLE ON BOMBA Y STOCK EXCHANGE MEMBERSHIP CARD AS ONLY THE INTANGIBLE PRO PERTY WHICH IS IN THE NATURE OF INTELLECTUAL PROPERTY IS COVERED WITHIN SECTION 36 (1)(II). THE HONBLE SUPREME COURT HAS REVERSED THE JUDGEMENT OF THE HONBLE BOM BAY HIGH COURT IN TECHNO SHARES AND STOCK LTD. (SUPRA) BY HOLDING THAT THE DEDUCTION IS ALLOWABLE ON BOMBAY STOCK EXCHANGE MEMBERSHIP CARD, WHICH IS A BUSINESS OR COMMERCIAL RIGHT IN THE NATURE OF `LICENCE OR `AKIN TO LICENC E. IT HAS FURTHER BEEN HELD BY THE HONBLE APEX COURT THAT THIS : JUDGEMENT SHOULD NO T BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A LICENCE OR FRANCHISE IN TERMS OF SECTION 32(1)(II). FROM THE FACTS OF THE INST ANT CASE IT IS SEEN THAT THE ASSESSEE MADE PAYMENT OF RS.4.50 CRORES TO THE OUTGOING PAR TNERS. IN OUR CONSIDERED ITA NO.488/MUM/2010 M/S.P.D.WAREHOUSING CORPORATION. 3 OPINION BY MAKING SUCH PAYMENT THE ASSESSEE DID NOT ACQUIRE ANY INTANGIBLE ASSET OF THE NATURE DEFINED IN SECTION 32(1)(II). THE TRI BUNAL IN ASSESSEES OWN CASE, ALBEIT REFERRED TO THE JUDGEMENT IN THE CASE OF TECHNO SHARES AND STOCKS LTD. (BOM.), BUT RETURNED AN INDEPENDENT FINDING THAT THE PAYME NT WAS MADE TO THE PARTNERS JUST TO AVOID LITIGATION ETC. THE RIGHT, T ITLE AND INTEREST IN THE CASE REMAINED WITH THE FIRM AS THE RETIRING PARTNERS COULD NOT CL AIM ANY RIGHT TITLE OR INTEREST OF THE ONGOING FIRM. IT HAS BEEN FURTHER HELD THAT : RETA INING THE RIGHT, TITLE AND INTEREST OF THE FIRM DOES NOT CREATE ANY ASSET TANGIBLE OR INTA NGIBLE FOR THE PURPOSE OF CLAIMING ANY DEPRECIATION. THERE IS NOTHING IN THE AGREEMENT THAT THE OUTGOING PARTNERS CANNOT DO ANY BUSINESS. THERE IS NOTHING IN THE AGR EEMENT THAT BY MAKING PAYMENTS TO THE PARTNERS, THE ASSESSEE WILL CREATE ANY TANGIBLE OR INTANGIBLE ASSET IN THE BOOKS OF ACCOUNT. IN VIEW OF THIS CATEGORICAL FINDING OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YE AR RESULTING IN TO THE DENIAL OF DEPRECIATION ON THE PAYMENT MADE TO THE OUTGOING PA RTNERS, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS WARRANTE D IN THE IMPUGNED ORDER ON THIS ISSUE SIMPLY ON THE GROUND THAT THE JUDGMENT OF THE HONBLE HIGH COURT HAS BEEN REVERSED BY THE HONBLE SUPREME COURT ON THE QUESTI ON OF ALLOWING OF DEPRECIATION ON THE BSE MEMBERSHIP CARD. RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE, WE DISMISS THIS GROU ND OF APPEAL. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF NOVEMBER, 2010. SD/- SD/- ( VIJAY PAL RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 26 TH NOVEMBER, 2010. DEVDAS* ITA NO.488/MUM/2010 M/S.P.D.WAREHOUSING CORPORATION. 4 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XXIX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.