M/s. Premier Book Co., New Delhi V. ACIT, New Delhi

ITA 5149/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4178 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B R ANAND
• Keywords: Capital asset; Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5149/DEL /2014 ASSESSMENT YEAR: 2010-11 M/S PREMIER BOOK CO., ANSARI ROAD, 23, DARYAGANJ, NEW DELHI-110002 (PAN: AAEFP8468R) VS ACIT, CIRCLE 30(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.R. ANAND, CA RESPONDENT BY : SHRI ATIQ AHMAD , SR. DR DATE OF HEARING : 05.09.2017 DATE OF PRONOUNCEMENT: 04.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN PREFE RRED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-XXV, NEW DELHI VIDE ORDER DATED 3.6.2014 WHEREIN THE LD. CIT(A) HAS DISMISSED THE A SSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 2, 68,71,345/-. SUBSEQUENT TO THE PROCESSING OF RETURN U/S 143(1) O F THE INCOME I.T.A. NO. 5149/DEL/2014 ASSESSMENT YEAR 2010-11 2 TAX ACT, 1961 (HEREINAFTER CALLED THE ACT), SCRUT INY PROCEEDINGS WERE INITIATED. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CL AIMED DEPRECIATION OF RS. 5,41,406/- @25% ON THE TENANCY RIGHTS VALUED AT RS. 21,65,625/-. ON QUERY FROM THE ASSES SEE, THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD, SOME TIME BACK I.E. RELEVANT TO ASSESSMENT YEAR 2008-09, SETTLED THE DI SPUTE BETWEEN THE LEGAL HEIRS OF A FORMER PARTNER LATE SHRI P.C. AGGARWAL AND THE AMOUNT PAID TOWARDS THE TENANCY RIGHTS WERE AMORTIS ED IN THE BOOKS OF THE ASSESSEE FIRM ON WHICH THIS DEPRECIATI ON WAS CLAIMED. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION THAT AS PER PROVISIONS OF SECTION 32(1)(II), DEPRECIATIO N WAS ALLOWABLE ONLY IN RESPECT OF KNOW-HOW, PATENTS, COPYRIGHTS, T RADEMARKS, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER 1.4.1998. THE ASSESSING OFFICER ALSO RELIED ON THE ORDER OF THE I TAT MUMBAI BENCH IN THE CASE OF M.M. NISSIM & CO. VS ACIT REPO RTED IN (2007) 18 SOT 274 (MUM) THAT THE TENANCY RIGHTS ACQ UIRED BY THE ASSESSEE CANNOT BE EQUATED WITH THE LICENSE PROVIDE D U/S 32 SO AS TO QUALIFY IT AS AN INTANGIBLE ASSET ELIGIBLE FO R DEPRECIATION. THE ASSESSING OFFICER PROCEEDED TO ADD BACK THE AMO UNT OF RS. I.T.A. NO. 5149/DEL/2014 ASSESSMENT YEAR 2010-11 3 5,41,406/- TO THE INCOME OF THE ASSESSEE WHICH ON A PPEAL WAS ALSO CONFIRMED BY THE CIT(A). NOW, THE ASSESSEE HA S APPROACHED THE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT 'TENANCY RIGHTS DO NOT COME UNDER THE PREVIEW OF THE INTANGIBLE ASSETS' AS PER THE DEFINITION CONTAINED IN SECTION 32(1 )(II). 2. THAT THE AUTHORITIES BELOW ERRED IN NOT HOLDIN G THAT TENANCY RIGHTS BEING A CAPITAL ASSET OF THE BUSINES S OF THE ASSSESSEE WERE COVERED UNDER THE EXPRESSION 'PROPER TY OF SIMILAR KIND' REFERRED TO IN SECTION 32(1)(II) AND THE ASSESSEE HAD RIGHTLY CLAIMED DEPRECIATION IN RESPEC T THEREOF. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX ERR ED IN CONFIRMING THE ORDER OF THE AO DISALLOWING DEPRECIA TION ON TENANCY RIGHTS AMOUNTING TO RS.5,41,406. 4. THAT THE ORDER OF THE LEARNED AUTHORITIES BELOW BEI NG CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPEAL BE ALLOWED. 3. LEARNED AR SUBMITTED THAT THE ORDER OF THE ITA T MUMBAI BENCH IN THE CASE OF M.M. NISSIM & CO. VS ACIT (SUP RA) RELIED UPON BY THE ASSESSING OFFICER HAD BEEN WRONGLY RELI ED UPON. LD. AR SOUGHT TO PLACE RELIANCE ON THE JUDGMENT OF THE HONBLE APEX COURT IN CIT KOLKATA VS SMIFS SECURITIES LTD. (2012 ) 24 TAXMANN.COM 222 (SC) AND SUBMITTED THAT TENANCY RIG HTS WERE AKIN TO GOODWILL AND, THEREFORE, THE RATIO LAID DOW N BY THE HONBLE I.T.A. NO. 5149/DEL/2014 ASSESSMENT YEAR 2010-11 4 COURTS IN THE CASE OF GOODWILL WILL ALSO APPLY TO T ENANCY RIGHTS. LD. AR ALSO RELIED ON AN ORDER OF THE ITAT DELHI BE NCH IN THE CASE OF THYSSENKRUPP ELEVATOR (INDIA) PVT. LTD. VS ACIT IN I.T.A. NOS. 153/DEL/2008 AND 154/DEL/2008 WHEREIN VIDE ORDER DA TED 29.8.2014, ITAT DELHI BENCH HAD RULED THAT EXCESS C ONSIDERATION PAID BY THE ASSESSEE OVER AND ABOVE THE NET VALUE O F ASSETS SHOULD BE CONSIDERED AS GOODWILL OF THE BUSINESS AN D THE SAME SHOULD QUALIFY FOR DEPRECIATION U/S 32(1)(II) OF TH E ACT. 4. LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE ORDER OF THE AUTHORITIES BELOW AND VEHEMENTLY ARGUE D THAT THE ASSESSEES CASE WAS DISTINGUISHABLE ON FACTS AND TH E JUDGMENTS BEING RELIED ON BY THE ASSESSEE WERE NOT IN FAVOUR OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. SECTION 32 OF THE ACT DEALS WITH DEPRECIATION AND THE EXPRESSION INTANGI BLE ASSETS IS DEFINED IN SECTION 32(1)(II) AS UNDER:- IN RESPECT OF DEPRECIATION OF KNOW-HOW, PATENTS, C OPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSIN ESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIB LE ASSETS ACQUIRED ON OR AFTER 1 ST DAY OF APRIL, 1998. I.T.A. NO. 5149/DEL/2014 ASSESSMENT YEAR 2010-11 5 6. THE QUESTION THAT ARISES BEFORE US IS WHETHER TH E TENANCY RIGHTS FALL WITHIN THE DEFINITION OF INTANGIBLE ASS ETS FOR THE PURPOSE OF DEPRECIATION ALLOWANCE U/S 32(1)(II). I N THE PRESENT CASE, IT IS UNDISPUTED THAT THE AMOUNT OF RS. 21,65 ,629/- WAS PAID TO THE LEGAL HEIRS OF A FORMER PARTNER AS A CO NSEQUENCE TO AN ARRANGEMENT TO SETTLE THE DISPUTE BETWEEN THE FIRM AND THE DECEASED PARTNER. THE PAYMENT SO MADE WAS CAPITALI SED UNDER THE HEAD GOODWILL AND TENANCY RIGHTS IN THE BOOKS O F THE ASSESSEE FIRM AND DEPRECIATION WAS CLAIMED ON SUCH AMORTISED AMOUNT. HOWEVER, IT IS VERY MUCH APPARENT THAT THE PAYMENT WAS MADE TO THE LEGAL HEIRS OF THE DECEASED PARTNER AND THUS, T HE PAYMENT WAS TOWARDS THE CAPITAL/OUTSTANDING DUES OF THE DEC EASED PARTNER. IT IS ALSO APPARENT THAT THE FIRM WAS NOT A TENANT/HAD NOT PAID FOR ACQUISITION OF TENANCY RIGHT BUT HAS M ADE PAYMENTS TO THE LEGAL HEIRS OF THE DECEASED PARTNERS AND HAS REFLECTED THE SAME AS PAYMENT MADE FOR ACQUISITION OF TENANCY RIG HTS IN ITS BOOKS OF ACCOUNT. IN SUCH A SITUATION, IT CANNOT B E SAID THAT THE PAYMENT WAS MADE FOR ACQUISITION OF TENANCY RIGHTS AND ACCORDINGLY, THE QUESTION AS TO WHETHER TENANCY RIG HTS WOULD FALL UNDER THE DEFINITION OF INTANGIBLE ASSETS FOR THE P URPOSE OF CLAIMING DEPRECIATION U/S 32 OF THE ACT DOES NOT AR ISE IN THE I.T.A. NO. 5149/DEL/2014 ASSESSMENT YEAR 2010-11 6 PRESENT APPEAL. BEFORE US, LD. AR COULD NOT LEAD A NY EVIDENCE TO SUPPORT THE CLAIM THAT THE PAYMENT MADE WAS TOWARDS ACQUISITION OF TENANCY RIGHTS. ACCORDINGLY, WE FIN D NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND W HILE UPHOLDING HIS ORDER, WE DISMISS THE ASSESSEES APPEAL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 4TH OC TOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 4 TH OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR