DCIT, Trivandrum V. S. Ambika, Trivandrum

ITA 594/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4435 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2010
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 15-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 23-04-2008
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: UMESH KUMAR
• Keywords: Capital asset; Depreciation; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL COCHIN BENCH, COC HIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY ARORA, AM I.T.A. NO. 594/COCH./2008 ASSESSMENT YEAR : 2004-05 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2), RANGE- 1, TRIVANDRUM. VS. S. AMBIKA, SUKANYA BHAVAN, T.C.XII/582, VADAYAKADU, KUNNUKUZHI, TRIVANDRUM. [PAN: AIYPS 0915L] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI T.J.VINCENT, DR ASSESSEE BY SHRI UMESH KUMAR, CA O R D E R PER SANJAY ARORA, A.M. : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, TRIVANDRUM (CIT(A) FOR SHO RT) DATED 20/1/2008, AND THE ASSESSMENT YEAR (A.Y.) UNDER REFERENCE IS 2004-05. 2. THE APPEAL RAISES THREE ISSUES PER ITS SEVERAL G ROUNDS, EACH OF WHICH WE SHALL TAKE UP IN SERIATIM. THE BACKGROUND FACTS OF THE CASE AR E THAT THE ASSESSEE, AN INDIVIDUAL, RUNS THREE BAR HOTELS IN TRIVANDRUM. SHE FILED HER RETUR N FOR THE YEAR ON 01.11.2004, DECLARING HER TOTAL INCOME AT RS. 8,47,610/- (WRONGLY MENTION ED IN THE APPELLATE ORDER AS RS. 867610/-), WHICH STOOD PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER) ON 10.3.2005. SUBSEQUENTLY, A NOTICE U /S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 14.11.2006 IN RESPONSE TO WHICH THE ASS ESSEE FILED HER RETURN, DISCLOSING THE SAME INCOME AS PER THE ORIGINAL RETURN, ON 22.11.20 06. THE ASSESSMENT IN THE INSTANT CASE STOOD MADE VIDE ORDER U/S. 143(3) R.W.S. 147 OF THE ACT DATED 19.12.2007 AT RS. 28,32,900/- (AND AGRICULTURAL INCOME AT RS. 1,10,00 0/-) BY MAKING TWO ADDITIONS, I.E., IN RESPECT OF DEPRECIATION ON THE LICENSE FEES CLAIMED U/S. 32(1)(II) OF THE ACT AT RS. 15,15,294/- AND RS. 4,70,000/- TOWARD SUPPRESSED T RADING INCOME. IT IS THESE TWO ADJUSTMENTS, WHICH STAND DELETED IN FIRST APPEAL, T HAT ARE THE SUBJECT MATTER OF THE PRESENT ITA. NO. 594/COCH./2008 2 APPEAL. IN ADDITION, THE REVENUE ALSO AGITATES THE VACATION OF THE REOPENING OF THE ASSESSMENT BY THE LD. CIT(A), WHO HELD SO ON THE GR OUND THAT THE ADDITIONS, AS MADE BY THE ASSESSING OFFICER (AO) AND CONTESTED BY THE ASS ESSEE BEFORE HIM, STOOD DELETED BY HIM IN FIRST APPEAL, SO THAT THE REASSESSMENT WOULD NOT SURVIVE. WITH REGARD TO THE LEGAL ISSUE OF THE RE-OPENING, WE FIND NO MERIT WHATSOEVE R IN THE ORDER OF THE LD. CIT(A); THE RE-OPENING BEING WITHIN THE PERIOD OF FOUR YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR [REFER: CIT(ASST.) VS. RAJESH JHAVERI STOCK BROKERS PVT. LT D ., 291 ITR 500 (SC)]. THE LEGAL VALIDITY OR OTHERWISE OF THE REASSESSMENT PROCEEDINGS DOES NOT DEPEND UPON, OR IS NOT DETERMINED BY, THE FINAL OUTCOME OF THE ADJU STMENTS EFFECTED BY THE REVENUE IN THE REASSESSMENT. IN OTHER WORDS, THE FATE OF THE DISAL LOWANCE(S) OR ADDITION(S), I.E., THE ASSESSMENT ON MERITS, ON APPEAL, CANNOT DECIDE THE LEGALITY OR MAINTAINABILITY OF THE REOPENING, WHICH HAS TO BE DECIDED ON ITS OWN MERIT S. THE LAW IN THE MATTER IS WELL SETTLED, AND FOR WHICH REFERENCE MAY BE MADE, INTER ALIA , TO THE DECISIONS IN THE CASE OF CENTRAL PROVINCES MANGANESE ORE CO. LTD. VS. ITO , 191 ITR 662 (SC); ITO V. SELECTED DALURBAND COAL (P.) LTD ., 217 ITR 597 (SC). THE REVENUES GROUND NOS. 2 & 3, I.E., QUA THIS ISSUE, ARE UPHELD. 3. THE NEXT ISSUE AGITATED BY THE REVENUE, PER ITS GROUND NOS. 4, 5 & 6, IS IN RESPECT OF CLAIM OF DEPRECIATION ON THE `CAPITAL ASSET, BE ING A BAR LICENSE IN RESPECT OF ONE OF THE BAR HOTELS, SHREE PADMANABHA TOURIST HOME AND BAR, BALARAMAPURAM PURCHASED FROM ONE MR. SUNIL, THE ERSTWHILE OWNER AND HOLDER OF TH E BAR LICENSE, IN NOVEMBER, 2000 AT A COST OF RS. 8081570/-. THE ASSESSEES CONTENTION IS THAT IT HAS THEREBY ACQUIRED A PERMANENT RIGHT TO CARRY ON THE BUSINESS OF BAR HOT EL AT BALARAMAPURAM, TRIVANDRUM. THE SAME THUS CONSTITUTES A VALUABLE RIGHT, NECESSARY F OR RUNNING HER BUSINESS, AND IS THUS ONLY AN INTANGIBLE ASSET, QUALIFYING FOR DEPRECIATI ON ALLOWANCE U/S. 32 (1)(II) OF THE ACT. THE REVENUES CASE, ON THE OTHER HAND, IS THAT IT I S ONLY A TEMPORARY RIGHT AND DOES NOT CREATE ANY ENDURING BENEFIT TO THE ASSESSEE AND, TH US, ONLY A REVENUE EXPENDITURE. THE LD. CIT(A), IN APPEAL, ENDORSED THE ASSESSEES VIEWPOIN T, HOLDING THAT THE RIGHT SO ACQUIRED IS A LICENSE, WHICH WOULD FALL WITHIN THE OMNIBUS CLAU SE OF `ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. ITA. NO. 594/COCH./2008 3 4. BEFORE US BOTH THE PARTIES RAISED LIKE CON TENTIONS. THE `ALLOWANCE OF DEPRECIATION TO THE ASSESSEE IN EARLIER YEARS WAS ONLY BY WAY OF PROCESSING OF HER RETURN U/S. 143(1) OF THE ACT, AND THE ASSESSEE, THUS, CANNOT BE CONSIDER ED AS HAVING BEEN `ALLOWED HER CLAIM BY THE REVENUE. IN ANY CASE, THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT. THE LD. AR, ON THE OTHE R HAND, WOULD SUBMIT THAT THE BAR LICENSE ACQUIRED COULD BE USED BY THE ASSESSEE FOR HER LIFETIME AND, HENCE, WAS ONLY AN ENDURING RIGHT. BESIDES, IT IS TRANSFERABLE, SO THA T IT COULD BE TRANSFERRED AT ANY TIME BEFORE HER DEATH AS PER THE PROVISIONS OF THE KERALA ABKAR I ACT, LENDING, RATHER, PERMANENCE TO IT. THE PAYMENT MADE AND THE RIGHT ACQUIRED THEREBY , IS NOT TO BE CONFUSED WITH THE LICENSE RENEWAL FEES TO BE PAID FROM YEAR TO YEAR, WHICH, IN FACT, STANDS CLAIMED FOR THE CURRENT YEAR AND, CONSEQUENTLY, ALLOWED AT RS. 45.1 5 LACS. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 5.1 THE FIRST ISSUE THAT WOULD ARISE FOR OUR CO NSIDERATION IS WHETHER THE AMOUNT PAID IS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE. TH E SAME CONFERS A VALUABLE RIGHT TO THE ASSESSEE, I.E., TO CARRY ON THE BUSINESS OF A BAR H OTEL AT BALARAMAPURAM, AND WITHOUT WHICH IT CANNOT RUN THE SAID BUSINESS. NO DOUBT, TH E SAME IS SUBJECT TO CANCELLATION BY THE ISSUING AUTHORITY, BUT THAT WOULD ONLY BE ON THE TR ANSGRESSION OR VIOLATION OF THE REGULAR CONDITIONS OF THE ISSUE, AS IS APPARENT FROM THE PE RUSAL OF THE BAR LICENSE (PLACED AS ANNEXURE I PGS. 1 TO 9 OF THE ASSESSEES PAPER-BO OK), SO THAT IT WOULD NOT BE REVOKED BY THE GOVERNMENT IN THE NORMAL COURSE. THE SAME AR E IN FACT ONLY REGULAR CONDITIONS, IN HARMONY WITH THE OTHER LAWS INCIDENTAL TO THE ASSES SEES TRADE, TO A VARIETY OF WHICH, ANY TRADE, IN FACT, IS. WE, THUS, HAVE NO HESITATION IN HOLDING THE BAR LICENSE ISSUED BY THE EXCISE COMMISSIONER OF THE KERALA STATE GOVERNMENT UNDER THE PROVISIONS OF KERALA AKBARI ACT, ENTITLING THE ASSESSEE TO RUN HER BUSIN ESS OF A BAR HOTEL AT BALARAMAPURAM, TRIVANDRUM, ON THE SATISFACTORY COMPLIANCE OF THE V ARIOUS CONDITIONS PRESCRIBED VIDE THE SAID ACT AND THE RULES FRAMED THERE-UNDER, TO BE A CAPITAL EXPENDITURE REPRESENTING A CAPITAL ASSET OF HER BUSINESS. THE FACT THAT CERTAI N CONDITIONS NEED TO BE SATISFIED ON A CONTINUOUS BASIS, INCLUDING THE PAYMENT OF THE ANNU AL LICENSE RENEWAL FEES, AND THAT IT IS NEGOTIABLE, WOULD MAKE NO DIFFERENCE, AS THESE DO N OT DETRACT FROM, BUT RATHER GO TO DEFINE THE RIGHTS CONFERRED, CONSTITUTING ITS ESSEN TIAL FEATURES OR ATTRIBUTES, WITHOUT ALTERING ITS BASIC CHARACTER. IN FACT, `ENDURING D OES NOT IMPLY PERMANENCE, EVEN AS IN THE ITA. NO. 594/COCH./2008 4 PRESENT CASE THE ASSESSEE HAS SHOWN THAT THE LICENC E IS NOT FOR A FIXED TERM OR TIME PERIOD, SO THAT IT WOULD CONTINUE TO COMMAND VALUE TILL SUC H TIME THERE IS A MARKET OR DEMAND FOR LIQUOR AND THE TRADE IS REGULATED, AND THE FACT THA T IT COULD BE TRANSFERRED AT ANY TIME, WOULD ONLY LEND IT WITH THE CHARACTER OF PERMANENCE OR AT LEAST QUASI PERMANENCE. 5.2 THE NEXT ISSUE WOULD BE WHETHER THE SAME IS AN INTANGIBLE ASSET WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 32(1)(II) OF THE ACT. REFERENCE IN THIS CONTEXT IS MADE TO THE DECISION BY THE TRIBUNAL IN THE CASE OF BAKIWAL CORPORATE SERVICES PVT. LTD. VS. ITO , 113 ITD 14 (MUM.) AND CIT VS. TECHNO SHARES AND STOCKS LTD ., 225 CTR (BOM.) 337, WHICH STOOD ALSO REFERRED TO BY THE BENCH DURING HEARING. THE ISSUE IN BOTH THESE CASES WAS THE ALLOWANCE OF DEPRECIATION U/S. 32(1)(II) OF THE ACT ON THE MEMBERSHIP CARD ISSUED BY THE BOMBAY STOCK EXCHANGE, ACQUIRED AFTER 1.4.1981, BUT FOR WHICH IT IS NOT POSSIBLE FOR ANY PERSON TO DEAL IN SECURITIES IN TERMS OF SECTION 17 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956. THE TRIBUNAL TOOK A VIEW DIFFERENT FROM THAT EXPRESSED IN THE CASE OF TECHNO SHARES AND STOCKS LTD ., 101 TTJ 349 (MUM.) EVEN AS IT CONCURRED WITH THE FINDINGS OF THE CO-ORDINATE BENCH THAT THE STOCK EXCHANGE CARD IS A PROPERTY AND, THUS, A CAPITAL ASSET, HELD, IN THE CIRCUMSTANCES OF THE CASE, FOR BUSINES S PURPOSES. HOWEVER, THAT BY ITSELF WOULD NOT SUFFICE FOR THE CLAIM OF ALLOWANCE OF DEP RECIATION UNLESS THE OTHER STATUTORY CONDITIONS STIPULATED BY SECTION 32 ARE FULFILLED, NAMELY: A). THE ASSET IN QUESTION IS LIABLE TO DIMINUTIO N IN VALUE; B). THE SAID ASSET IS OWNED BY THE ASSESSEE; AND C). THE SAID ASSET IS USED FOR THE PURPOSES OF TH E ASSESSEES BUSINESS OR PROFESSION. WHAT WOULD BE MATERIAL FOR US IS THE FIRST CONDITIO N AS THERE IS NO DISPUTE WITH REGARD TO THE SATISFACTION OF THE OTHER TWO. IT WOULD BE RELE VANT AT THIS STAGE TO CLARIFY AS TO WHY THE SAME STANDS LISTED AS A SEPARATE CONDITION. THIS IS AS BUT FOR THE SATISFACTION OF THIS CONDITION, THE SATISFACTION OF THE OTHER TWO WOULD BE OF NO CONSEQUENCE, AND BEING GENERALLY SATISFIED; THE EXAMPLES OF NON-DEPRECIABL E ASSETS, AS LAND, BEING ADMITTEDLY FEW AND FAR BETWEEN, ITS SATISFACTION IS OFTEN PRESUMED . THE CONDITION IS IMMINENT AND APPARENT FROM THE LANGUAGE OF THE PROVISION, WHICH BEGINS WITH THE WORDS ` IN RESPECT OF DEPRECIATION OF , SO THAT IT IS ONLY AN ALLOWANCE TOWARD DEPRECIAT ION OR DIMINUTION IN THE VALUE OF A (DEPRECIABLE) ASSET. THE ALLOWANCE OF DE PRECIATION REPRESENTS AND IS ESSENTIALLY A CAPITAL ALLOWANCE TO COMPENSATE FOR THE LOSS OF C APITAL SUFFERED DUE TO THE DIMINUTION IN ITA. NO. 594/COCH./2008 5 THE VALUE OF THE ASSET OVER TIME OR ON ACCOUNT OF I TS USER, WHICH IS THEREFORE NECESSARILY TO BE ALLOWED IF THE TRUE AND FAIR PICTURE OF THE OPER ATING RESULTS OF THE BUSINESS, AND NOT DISTORTED ONE, IS TO BE ARRIVED AT. PROFIT, BY DEFI NITION, IT MAY BE EMPHASIZED, IS ONLY AN ACCRETION TO CAPITAL OVER THE GIVEN PERIOD OF TIME, SO THAT THE CAPITAL LOST OR DEPLETED IN THE GIVEN ECONOMIC ACTIVITY HAS TO BE ALLOWED IN DETERM INING THE SAME. WHAT IS IMPORTANT, THEREFORE, IS THAT THE CAPITAL ASSET IN QUESTION IS CAPABLE OF DIMINUTION IN THE VALUE OVER ITS LIFETIME. IF THE ASSET IS NOT LIABLE TO DEPRECIATIO N, THE QUESTION OF ALLOWANCE ON ITS ACCOUNT WOULD NOT ARISE. THE NATURE OF THE DEPRECIATION ALL OWANCE, OR IT BEING A RECOMPENSE TOWARD DIMINUTION IN VALUE OF THE ASSET IN QUESTION , STANDS EXPLAINED BY THE TRIBUNAL IN THE SAID DECISION WITH REFERENCE TO THE DECISIONS B Y HIGHER COURTS OF LAW, AS IN THE CASE OF G.R.GOVINDARAJULU V. CIT , 90 ITR 13 (MAD.) AND CIT VS. ELECON ENGG. CO. LTD. , 96 ITR 672 (MAD.), WHEREIN THE CONCEPT STANDS ELUCIDATED, THE LATTER HAVING BEEN AFFIRMED BY THE HONBLE APEX COURT, REPORTED AT 166 ITR 66 (SC). IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE BAR LICENSE ACQUIRED CONFERS AN ALMOS T ABSOLUTE RIGHT ON THE ASSESSEE WHICH COULD, SUBJECT TO THE SATISFACTION OF THE TERMS OF ITS ISSUE, USED BY THE ASSESSEE DURING HER LIFETIME. BESIDES, IT COULD BE TRANSFERRED BY HER A T ANY TIME, SO THAT IF AND WHEN SHE FELT INCAPABLE OF OR DISINCLINED TO EXPLOIT IT COMMERCIA LLY HERSELF, SHE COULD TRANSFER THE SAME FOR A CONSIDERATION, IN THE SAME MANNER AS SHE PURC HASED IT, LENDING IT WITH THE CHARACTER OF PERMANENCE, I.E., INSOFAR AS PHYSICAL THING OR M ATTER CAN BE. AS SUCH, THE BENEFITS THERE-FROM ARE PERMANENT AND PERPETUAL IN NATURE, E VEN AS CONTENDED BY THE ASSESSEE HERSELF BEFORE THE AUTHORITIES BELOW, AND WHICH FOR MS THE SUBSTRATUM OF HER CASE BEFORE US AS WELL. THERE IS THUS NO QUESTION OF ANY DIMINU TION IN ITS VALUE, IMPLYING LOSS OF VIGOUR, STRENGTH, CAPACITY, UTILITY, ETC., EITHER O N ACCOUNT OF ITS USER OR WITH TIME, AND THUS, IT BEING REGARDED AS A DEPRECIABLE ASSET, EVEN AS E XPLAINED BY THE TRIBUNAL IN THE CASE OF BAKIWAL CORPORATE SERVICES PVT. LTD. (SUPRA), TOWARD DEPRECIATION IN RESPECT OF WHICH AN ALLOWANCE UNDER THE RELEVANT PROVISION OF THE ACT C OULD BE CONSIDERED. 5.3 CONTINUING FURTHER, WE WOULD, WITHOUT PREJ UDICE TO THE ABOVE, ALSO CONSIDER THE TENABILITY OF THE ASSESSEES CLAIM ASSUMING THE SAT ISFACTION OF THE PRECEDENT CONDITION OF THE ASSET UNDER REFERENCE BEING SUBJECT TO DEPRECIA TION. THE ORDER BY THE TRIBUNAL IN THE CASE OF TECHNO SHARES AND STOCKS LTD . (SUPRA), HOLDING THE MEMBERSHIP CARD OF A RECOGNIZED STOCK EXCHANGE TO BE A ELIGIBLE FOR DEPR ECIATION U/S. 32(1)(II), STOOD ITA. NO. 594/COCH./2008 6 CHALLENGED BY THE REVENUE BEFORE THE HONBLE BOMBAY HIGH COURT, CITED SUPRA, WHICH SET ASIDE THE SAME, AND REVERSING THE SAID DECISION , UPHOLDED THE REVENUES CONTENTION OF IT BEING NOT SO. IT STANDS HELD THEREIN THAT ONLY T HOSE DEPRECIABLE ASSETS AS ENUMERATED IN THE RELEVANT CLAUSES OF SECTION 32(1) WOULD QUALIFY FOR THE GRANT OF DEPRECIATION THERE- UNDER. THE ASSESSEES CONTENTION IN THAT CASE, AS I N THE INSTANT CASE, WAS THAT THE MEMBERSHIP CARD IS A LICENCE AND, IN ANY CASE, A BU SINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE. AFTER AN AT LENGTH EXAMINATION OF THE MATTE R, IT STOOD HELD THAT THE EXPRESSION `LICENCE, OCCURRING IN S. 32(1)(II), HAS TO BE CON STRUED RESTRICTIVELY, AS ALL THE OTHER INTANGIBLE ASSETS SPECIFIED UNDER THE SAID CLAUSE, I.E., EXCEPT LICENCE, BELONG TO THE CATEGORY OF INTELLECTUAL PROPERTY RIGHTS (IPRS). AP PLYING THE RULE OF NOSCITUR A SOCIIS , IT STANDS EXPLAINED THAT THE WORD LICENCE, WHICH ONLY MEANS A FORMAL PERMISSION, BUT FOR WHICH THE ACT UNDER CONTEMPLATION WOULD BE NOT LEGA L OR AUTHORIZED, WOULD TAKE ITS COLOUR FROM THE WORDS PRECEDING AND SUCCEEDING IT. THE SA ID REASONING WOULD FURTHER BE FORTIFIED BY THE USE OF THE WORDS ` KNOWHOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES , FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE , SO THAT THE PROVISION CLEARLY POSTULATES THAT THE BUSINESS OR C OMMERCIAL RIGHTS WHICH ARE NOT SIMILAR TO THE CATEGORY SPECIFIED U/S. 32(1)(II) ARE NOT EN TITLED TO DEPRECIATION. ACCORDINGLY, THE ASSESSEES ALTERNATIVE ARGUMENT QUA THE BSE CARD AS REPRESENTING A BUSINESS OR COMMERCIAL RIGHT STOOD ALSO REJECTED. IN FACT THE A SSESSEES ARGUMENT FOR CONSTRUING THE EXPRESSION `LICENSE WIDELY, AND AT THE SAME TIME C ONCEDING TO IT TO BE NOT A PERSONAL LICENSE, AS, SAY, A DRIVING LICENCE; A LICENCE TO P RACTICE THE PROFESSION OF LAW, MEDICINE OR ACCOUNTANCY, ETC., WHICH, BEING IN THE NATURE OF A PRIVILEGE, WAS ADMITTED TO BEING NOT COVERED BY THE PROVISION OF S. 32(1)(II), WAS OBSER VED BY THE HONBLE COURT AS CONTRADICTORY. ATTENTION IS DRAWN IN PARTICULAR TO PARAS 31 TO 33 OF THE JUDGMENT. AS APPARENT, THE HONBLE COURT RELIED ON THE DECISIONS BY THE HONBLE APEX COURT IN THE MATTER OF INTERPRETATION OF STATUTES, AND ALSO DIST INGUISHED THE CASE LAW BY IT [ SCIENTIFIC ENGINEEERING HOUSE PVT. LTD. VS. CIT, 157 ITR 86(SC)], CITED BY THE ASSESSEE. 5.4 COMING TO THE FACTS OF THE PRESENT CASE, T HE BAR LICENSE GRANTED TO THE ASSESSEE IS A LICENSE ISSUED BY THE EXCISE AUTHORITIES. IT IS A B USINESS RIGHT, NO DOUBT, BUT NOT AN INTELLECTUAL PROPERTY RIGHT BY ANY STRETCH OF IMAGI NATION. THE DECISION IN THE CASE OF TECHNO SHARES AND STOCKS LTD. (SUPRA) SHALL, THUS, HAVE A DIRECT APPLICATION IN T HE FACTS ITA. NO. 594/COCH./2008 7 AND CIRCUMSTANCES OF THE PRESENT CASE, LEADING TO A REJECTION OF THE ASSESSEES CLAIM FOR DEPRECIATION ALLOWANCE THEREON. IN THIS REGARD, TH E ANALOGY OF `GOODWILL WOULD BE PERTINENT, WHICH, THOUGH WITHOUT DOUBT AN INTANGIBL E CAPITAL ASSET OF THE BUSINESS, HAS BEEN HELD AS NOT EXIGIBLE FOR DEPRECIATION ALLOWANC E U/S. 32(1)(II), FOR PRECISELY THE SAME REASONS, BY THE TRIBUNAL IN A NUMBER OF CASES, AS: BHARATBHAI J. VYAS V. ITO , 97 ITD 248 (AHD.); GURUJI ENTERTAINMENT NETWORK V. ACIT , 108 TTJ (DEL.) 180. 6. IN VIEW OF THE FOREGOING, WE HAVE NO HESITATI ON IN DECIDING THIS ISSUE IN FAVOUR OF THE REVENUE, UPHOLDING ITS GROUND NOS. 4 TO 6. 7. NEXT, WE SHALL TAKE THE LAST ISSUE AGITATED BY T HE REVENUE VIDE ITS GROUND NOS. 7AND 8; GROUND # 1 AND 9 BEING GENERAL IN NATURE WA RRANTING NO ADJUDICATION. THE FACTS IN RELATION TO THE CASE ARE THAT THERE WAS AN INSPECTI ON BY THE SALES TAX AUTHORITIES ON 23.8.2003 WHEREAT A PHYSICAL INVENTORY OF GOODS WAS DRAWN AND THE RECORDS MAINTAINED ALSO VERIFIED. SEVERAL DISCREPANCIES WERE OBSERVED, INCLUDING SUPPRESSION OF TURNOVER, WHICH STOOD ASSESSED AT RS. 94.27 LAKHS HIGHER THAN THAT DISCLOSED (RS. 668.95 LAKHS) PER THE ASSESSEES ACCOUNTS. THE AO ADOPTING THE FIGUR E OF THE TURNOVER AS ASSESSED BY THE SALES-TAX AUTHORITIES, APPLIED A NET PROFIT RATE OF 5% ON THE SUPPRESSED TURNOVER, FURTHER ROUNDING OFF THE RESULTANT FIGURE TO RS. 4.70 LACS. THE LD. CIT(A) DID NOT ADJUDICATE ON THE MERITS OF THE ISSUE AS HE HAD ANNULLED THE REASSESS MENT PROCEEDINGS. AGGRIEVED, THE REVENUE IS IN APPEAL. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MA TERIAL ON RECORD. THOUGH CONTENTIONS WERE RAISED BY EITHER SIDE BEFORE US ON MERITS, WE DECLINE TO ADJUDICATE THE SAME AS THESE DO NOT ARISE OUT OF THE IMPUGNED ORDER. THE PROPER COURSE FOR THE FIRST APPELLATE AUTHORITY; ITS ORDER BEING APPEALABLE, WAS TO, NEVERTHELESS, A DJUDICATE THE SAME ON MERITS AS WELL, WHICH WOULD OBVIOUSLY NOT SURVIVE IN CASE HIS ORDER ON JURISDICTION STOOD CONFIRMED IN FURTHER APPEAL. SO, HOWEVER, HE HAVING NOT DONE SO , WE ARE CONSTRAINED NOT TO DECIDE THE ISSUE ON MERITS AND, CONSEQUENTLY, RESTORE THIS MAT TER BACK TO THE FILE OF THE LD. CIT (A) FOR A DECISION ON MERITS IN ACCORDANCE WITH LAW AFT ER GIVING BOTH THE SIDES A PROPER OPPORTUNITY OF HEARING. WE DECIDE ACCORDINGLY. HOW EVER, IN ORDER TO SAFEGUARD THE INTEREST OF THE REVENUE, WE MAY ADD THAT IN CASE TH E AOS ACTION STANDS REVERSED BY THE ITA. NO. 594/COCH./2008 8 LD. CIT (A) IN THE RESTORED PROCEEDINGS, THE REVENU E SHALL NOT BE PRECLUDED BY S. 268A OF THE ACT FOR APPEALING TO THE APPELLATE TRIBUNAL AND SECURING AN ADJUDICATION BY IT ON THE ISSUE ON MERITS. THIS IS FOR THE SIMPLE REASON THAT THE SAID APPEAL WOULD NOT QUALIFY TO BE AN INDEPENDENT APPEAL FOR THE PURPOSES OF THE SAID SECTION, BUT ONLY ONE ARISING FROM THE SAME ASSESSMENT ORDER, AND ITS SEPARATE CONSIDERATI ON BY THE TRIBUNAL BEING OCCASSIONED, IN THE CIRCUMSTANCES OF THE CASE, ONLY ON ACCOUNT O F ITS NON-CONSIDERATION ON MERITS BY THE FIRST APPELLATE AUTHORITY IN THE FIRST INSTANCE , ON THE GROUND OF NON-MAINTAINABILITY OF THE PROCEEDINGS, EVEN AS HE, ADOPTING AN AMBIVALENT APPROACH IN THE MATTER, DECIDES THE FIRST ISSUE, ARISING OUT OF THE SAME PROCEEDINGS, O N MERITS. THIS WOULD ALSO BE APPARENT IF ONE CONSIDERS THE MATTER IN LIGHT OF THE PROVISIONS OF S. 153 OF THE ACT. 9. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 20TH APRIL 2010 GJ COPY TO: 1. SMT. S. AMBIKA, SUKANYA BHAVAN, T.C.XII/582, VAD AYAKADU, KUNNUKUZHI, TRIVANDRUM. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -1(2), RANGE-1, TRIVANDRUM 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM. 4. COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R./I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITA. NO. 594/COCH./2008 9