Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 4872 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-08-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Assessment Year
2010-2011
Appeal Filed On
10-11-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6157/DEL./2014 (ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE 11 (1), VS. M/S. INTERTEK INDIA PVT. LTD., NEW DELHI. E 20, BLOCK B 1, MOHAN COOPERATIVE INDUSTRIAL AREA, MATHURA ROAD, NEW DELHI 110 044. (PAN : AAACI6890F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. KAPOOR, FCA REVENUE BY : SHRI ARUN KUMAR YADAV, SENIOR DR DATE OF HEARING : 29.08.2017 DATE OF ORDER : 30.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, CIRC LE 11 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REV ENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 29.08.2014 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XV, NEW DELHI, FOR THE ASSESSMENT YEAR 2010-11 ON T HE GROUNDS INTER ALIA THAT :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ALLOWING ITA NO.6157/DEL./2014 2 DEPRECIATION ON GOODWILL AMOUNTING TO RS.99,33,180/- BY HOLDING GOODWILL AS AN ASSET COVERED UNDER EXPLANATION 3(B) OF SECTION 32 OF THE I.T. ACT, 1961. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION OF RS.99,33,180/- ON ACCOU NT OF GOODWILL. ASSESSEE SUBMITTED BEFORE THE AO THAT AS PER BUSINESS TRANSFER AGREEMENT (BTA) DATED 15.12.2005, THE ASSE SSEE HAS PURCHASED THE QUALITY REGISTRAR (QR) DIVISION OF KP MG (SELLER) AS AN ON-GOING CONCERN ON SLUMP SALE BASIS AND THE CON SIDERATION PAID BY THE ASSESSEE OVER AND ABOVE THE BOOK VALUE OF TH E NET CURRENT ASSET APPEARED IN THE BALANCE SHEET AS ON 15.12.200 5 BEING RECORDED AS GOODWILL AND CLAIMED THE DEPRECIATION O N THE SAME BY TREATING THE SAME AS INTANGIBLE ASSET. ASSESSEE AL SO BROUGHT ON RECORD VALUATION REPORT OF INDEPENDENT VALUER, M/S. GRANT THORNTON, WHEREIN VALUES HAVE BEEN ASSIGNED TO EACH OF THE INTANGIBLE ASSETS ACQUIRED BY THE ASSESSEE UNDER BT A. AO, BEING NOT SATISFIED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE, INVOKED SECTION 32 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) AND DISALLOWED THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON GOODWILL OF RS.10,44,49,250/-. ITA NO.6157/DEL./2014 3 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING AN APPEAL WHO HAS ALLOWED THE APPEAL. FEELI NG AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AT THE VERY OUTSET, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE ISSUE IN CONTROVERSY HAS ALREADY BEEN SET AT RE ST BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.5540/DEL /2013 FOR AY 2008-09 IN ASSESSEES OWN CASE BY FOLLOWING THE JUDGMENT RENDERED BY HONBLE SUPREME COURT IN CASE OF CIT VS. SMIFS SECURITIES LTD. AND THE SAID ORDER HAS FURTHER BEEN FOLLOWED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.5740/DEL /2011 DATED 26.07.2017 FOR AY 2007-08 IN ASSESSEES OWN CASE. 6. WE HAVE GONE THROUGH THE ORDER PASSED BY THE COO RDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007-08 (SUPRA) AND FOR FACILITY OF REFERENCE, THE OPERATIV E PART THEREOF IS REPRODUCED FOR READY PERUSAL AS UNDER :- 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVA ILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSU E WAS A ITA NO.6157/DEL./2014 4 SUBJECT MATTER OF THE DEPARTMENTAL APPEAL FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 5540/DE1/2013 WHEREIN BY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SMIFS SECURITIE S LTD., THE ISSUE HAS BEEN DECIDED AGAINST THE DEPART MENT AND IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDING S HAVE BEEN GIVEN IN PARAS 4 & 5 OF THE AFORESAID ORDER DA TED 18.06.2014 WHICH READ AS UNDER :- '4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING TESTING SERVICES TO ITS CLIENTS. BY BUSINESS TRANSFER AGREEMENT DATED 15.12.2005, THE ASSESSEE HAD PURCHASED QUALITY REGISTER DIVISION OF KPMG AND THE CONSIDERATION MADE BY APPELLANT OVER AND ABOVE BOOK VALUE OF NET CURRENT ASSET AS APPEARING IN BOOKS AS ON 15.12.2005 WAS RECORDED AS GOODWILL WAS ELIGIBLE FOR DEPRECIATION BY OBSERVING THAT THE SAME WAS NOT INCLUDED IN THE DEFINITION OF INTANGIBLE ASSET U/S 32 OF THE ACT. HOWEVER, LD. CIT(A) ON THE BASIS OF SUBMISSIONS FILED BY THE LD. A.R. AND RELYING UPON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS SMIFS SECURITIES LTD. (SUPRA), HAS HELD THAT GOODWILL IS AN ASSET WHICH IS COVERED UNDER EXPLANATION (3)(B) OF SECTION 32(1) OF THE ACT WHICH WOULD FALL UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE '. THE RELEVANT FINDING OF LD. CIT(A) ARE CONTAINED IN PARA 6 TO 6.3, WHICH ARE REPRODUCED BELOW: '6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE SUBMISSION MADE BY THE APPELLANT AND APPLICABLE LAW IN THIS REGARD. ACCORDINGLY, MY DECISION ON VARIOUS GROUNDS IS AS UNDER: 6.2 ON CAREFUL CONSIDERATION OF THE FACTS, I FIND THAT EVEN THOUGH THE APPELLANT HAD TREATED THE SURPLUS OF CONSIDERATION PAID OVER THE VALUE OF NET CURRENT ASSET KLPM IN TERMS 0 B T A DATED 15.12.2005, WHICH WAS TREATED AS GOODWILL IN ITS BOOKS, HOWEVER, THE SAME WAS AN AGGREGATION OF VARIOUS INTANGIBLE ASSET COMPRISING ITA NO.6157/DEL./2014 5 PENDING CUSTOMERS CONTRACTS INTANGIBLE PROPERTY RIGHTS, ASSEMBLE WORK FORCES AND CUSTOMERS RELATIONSHIP ETC. BEING INTANGIBLE ASSET IN NATURE EACH OF SUCH ITEM WAS SEPARATELY ELIGIBLE FOR DEPRECIATION IN VIEW OF THE PROVISIONS OF EXPLANATION 3 (B) TO SECTION 32(1). 6.3 MOREOVER, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SMIFS SECURITIES LTD. (SUPRA), WHILE HELD THAT GOODWILL IS AN ASSET, WHICH IS COVERED UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT, WHICH WOULD FALL UNDER THE EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE'. KEEPING IN VIEW. THE ABOVE DECISION OF THE APEX COURT, WHICH IS BINDING, IT IS HELD THAT THE CLAIM OF DEPRECIATION ON THE GOODWILL OF THE APPELLANT WAS JUSTIFIED AS PER LAW. IN VIEW OF THE SAME, GROUNDS NO.1 TO 4 OF THE APPEALS ARE DECIDED IN FAVOUR OF THE APPELLANT. 5. WE FIND THAT HON'BLE SUPREME COURT IN THE ABOVE NOTED CASE HAS CLEARLY HELD THAT THE GOODWILL WOULD FALL IN ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE'. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) AND THEREFORE, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9. IT IS RELEVANT TO POINT OUT THAT THE AFORESAID REFERRED TO ORDER PASSED BY THE ITAT WAS A SUBJECT MATTER OF THE DEPARTMENTAL APPEAL BEFORE THE HON'BL E JURISDICTIONAL HIGH COURT IN ITA NO. 104/2016 WHERE IN VIDE ORDER DATED 03.02.2016, THE APPEAL OF THE DEPARTMENT WAS DISMISSED, THEREFORE, THE ORDER DATE D 18.06.2014 PASSED BY THE ITAT FOR THE ASSESSMENT YE AR 2008-09 IN ITA NO. 5540/DE1/2013 HAD BEEN AFFIRMED. IN THAT VIEW OF THE MATTER, THE ADDITION MADE BY TH E AO ON ACCOUNT OF DEPRECIATION ON THE GOODWILL IS DELET ED. 7. FOLLOWING THE ORDER PASSED BY THE COORDINATE BEN CH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007-08 AND 2008-09 AND ITA NO.6157/DEL./2014 6 THE APPEAL FILED BY THE REVENUE IN HONBLE HIGH COU RT HAS ALSO BEEN DISMISSED IN THE LIGHT OF THE DECISION RENDERE D BY HONBLE SUPREME COURT IN CIT VS. SMIFS SECURITIES LIMITED (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE GOODWILL IS AN ASSET SQUARELY COVERED UNDER EXPLANATION 3 (B) TO SECTION 32(1) OF THE ACT AND IS NOT COVERED UNDER THE EXPRESSION ANY OTHER BUSINES S OR COMMERCIAL RIGHTS OF SIMILAR NATURE. SO, IN TERMS OF BTA DATED 15.12.2005, THE GOODWILL BEING AN INTANGIBLE PROPER TY RIGHT IS ENTITLED FOR DEPRECIATION. SO, FINDING NO ILLEGALI TY OR PERVERSITY IN THE ORDER PASSED BY LD. CIT (A), WE HEREBY DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF AUGUST, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
