Appeal Details
Counselvise Citation
850019914 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-01-2012
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
E
Next Hearing Date
13-12-2011
Assessment Year
2006-2007
Appeal Filed On
07-12-2010
Judgement Text
1 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI N.V. VASUDEVAN, J.M. AND SHRI R.K. PAN DA, A.M. ITA NO. 8500/MUM/2010 (ASST YEAR 2006-07) TAJ SATS AIR CATERING LIMITED., MANDLIK HOUSE, MANDLIK ROAD, COLABA, MUMBAI 400 001. VS DY. COMMISSIONER OF INCOME-TAX, RANGE 2(3), ROOM NO. 555, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI. 20 (APPELLANT) (RESPONDENT) PAN NO. AABCT4686P APPELLANT BY SHRI RAJAN R. VORA RESPONDENT BY SHRI B. JAYA KUMAR DATE OF HEARING 13.12.2011 DATE OF PRONOUNCEMENT 20.01.2012 ORDER PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 26.10.2010 OF THE A.O. PASSED U/S 143(3) R.W.S. 144 C(13) OF THE ACT. 2. IN GROUND OF APPEAL NO. 1 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE A.O. IN MAKING ADJUSTMENT OF RS. 460391/- U/S 92CA( 3) OF THE ACT. 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN PROVIDING CATERING SERVICES TO DIFFERENT AIRLINES. IT IS A JOINT VENTURE BETWEEN INDIAN HOTELS COMPANY LIMITED (IHCL) WHICH HOLDS 51 % STAKE AND SINGAPORE AIRPORT TERMINAL SERVICES LIMITED WHICH H OLDS 49% STAKE. DURING 2 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . THE IMPUGNED ASSESSMENT YEAR, TAJ SATS SUPPLIED PRO CESSED FOOD TO AES NAMELY SINGAPORE AIRLINES FOR RS. 7.85 CRORES AND V IRGIN ATLANTIC FOR RS. 7.30 CRORES FOR CONSUMPTION ON BOARD ITS AIRCRAFT. TAJ SATS HAS BENCHMARKED THIS TRANSACTION USING COMPARABLE UN-CO NTROLLED PRICE METHOD (CUP). THE TPO VIDE ORDER DT. 27.10.2009 PASSED U/S 92CA(3) MADE THE FOLLOWING ADJUSTMENT TO THE ARMS LENGTH PRICE CHAR GED BY TAJ SATS TO ITS AE (SINGAPORE AIRLINE) AFTER COMPARING THE AVERAGE OF PRICES PER ITEM OF MEAL CHARGED TO OTHER AIRLINES: PARTICULARS AMOUNT (IN RS) ECONOMY CLASS 167,968 BUSINESS CLASS 60,266 OTHER SERVICES 232,157 TOTAL ADJUSTMENT 460,391 2.2 BASED ON THE TPOS ORDER, THE AO MADE AN ADDITI ON OF RS 460,391 TO THE INCOME OF THE ASSESSEE. THE DRP CONFIRMED THE D ISALLOWANCE MADE BY A.O. BASED ON WHICH THE A.O. MADE ADJUSTMENT OF RS. 460391/-. AGGRIEVED WITH SUCH ORDER OF THE A.O. THE ASSESSEE IS IN APPE AL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONTRACT WITH THE AIRLINE IS FOR SUPPLY AS WELL AS SERVICE AND THE FO OD SUPPLIED IS A BASKET COMPRISING OF INDIVIDUAL ITEMS RATHER THAN SUPPLY O F ITEMS INDIVIDUALLY AND HENCE ENTIRE TRANSACTION HAS TO BE VIEWED AS A SING LE TRANSACTION. HE SUBMITTED THAT RULE 10(1)(D) OF THE I.T. RULES DEFI NE TRANSACTION TO INCLUDE THE CLOSELY LINKED TRANSACTION. THE SALE OF LIME CH UTNEY, RAITA, MALWAMI MURG ETC. ARE CLOSELY LINKED TOGETHER AND HENCE SHO ULD BE VIEWED AS A SINGLE 3 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . TRANSACTION THAT IS SALE OF MEALS. REFERRING TO OEC D GUIDELINES PARA 1.42 HE SUBMITTED THAT WHERE TRANSACTIONS ARE SO CLOSELY LI NKED THAT THEY CANNOT BE EVALUATED SEPARATELY THEN SUCH TRANSACTION SHOULD B E EVALUATED TOGETHER USING THE MOST APPROPRIATE METHOD. THEREFORE, THE S ALE OF VARIOUS FOOD ITEMS IS BUNDLED TRANSACTION AND IT WOULD NOT BE CORRECT TO TREAT THE SALE OF EACH FOOD ITEM AS SEPARATE TRANSACTION IN ITSELF. THE L D. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING TA BLE OF COMPARISON OF RATE PER PASSENGER FOR INDIVIDUAL AIRLINES WHICH IS AS U NDER: AIRLINE PASSENGER RATE (RUPEES) AIR INDIA 171 CATHAY PACIFIC 153 EMIRATES 167 AIR FRANCE 154 MALAYSIAN AIRLINES 294 VIRGIN ATLANTIC 292 SINGAPORE AIRLINES 323 3.1 REFERRING TO THE ABOVE TABLE HE SUBMITTED THAT THE RATE PER PASSENGER FOR SINGAPORE AIRLINE IS THE HIGHEST, WHEREAS THE R ATE FOR VIRGIN ATLANTIC IS THIRD HIGHEST. HE SUBMITTED THAT IT CATEGORICALLY S HOWS THAT THE TRANSACTIONS ARE AT ARMS LENGTH PRICE. 3.2 WITHOUT PREJUDICE TO THE ABOVE CONTENTION THAT THE SALE OF FOOD ITEMS SHOULD BE VIEWED AS A SINGLE TRANSACTION, THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT HIGHEST AND THE LOWEST CHARGED TO AN INDEPENDENT PARTY (NON 4 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . AE) FOR A PARTICULAR ITEM CONSTITUTES AN ARMS LENGT H RANGE AND ANY PRICE WHICH FALLS IN THAT RANGE IS AN ARMS LENGTH PRICE. IN BUSINESS THERE CANT BE ONE STANDARD PRICE AT WHICH GOODS OR SERVICES CAN B E SOLD TO ALL THE PARTIES AND THEREFORE ANY PRICE WHICH FALLS IN THE RANGE SH OULD BE TREATED AS AN ARMS LENGTH PRICE. REFERRING TO PARA 1.48 OF THE OE CD GUIDELINES HE SUBMITTED THAT IF PRICE CHARGED IN A CONTROLLED TRA NSACTION IS WITHIN THE ARMS LENGTH RANGE, THEN NO ADJUSTMENT SHOULD BE MA DE. HE ACCORDINGLY SUBMITTED THAT ALL THE TRANSACTIONS ARE AT ARMS LEN GTH PRICE AND HENCE NO ADJUSTMENT IS CALLED FOR. 4. THE LD. D.R. ON THE OTHER HAND REFERRING TO THE FINDINGS GIVEN BY THE A.O. SUPPORTED THE ORDER OF THE A.O. 4.1 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE DRP AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. IN OUR OPINION, TH E FOOD SUPPLIED IS A BASKET CONTAINING INDIVIDUAL ITEMS RATHER THAN SUPPLY OF T HE ITEMS INDIVIDUALLY. THEREFORE THE ENTIRE TRANSACTION, IN OUR OPINION, H AS TO BE VIEWED AS A SINGLE TRANSACTION. FURTHER WE FIND FROM THE COMPARISON O F RATE PER PASSENGER FOR INDIVIDUAL AIRLINES THAT THE RATE FOR THE PASSENGER RATE FOR SINGAPORE AIRLINES IS THE HIGHEST AND THE RATE FOR VIRGIN ATLANTIC IS THE THIRD HIGHEST. THEREFORE WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE TRANSACTIONS ARE AT ARMS LENGTH PRICE. IN THIS VI EW OF THE MATTER WE HOLD THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADJUS TMENT OF RS. 460391/- U/S 92CA(3) OF THE ACT. WE THEREFORE DIRECT THE A.O . TO DELETE THE ADDITION. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY AL LOWED. 5 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . 5. IN GROUNDS OF APPEAL NO. 2, THE ASSESSEE HAS CHA LLENGED THE ORDER OF THE A.O. IN MAKING ADDITION OF RS. 205950/- U/S 14A OF THE I.T. ACT. 5.1 . FACTS OF THE CASE IN BRIEF ARE THAT DURING THE F INANCIAL YEAR ENDED 31 MARCH 2006, THE ASSESSEE COMPANY HAS EARNED DIVIDEN D INCOME OF RS 0.49 CRORES FROM TATA MUTUAL FUNDS WHICH IT CLAIMED AS E XEMPT FROM INCOME-TAX UNDER SECTION 10(35) OF THE ACT. BASED ON THE DIREC TIONS GIVEN BY THE DRP, THE A.O. DISALLOWED 10% OF CFOS REMUNERATION AMOUN TING TO RS. 205950/ U/S 14A OF THE I.T. ACT. AGGRIEVED WITH SUCH ORDER OF THE A.O. THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE DIVIDEND INCOME HAS BEEN EARNED BY TAJ SATS ON THE INVESTMEN TS MADE OUT OF OWN FUNDS. HE SUBMITTED THAT EVEN AFTER INSERTION OF SE CTION 14A, ONLY THE EXPENDITURE THAT HAS BEEN SPECIFICALLY INCURRED IN RELATION TO EARNING EXEMPT INCOME HAS TO BE DISALLOWED. HE SUBMITTED THAT THE INVESTMENTS IN MUTUAL FUNDS ARE MADE BASED ON PREDETERMINED INVESTMENT CR ITERIA DECIDED BY THE BOARD OF DIRECTORS. THE BOARD HAS LISTED DOWN SPECI FIC MUTUAL FUNDS (SUCH AS HSBC MUTUAL FUND, BIRLA MUTUAL FUND AND TATA MUT UAL FUND) IN WHICH INVESTMENTS COULD BE MADE AND THIS DECISION IS BEIN G DELEGATED TO CFO. HE SUBMITTED THAT TAJ SATS HAS MADE INVESTMENT ONLY IN TATA LIQUID FUND AND THAT TOO IN TWO TRANCHES ONLY DURING THE YEAR UNDER CONSIDERATION. THE CFO, BASED ON THE CRITERIA DETERMINED BY BOARD, HAS MADE INVESTMENTS WITHOUT ANY RESEARCH AND ANALYSIS AND NO OTHER PERSON IS IN VOLVED IN THE ABOVE INVESTMENTS MADE IN MUTUAL FUND. DIVIDEND INCOME IS DIRECTLY REINVESTED INTO THE SCHEME BY THE FUND AND THEREFORE NO EXPENS ES ARE BEING INCURRED 6 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . FOR COLLECTION OF DIVIDEND INCOME. HE SUBMITTED THA T NO OVERHEAD EXPENDITURE IS RELATABLE TO THE DIVIDEND INCOME IN THIS YEAR. FURTHER, NO DIRECT OR INDIRECT COST (ADMINISTRATION COST IN THE NATURE OF SALARY, TELEPHONE, ETC) COULD BE SAID TO HAVE BEEN INCURRED FOR MAKING INVESTMENT IN MUTUAL FUNDS OR EARNING DIVIDEND INCOME. HE ACCORDINGLY SU BMITTED THAT SINCE NO EXPENDITURE HAD BEEN INCURRED BY IT IN RELATION TO EARNING OF SUCH DIVIDEND INCOME, NO DISALLOWANCE UNDER SECTION 14A COULD BE MADE. 6.2 THE LD. D.R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE A.O. AND SUBMITTED THAT THE CFO DEFINITELY SPENT SOMETIM E FOR INVESTMENT DECISION. HE SUBMITTED THAT SINCE THE A.O. HAS NOT CONSIDERED THE SALARY OF OTHER STAFF ASSISTING THE CFO, THEREFORE, DISALLOWA NCE OF 10% SALARY OF THE CFO UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE I S JUSTIFIED. 6.3 THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER SUBMITTED THAT SOME TOKEN AMOUNT MAY BE DISALLOWED BUT CERTAINLY THE DI SALLOWANCE CANNOT BE A PERCENTAGE OF THE SALARY OF CFO. 6.4 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE DRP AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUT E TO THE FACT THAT THE ASSESSEE HAS EARNED TAX FREE DIVIDEND INCOME OF RS. 4,968,000 FROM TATA MUTUAL FUND WHICH IS CLAIMED AS EXEMPT U/S 10(35) O F THE ACT. IN ABSENCE OF ANY EXPENSES DISALLOWED BY THE ASSESSEE FOR EARN ING SUCH TAX FREE DIVIDEND INCOME THE A.O. DISALLOWED AN AMOUNT OF RS . 2,05,950/- BEING 10% OF THE SALARY OF THE CFO U/S 14A OF THE ACT. IT IS THE SUBMISSION OF THE LD. 7 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . COUNSEL FOR THE ASSESSEE THAT NO DISALLOWANCE SHOUL D BE MADE U/S 14A OF THE ACT SINCE NO EXPENDITURE HAS BEEN INCURRED IN R ELATION TO EARNING OF SUCH DIVIDEND INCOME. IN HIS ALTERNATE CONTENTION THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SOME TOKEN DISALLOWANCE MAY BE MADE AS AGAINST DISALLOWANCE OF SALARY OF THE CFO ON PERCENTAGE BAS IS. SINCE THE ASSESSEE HAS NOT ALLOCATED ANY EXPENDITURE FOR EARNING TAX F REE DIVIDEND INCOME AND SINCE THE DISALLOWANCE MADE BY THE A.O. ON ADHOC BA SIS APPEARS TO BE ON HIGHER SIDE, THEREFORE, IN OUR OPINION, A REASONABL E DISALLOWANCE OF RS. 1,50,000/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THE G ROUND RAISED BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 7. IN GROUNDS OF APPEAL NO.3 THE ASSESSEE HAS CHALLENG ED THE ORDER OF THE AO IN NOT ALLOWING THE CLAIM OF DEPRECIATION OF `. 7,77,77,860/- ON VARIOUS INTANGIBLE ASSETS GROUPED UNDER THE HEAD GOODWILL . 8. FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSESSE E HAS CLAIMED DEPRECIATION OF `. 17,91,79,623/- U/S.32 READ WITH I.T. RULES, 1962. FROM THE WORKING OF THE DEPRECIATION CHART FILED BY THE ASSESSEE, THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF `. 7,77,77,860/- ON GOODWILL. THE AO OBSERVED THAT DURING THE ASSESSMENT YEAR 200 5-06, THE AO IN THE ORDER PASSED U/S.143(3) DATED 18.12.2008 HAS DISALL OWED DEPRECIATION OF `. 10,37,03,814/- FOR THE DETAILED REASONS MENTIONED T HEREIN. HE, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DEPR ECIATION ON GOODWILL SHOULD NOT BE DISALLOWED. 8 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . 8.1 IT WAS SUBMITTED BY THE ASSESSEE THAT TAJ SATS HAS RECOGNIZED THE GOODWILL OF `. 73,74,49,343/- IN THE BOOKS AT THE TIME OF FORMATIO N OF THE JOINT VENTURE. THE ASSESSEE HAS CLAIMED DEPRECIATI ON ON VARIOUS INTANGIBLES/RIGHTS GROUPED UNDER THE HEAD GOODWILL IN THE BOOKS AMOUNTING TO `. 7,77,77,860/- FOR THE ASSESSMENT YEAR 2006-07. IT WAS SUBMITTED THAT THE BUSINESS OF INDIAN HOTELS COMPAN Y LIMITED (IHCL) WAS ACQUIRED BY THE ASSESSEE AS A GOING CONCERN. TAJ S ATS IS A JOINT VENTURE BETWEEN INDIAN HOTELS COMPANY LTD. AND SINGAPORE AI R TERMINUS SERVICES LIMITED. IHCL WAS CARRYING ON CATERING BUSINESS TH ROUGH THEIR AIR CATERING UNITS LOCATED AT DIFFERENT PLACES IN INDIA. THE AS SESSEE HAD PURCHASED THE CATERING BUSINESS OF THE IHCL ON 01.10.2001 VIDE BU SINESS TRANSFER AGREEMENT (BTA) DATED 25.09.2001. TAJ SATS ACQUIRE D THE GOING CONCERN BUSINESS AND THE OWNERSHIP OF VARIOUS BUSINESS/COMM ERCIAL RIGHTS WHICH ARE CONNECTED WITH IHCLS BUSINESS. THE CONSIDERATI ON PAID TO IHCL INCLUDES CONSIDERATION FOR VARIOUS BUSINESS/COMMERC IAL RIGHTS WHICH ARE DESCRIBED AS GOODWILL ON A CONSOLIDATED BASIS. IT WAS SUBMITTED THAT TAJ SATS SUBSEQUENTLY HAS GOT THE VALUATION DONE OF THE VARIOUS INTANGIBLES/RIGHTS WHICH WERE PREVIOUSLY GROUPED UN DER THE HEAD GOODWILL WHICH ARE AS UNDER : SR. NO. PARTICULARS AMOUNT (IN CRORES) I RIGHT TO USE TAJ BRAND NAME AND THE MARK (HEXAGON ) IN PERPETUITY 30.8 II CORPORATE PROCUREMENT AGREEMENT WITH IHCL- RIGHT TO AVAIL SERVICES 9.5 ILL OPERATING AGREEMENT WITH TA) MADRAS FLIGHT KITCHEN RIGHT TO MANAGE THE AIR CATERING UNIT 3.2 IV LEASE AGREEMENT FOR DELHI KITCHEN 1.3 V RECIPES 2.0 9 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . VI LICENSE TO OPERATE KITCHEN AT MUMBAI, KOLKOTA AND N EW DELHI 0.1 VII VALUABLE WORK FORCE 2.6 VIII GOODWILL 21.4 TOTAL 71.0 REFERRING TO PROVISIONS OF SECTION 32 IT WAS SUBMIT TED THAT VARIOUS INTANGIBLES/RIGHTS ENUMERATED ABOVE ARE INTANGIBLE ASSETS SPECIFICALLY COVERED U/S 32 OF THE I.T. ACT. IT WAS SUBMITTED T HAT ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE HAVE ALSO BEEN COVERED WITHIN THE AMBIT OF SECTION 32 ALTHOUGH THE SAME IS NOT SPECIFICALLY DEFINED IN THE ACT OR IN THE RULES. 8.2 REFERRING TO VARIOUS DECISIONS, IT WAS SUBMITTE D THAT THE VARIOUS INTANGIBLES/ RIGHTS ENUMERATED ABOVE ARE INTANGIBLE ASSETS COVERED UNDER THE PROVISIONS OF SECTION 32 OF THE ACT AND THE ASS ESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE ABOVE. 8.3 HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE TAX AUDITORS IN THE TAX AUDIT REPORT DATED 28.10.2005 WITHOUT ANY QUALIFICATION HAS NOT CONSID ERED DEPRECIATION ON GOODWILL AS ALLOWABLE DEDUCTION. ACCORDING TO THE AO WHEN ANY BUSINESS IS TAKEN OVER AS A GOING CONCERN, IT INCLUDES TAKING O VER OF ALL ASSETS AND LIABILITIES INCLUDING THE VARIOUS COMMERCIAL RIGHTS AND LICENSES. THE CONSIDERATION IS NOT PAID INDEPENDENTLY FOR EACH AS SET OR LIABILITY. THE ASSESSEE ALSO HAS NOT PAID SEPARATELY FOR ANY OTHER INTANGIBLE RIGHT OR FOR NON-COMPETE FEES OR FOR ACQUIRING ANY TECHNICAL KNO W-HOW. THE CONSIDERATION SO PAID BY THE ASSESSEE DOES NOT INCL UDE ACQUISITION OF ANY 10 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . GOODWILL ALREADY EXISTING IN THE BOOKS OF IHCL. TH E LICENSES AND COMMERCIAL RIGHTS SO ACQUIRED AS A GOING BUSINESS CONCERN ARE INCIDENTAL TO THE BUSINESS OF THE ASSESSEE I.E. AIR CATERING AND INST ITUTIONAL CATERING. REFERRING TO THE VARIOUS DECISIONS CITED BEFORE HIM , THE AO OBSERVED THAT IT IS A DEBATABLE SUBJECT WHETHER GOODWILL IS AN INTAN GIBLE ASSET OR WHETHER ACQUISITION OF COMMERCIAL RIGHTS AND INTEREST IS A GOODWILL. 8.3 THE AO NOTED THAT THE ISSUE HAD COME UP FOR THE FIRST TIME DURING THE ASSESSMENT YEAR 2003-04, WHEREIN THE ASSESSEE HAD C LAIMED DEPRECIATION OF `. 18,43,62,335/- ON GOODWILL OF `. 73,74,49,343/-. THE SAME WAS DISALLOWED BY THE AO ON THE GROUND THAT THE PROVISIONS OF SECT ION 32(1) DO NOT INCLUDE GOODWILL AS AN INTANGIBLE ASSET QUALIFYING FOR DEPR ECIATION. THE CIT(A) UPHELD THE ACTION OF THE AO. BEFORE THE TRIBUNAL, THE ASS ESSEE FURNISHED THE VALUATION REPORT DATED 23.03.2009 PROVIDED BY VALUE R M/S. ERNST & YOUNG PVT. LTD. WHO HAS MADE SEPARATE VALUATION FOR EACH OF THE INTANGIBLE ASSETS AS AN ADDITIONAL EVIDENCE AND SUBMITTED THAT THE SA ID VALUATION HAS TO BE TAKEN INTO CONSIDERATION AND THEN ONLY A DECISION C AN TO BE TAKEN ON THE ALLOWABILITY OR OTHERWISE OF DEPRECIATION U/S.32(1) (II) OF THE I.T. ACT. THE TRIBUNAL AFTER ADMITTING THE ADDITIONAL EVIDENCE, R ESTORED THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 8.4 THE AO NOTED FROM THE VALUATION REPORT DATED 23 .03.2009 THAT THE VALUER HAS ANALYSED AND IDENTIFIED INTANGIBLE ASSET S OF TAJ AIR CATERERS LTD. AS ON 30.09.2001. HE OBSERVED THAT THE VALUERS HAD VALUED INTANGIBLE ASSETS AS UNDER : 11 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . SR. NO. PARTICULARS AMOUNT (IN CRORES) REMARKS I RIGHT TO USE TAJ BRAND NAME 30.8 TACL HAS NON-EXCLUSIVE ROYALTY FREE LICENSE TO USE THE NAME (TAJ) AND THE MARK (THE HEXAGON) IN PERPETUITY. II CORPORATE PROCUREMENT AGREEMENT WITH IHCL 9.5 TACL HAS RIGHTS TO AVAIL THE SERVICES FROM IHCL IN RELATION TO SOURCING AND PROCUREMENT AS REQUIRED FOR ITS BUSINESS. ILL OPERATING AGREEMENT WITH TMFK 3.2 TACL GETS OPERATING FEES TO MANAGE THE AIR CATERING UNIT OF TMFK. IV LEASE AGREEMENT FOR DELHI KITCHEN 1.3 TACL HAS 30 YEARS (10 YEARS EXTENDABLE) RIGHT IN LEASEHOLD LAND MEASURING 14440 SQ.MT. LOCATED AT DELHI INTERNATIONAL AIRPORT. V RECIPES 2.0 TACL HAS INVESTED IN R&D OF IN-HOUSE RECIPES DEVELOPED OVER A PERIOD OF 5 YEARS). VI LICENSE 0.1 TACL HAS LICENSES TO OPERATE KITCHEN AT MUMBAI, KOLKATA AND NEW DELHI. VII WORK FORCE 2.6 TACL HAS VALUABLE WORK FORCE AT MUMBAI, NEW DELHI AND KOLKATA WHICH IS VALUED AS PART OF GOODWILL. TOTAL 49.6 8.5. ACCORDING TO THE AO, THE ASSESSEE HAD ACQUIRED THE CATERING BUSINESS OF INDIAN HOTELS COMPANY LIMITED, A JOINT VENTURE B ETWEEN INDIAN HOTELS COMPANY LTD. AND SINGAPORE AIR TERMINUS SERVICES LI MITED VIDE BUSINESS TRANSFER AGREEMENT DATED 25.09.2001. THE CONTRACTS FOR ACQUIRING THE VARIOUS ASSETS WERE AVAILABLE TO THE ASSESSEE AT TH E TIME OF MAKING ORIGINAL VALUATION, INCLUDING THAT OF GOODWILL. THE SAID CON TRACTS WERE INCLUDED IN THE ORIGINAL VALUATION. THE ASSESSEE HAS VALUED VARIOU S ASSETS INCLUDING GOODWILL WHICH WAS VALUED AT `. 73,74,49,345/- AS ON 01.04.2002. THE ASSESSEE DID NOT BRING IN ANY OTHER ASSETS IN THE V ALUE OF `. 73.74 CRORES AT 12 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . THE TIME OF ACQUIRING THE BUSINESS. THE ASSESSSEE D ID NOT BRING IN ANY OTHER ASSETS IN THE SAID VALUE DURING THE COURSE OF ASSES SMENT PROCEEDINGS NOR IT WAS ARGUED BEFORE THE AO THAT VARIOUS INTANGIBLE AS SETS WERE INCLUDED IN THE VALUE OF `. 73.74 CRORES. NO SUCH ARGUMENTS WERE ADVANCED BEFOR E THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS. IT WAS ONLY WHEN THE CIT(A) UPHELD THE ORDER OF THE AO ON THIS GROUND TH AT THE ASSESSEE SUDDENLY REALIZED THAT THERE WERE INTANGIBLE ASSETS THAT WERE INCLUDED IN THE VALUE OF `. 73.74 CRORES WHICH WAS LOOSELY GROUPED AS GOODWILL AND FILED THE VALUATION REPORT BEFORE THE TRIBUNAL. THIS CLEARLY SHOWS THAT THIS IS AN AFTER THOUGHT OF THE ASSESSEE. 8.6 THE AO NOTED THAT THE PURCHASE CONSIDERATION A S PER BUSINESS TRANSFER AGREEMENT WAS `. 206.4 CRORES WHICH WAS APPORTIONED AS UNDER :- PARTICULARS AMOUNT ( `. `.`. `. IN CRORES) PURCHASE CONSIDERATION 206.4 (43 M US $) ALLOCATED TO: TANGIBLE FIXED ASSETS 95.6 NET CURRENT ASSETS 18.9 INVESTMENTS 9.1 INCENTIVE PAID 1.1 CONTRACTS 5.5 NON-COMPETE 5.2 TOTAL 135.4 BALANCE ALLOCATED TO GOODWILL 71.0 8.7 HE OBSERVED THAT THE ABOVE VALUATION REPORT WAS ALSO DONE BY THE SAME VALUER M/S. ERNST & YOUNG PVT. LTD. IN MARCH, 2002. BY HOLDING THE VALUATION REPORT PREPARED AFTER BUSINESS TRANSFER A GREEMENT AS AN AFTER 13 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . THOUGHT THE AO REJECTED THE CLAIM OF DEPRECIATION O N GOODWILL BY THE ASSESSEE. 9. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO A S ERIES OF DECISIONS AND SUBMITTED THAT THE ASSESSEE IS ENTITLED TO DEPRECIA TION ON GOODWILL AS WELL AS ON VARIOUS OTHER INTANGIBLE ASSETS AS PER THE VALUA TION REPORT PREPARED BY THE VALUER. HE SUBMITTED THAT THE ORDER OF THE A.O . AFTER THE DIRECTION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04 IS STILL P ENDING BEFORE THE CIT(A). THE APPEAL FOR THE ASSESSMENT YEARS 2004-05 AND 200 5-06 ARE ALREADY PASSED BY THE LD. CIT(A) AND THE MATTER IS PENDING BEFORE THE TRIBUNAL. SO FAR AS THE ASSESSMENT YEAR 2006-07 IS CONCERNED, SI NCE THE AO HAD PASSED THE ORDER ON THE BASIS OF THE DIRECTION OF THE DRP, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL FIRST AND THAT IS HOW THE APPEA L FOR THE ASSESSMENT YEAR 2006-07 HAS COME UP BEFORE THE TRIBUNAL FOR HEARING . 9.1 REFERRING TO THE DECISION OF HON'BLE KERALA HIG H COURT IN THE CASE OF B. RAVEENDRAN PILLAI VS. CIT REPORTED IN 7 TAXMAN 92, THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES PRIVATE LIMITED, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TECHNOSHARES & STOCKS LTD. VS. OTHERS (327 ITR 323) AND VARIOUS OTHER DECISIONS HE SUBMITTED THAT DEPRECIATION IS ALLOWAB LE ON GOODWILL. REFERRING TO A SERIES OF DECISIONS AS FILED IN THE PAPER BOOK , HE SUBMITTED THAT GOODWILL IS AN INSEPARABLE PART OF THE BUSINESS AND IT GOES ALONG WITH THE BUSINESS. IT CANNOT BE SOLD WITHOUT THE BUSINESS. SO FAR AS T HE OTHER INTANGIBLE ASSETS DESCRIBED AS GOODWILL ARE CONCERNED, HE SUBMITTED T HAT THESE ALSO FULFIL ALL THE CONDITIONS WHICH ARE REQUIRED TO BE SATISFIED I N ORDER TO CLAIM 14 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . DEPRECIATION ON INTANGIBLE ASSETS AS PROVIDED U/S.3 2 OF THE I.T. ACT. HE ACCORDINGLY SUBMITTED THAT CONSIDERATION PAID FOR A VAILING THE VARIOUS RIGHTS TO MANAGE/RUN THE AIR CATERING UNIT IS FOR ACQUISIT ION OF INTANGIBLE ASSETS COVERED U/S.32 OF THE I.T. ACT AND, THEREFORE, THE ASSESSEE IS ENTITLED TO DEPRECIATION ON THESE INTANGIBLE ASSETS AS WELL. 9.2. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT WHEN THE ASSESSEE ACQUIRED THE BUSINESS OF IHCL AS A GOING CONCERN, I T WAS A SLUMP SALE. HE SUBMITTED THAT THE INCOME TAX ACT PROHIBITS THE ASS ESSEE TO APPORTION ANY SPECIFIC VALUE IN CASE OF A SLUMP SALE. REFERRING T O THE COPY OF THE VALUATION REPORT HE SUBMITTED THAT AT MORE THAN ONE PLACE IT HAS BEEN MENTIONED AS GOODWILL ONLY. REFERRING TO THE COPIES OF THE VA LUATION REPORT PLACED AT PG. NOS. 68 TO 118 OF THE PAPER BOOK, THE LD. D.R REFER RED TO PAGE NO. 74 AND 75 OF THE REPORT AND SUBMITTED THAT THE SAME HAS BEEN PREPARED AT THE INSTANCE OF THE ASSESSEE. IT HAS FURTHER BEEN MENTIONED BY T HE VALUER IN THE SAID REPORT THAT IN MARCH, 2002 AT THE REQUEST OF TACL, THREE INTANGIBLES I.E. INCENTIVES, CONTRACTS AND NON COMPETE AGREEMENT WER E VALUED AS A PART OF THE APPORTIONMENT OF PURCHASE PRICE EXERCISE. HOWE VER, IT WAS STATED BY THE ASSESSEE COMPANY THAT DUE TO LACK OF TIME AND UNABL E TO COLLECT THE REQUIRED INFORMATION BY THE COMPANY, THE VALUATION OF VARIOU S OTHER INTANGIBLE ASSETS COULD NOT BE PREPARED AND, THEREFORE, THE DIFFERENC E BETWEEN THE PURCHASE CONSIDERATION AND THE VALUATION OF TANGIBLE FIXED A SSET, NET CURRENT ASSETS, INVESTMENT, REVENUE EXPENDITURE AND NON-COMPETE COM PENSATION WAS GROUPED UNDER THE HEAD GOODWILL. HOWEVER, THE C OMPANY HAS NOW BEEN ABLE TO COLLECT ALL THE REQUIRED DETAILS FOR THE VA LUATION OF VARIOUS OTHER 15 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . INTANGIBLE ASSETS WHICH WERE GROUPED TOGETHER WITH THE VALUATION OF GOODWILL IN THE PREVIOUS EXERCISE. REFERRING TO PAGE NO.17 OF THE VALUATION REPORT (PAPER BOOK PG. NO. 86) THE LD. DR DREW THE ATTENTI ON OF THE BENCH TO THE DISCLAIMER CLAUSES BY THE VALUER. ACCORDING TO THE VALUER, THEY HAVE VALUED ON THE BASIS OF THE INFORMATION PROVIDED TO THEM BY THE COMPANY THROUGH BROAD ENQUIRY, ANALYSIS AND REVIEW, BUT IT HAD NOT CARRIED OUT DUE DILIGENCE OR AUDIT OF THE COMPANY FOR THE PURPOSE OF THIS ENG AGEMENT, NOR THEY HAVE INDEPENDENTLY INVESTIGATED OR OTHERWISE VERIFIED TH E DATA PROVIDED. ACCORDINGLY, THEY HAVE MENTIONED THAT THEY DO NOT E XPRESS ANY OPINION OR OFFER ANY FORM OF AN ASSURANCE REGARDING ITS ACCURA CY AND COMPLETENESS. REFERRING TO THE VARIOUS DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE, THE LD. DR SUBMITTED THAT THEY ARE ALL DISTINGUISHA BLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 9.3 THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER SUBMITTED THAT THERE ARE SEVERAL INTANGIBLE ASSETS AND THE GOODWILL IS O NLY NOMINAL IN NATURE. HE SUBMITTED THAT RESPECTIVE AGREEMENTS ARE SEPARATELY FILED. THE ASSESSEE HAS SATISFACTORILY ESTABLISHED THAT THESE ARE THE AGREE MENTS FOR THE INTANGIBLE ASSETS AND THE BALANCE IS GOODWILL. HE AGAIN REITE RATED THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THESE INTANGIBLE ASSETS AS WELL AS ON GOODWILL. 9.4 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE DRP AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED 16 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . BEFORE US. WE FIND THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 WHILE SETTING ASIDE THE ISS UE TO THE FILE OF THE A.O HAS OBSERVED AS UNDER :- THIS EVIDENCE IN OUR HUMBLE OPINION GOES INTO THE ROOT OF THE MATTER. FROM THE ASSESSMENT ORDER IT CA N BE CLEARLY SEEN THAT THE ASSESSING OFFICER HAD NOTICED FROM THE RECITALS IN THE BUSINESS TRANSFER AGREEMENT, THAT I NTELLECTUAL PROPERTIES WHICH ARE LISTED OUT IN ARTICLE 1. SUB C LAUSE B HAVE BEEN TRANSFERRED ALONG WITH OTHER MOVABLE AND IMMOVABLE ASSETS. EVEN ARTICLE 2. SUB CLAUSES B AND E MENTION A LIST OF INTANGIBLE ASSETS, WHICH HAVE BEE N AGGREGATED AND LOOSELY TERMED AS GOODWILL BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THUS THE FACT THA T SLUMP SALE CONSISTS OF MANY INTANGIBLE ASSETS ALONG WITH GOODWILL IS NOT IN DISPUTE. IT IS TRUE THAT NO DEPRECIATION IS ALLOWABLE ON GOODWILL. BUT AT THE SAME TIME, THE LEGISLATURE PROVIDES THAT DEPRECIATION SHOULD BE ALLOWED ON ALL OTHER IN TANGIBLE ASSETS OTHER THAN GOODWILL. THE ASSESSEES ADDITION AL EVIDENCE THROWS LIGHT ON THE VALUATION OF EACH OF T HE INTANGIBLE ASSETS: SUCH EVIDENCE GOES INTO THE ROOT OF THE MATTER FOR THE PURPOSE OF ARRIVING AT A DECISION AS TO WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 32(1)(II) OF THE ACT AND IF SO, THE QUANTUM OF DEPRECIATION THAT HE IS E NTITLED TO. THUS, WE ADMIT THIS ADDITIONAL EVIDENCE AND REMIT T HE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R FRESH ADJUDICATION IN ACCORDANCE WITH LAW. 9.5 FROM THE ABOVE IT IS CLEAR THAT THE TRIBUNAL HA S CATEGORICALLY HELD THAT NO DEPRECIATION IS ALLOWABLE ON GOODWILL. THE ASSE SSEE HAS NOT CHALLENGED THE ABOVE FINDING OF THE TRIBUNAL BEFORE THE HON'BL E HIGH COURT AND HAS ACCEPTED THE SAME. THIS BEING SO IT HAS TO BE HELD THAT NO DEPRECIATION IS ALLOWABLE ON GOODWILL IN CASE OF THE ASSESSEE. THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE TO THE PROPO SITION THAT DEPRECIATION IS ALLOWABLE ON GOODWILL DOES NOT HOLD GOOD UNDER THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. 17 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . 9.6 SO FAR AS THE BIFURCATION OF VARIOUS ITEMS I.E. INTANGIBLE ASSETS WHICH ACCORDING TO THE LD. A.R. WERE LOOSELY WORDED AS G OODWILL IN THE EARLIER AGREEMENT, WE FIND THE ASSESSEE FURNISHED THE VALUA TION REPORT OF THE VALUERS AFTER 8 YEARS OF THE BUSINESS TRANSFER AGRE EMENT. EVEN THE VALUERS IN THE SAID VALUATION REPORT HAS MENTIONED THAT THE Y ARE PREPARING THE SAME AT THE INSTANCE OF THE ASSESSEE AND ON THE BASIS OF THE MATERIAL PROVIDED TO THEM BY THE ASSESSEE. THEY HAVE NOT DONE ANY INDEP ENDENT ENQUIRY. THE RELEVANT PORTION OF THE DISCLAIMER BY THE VALUER AT PAGES 18 & 19 OF THE VALUATION REPORT (PAGE 87 & 88 OF THE PAPER BOOK) READS AS UNDER :- IN THE COURSE OF THE VALUATION, E&Y WERE PROVIDED WITH BOTH WRITTEN AND VERBAL INFORMATION, INCLUDING MARKET, T ECHNICAL, FINANCIAL AND OPERATING DATA. WE HAVE HOWEVER, EV ALUATED THE INFORMATION PROVIDED TO US BY THE COMPANY THROUGH B ROAD INQUIRY, ANALYSIS AND REVIEW (BUT HAVE NOT CARRIED OUT A DUE DILIGENCE OR AUDIT OF THE COMPANY FOR THE PURPOSE O F THIS ENGAGEMENT, NOR HAVE WE INDEPENDENTLY INVESTIGATED OR OTHERWISE VERIFIED THE DATA PROVIDED). THROUGH THE ABOVE EVALUATION, NOTHING HAS COME TO OUR ATTENTION TO IN DICATE THAT THE INFORMATION PROVIDED WAS MATERIALLY MIS-STATED/ INCORRECT OR WOULD NOT AFFORD REASONABLE GROUNDS UPON WHICH TO B ASE THE REPORT. WE DO NOT IMPLY AND IT SHOULD NOT BE CONST RUED THAT WE HAVE VERIFIED ANY OF THE INFORMATION PROVIDED TO US , OR THAT OUR INQUIRIES COULD HAVE VERIFIED ANY MATTER, WHICH A M ORE EXTENSIVE EXAMINATION MIGHT DISCLOSE. WE ARE NOT R ESPONSIBLE FOR ARITHMETICAL ACCURACY/LOGICAL CONSISTENCY OF AN Y FINANCIAL MODEL OR BUSINESS PLAN PROVIDED BY THE COMPANY AND USED IN OUR VALUATION ANALYSIS. THE TERMS OF OUR ENGAGEMEN T WERE SUCH THAT WE WERE ENTITLED TO RELY UPON THE INFORMA TION PROVIDED BY THE COMPANY WITHOUT DETAILED INQUIRY. ALSO, WE HAVE BEEN GIVEN TO UNDERSTAND BY THE MANAGEMENT THA T IT HAS NOT OMITTED ANY RELEVANT AND MATERIAL FACTORS AND T HAT IT HAS CHECKED OUT RELEVANCE OR MATERIALITY OF ANY SPECIFI C INFORMATION TO THE PRESENT EXERCISE WITH US IN CASE OF ANY DOUB T. ACCORDINGLY, WE DO NOT EXPRESS ANY OPINION OR OFFER ANY FORM OF ASSURANCE REGARDING ITS ACCURACY ANY COMPLETENESS. OUR CONCLUSIONS ARE BASED ON THESE ASSUMPTIONS, FORECAS TS AND OTHER INFORMATION GIVEN BY/ON BEHALF OF THE COMPANY . THE MANAGEMENT OF THE COMPANY HAS INDICATED TO US THAT IT HAS UNDERSTOOD THAT ANY OMISSION, INACCURACIES OR MISST ATEMENTS MAY MATERIALLY AFFECT OUR VALUATION ANALYSIS/RESULT S. ACCORDINGLY, WE ASSUME NO RESPONSIBILITY FOR ANY ER RORS IN THE ABOVE INFORMATION FURNISHED BY THE COMPANY AND THEI R IMPACT 18 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . ON THE PRESENT EXERCISE. ALSO, WE ASSUME NO RESPON SIBILITY FOR TECHNICAL INFORMATION FURNISHED BY THE COMPANY AND BELIEVED TO BE RELIABLE. WE EXPRESS NO OPINION ON THE ACHIEVABILITY OF THE F ORECASTS GIVEN TO US. THE ASSUMPTIONS USED IN THEIR PREPARA TION, AS WE HAVE BEEN EXPLAINED, ARE BASED ON THE MANAGEMENT S PRESENT EXPECTATION OF BOTH-THE MOST LIKELY SET OF FUTURE BUSINESS EVENTS AND CIRCUMSTANCES AND THE MANAGEMEN TS COURSE OF ACTION RELATED TO THEM. IT IS USUALLY TH E CASE THAT SOME EVENTS AND CIRCUMSTANCES DO NOT OCCUR AS EXPEC TED OR ARE NOT ANTICIPATED. THEREFORE, ACTUAL RESULTS DUR ING THE FORECAST PERIOD MAY DIFFER FROM THE FORECAST AND SU CH DIFFERENCES MAY BE MATERIAL. NO INVESTIGATION OF THE COMPANYS CLAIM TO TITLE TO ASSETS HAS BEEN MADE FOR THE PURPOSE OF THIS VALUATION AND THE COMPANYS CLAIM TO SUCH RIGHTS HAS BEEN ASSUMED TO BE VALID. NO CONSIDERATION HAS BEEN GIVEN TO LIENS OR ENCUMBRANC ES AGAINST THE ASSETS, BEYOND THE LOANS DISCLOSED IN THE ACCOU NTS. THEREFORE, NO RESPONSIBILITY IS ASSUMED FOR MATTERS OF A LEGAL NATURE. 9.7 FROM THE ABOVE IT IS CLEAR THAT THE VALUATION D ONE BY THE VALUERS WAS AT THE INSTANCE OF THE ASSESSEE COMPANY WITH NO OBL IGATION AND RESPONSIBILITY ON THEIR PART AND ITS PREPARATION AF TER A GAP OF EIGHT YEARS AND THAT TOO AFTER THE ORDER PASSED BY THE CIT(A) REJEC TING THE CLAIM OF DEPRECIATION ON GOODWILL CLEARLY AN AFTER THOUGHT A S OBSERVED BY THE A.O. FURTHER DEPRECIATION CAN BE CLAIMED ON ASSETS APPEA RING IN THE BALANCE SHEET ON WHICH DEPRECIATION WAS ALLOWED IN THE PAST . IT IS A FACT THAT NO DEPRECIATION WAS CLAIMED OR ALLOWED ON INTANGIBLE A SSETS IN THE PRECEDING YEARS. THE ASSESSEE HAD CLAIMED DEPRECIATION ONLY ON GOODWILL IN THE ASSESSMENT YEAR 2003-04 AND ONWARDS WHICH WAS DENIE D BY THE A.O. THEREFORE, WHEN DEPRECIATION HAS NEITHER BEEN CLAIM ED NOR ALLOWED ON INTANGIBLE ASSETS IN THE PRECEDING YEARS THE ASSESS EE, IN OUR OPINION, CANNOT BE ALLOWED TO CLAIM DEPRECIATION ON INTANGIBLE ASSE TS IN THE IMPUGNED ASSESSMENT YEAR. IN THIS VIEW OF THE MATTER WE UPH OLD THE ORDER OF THE AO 19 ITA NO. 8500/MUM/2010 M/S TAJ SATS AIR CATERING LTD . IN DISALLOWING DEPRECIATION ON GOODWILL AND OTHER I NTANGIBLE ASSETS. WE ALSO UPHOLD HIS ORDER IN REJECTING THE CLAIM OF THE ASSE SSEE OF THE BIFURCATION OF GOODWILL INTO INTANGIBLE ASSETS AND GOODWILL AS PER THE VALUATION REPORT AS AN AFTER THOUGHT. WE HOLD ACCORDINGLY. THE GROUNDS ON THIS ISSUE BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. 10. GROUND OF APPEAL NO. 4 TO 6 WERE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE BEING ACADEMIC IN NATURE. ACCORDINGLY THE ABOVE GROUNDS ARE DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 20.01.2012. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 20.01.2012. RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT/DIT, MUMBAI 4 SECRETARY, DRP, MUMBAI 5 DR BENCH E 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI
Mehul