ACIT CIR 6(3)(1), MUMBAI V. FRANKLIN TEMPLETON ASSET MANAGEMENT (I) P.LTD, MUMBAI

ITA 90/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7947 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA NO . 9 0 /MUM. /2016 ( ASSESSMENT YEAR : 20 10 11 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 6(3)(1), MUMBAI . APPELLANT V/S FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD. , INDIABULLS FINANCE CENTRE, TOWER 2, 12 TH & 13 TH FLOOR SENAPATI BAPAT MARG, ELPHISTON (W) MUMBAI 400 013 AAACT1609B . RESPONDENT REVENUE BY: MS. POOJA SWAROOP ASSESSEE BY : SHRI MADHUR AGRAWAL DATE OF HEARING 28.11.2017 DATE OF ORDER 13.12.2017 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 6 TH OCTOBER 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 12 , MUMBAI,FOR THE ASSESSMENT YEAR 20 10 1 1 . 2. GROUND S RAISED BY THE REVENUE ARE AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE DEPRECIATION ON GOODWILL RS. 8,26,27,602/ - .' 2 FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING UPON THE DECISION OF THE JUDGMENT OF HON 'BLE SUPREME COURT IN THE CASE OF CIT KOLKATA VS. SMIFS SECURITIES LTD.(2012) 348 ITR 302(SC) WHEREIN THE HON'BLE COURT HELD THAT 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1), WITHOUT APPRECIATING THE FACTS THAT THE THERE IS NO EXCESS CONSIDERATION GIVEN TO THE SUBSIDIARY COMPANY WHICH COMES UNDER THE PURVIEW OF 'GOODWILL'. 3. ON THE FACTS AN D CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEPRECIATION WITHOUT APPRECIATING THE FACT THAT NO CLAIM OF DEPRECIATION WAS MADE BY THE ASSESSEE IN THE RETURN OF INCOME NOR WAS 'GOODWILL' REFLECTING IN THE ASSETS OF THE ASSESSEEAND TH E ASSESSEE HAS MADE CLAIM AFTER THE DECISION OF THE HON'BLE SUPREME COURT AND THE SAME CANNOT BE APPLIED RETROSPECTIVELY. 3. AS COULD BE SEEN FROM THE GROUNDS RAISED, THE SOLITARY ISSUE ARISING FOR CONSIDERATION IS ALLOWANCE OF CLAIM OF DEPRECIATION ON GOODWILL. 4. BRIEF FACTS ARE, THE ASSESSEE AN INDIAN COMPANY IS AN ASSET MANAGEMENT COMPANY FOR FRANKLIN TEMPLETON MUTUAL FUND . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 7 TH OCTOBER 2010, DECLARING TOTAL INCOME OF RS. 107,04,73,542. ASSESSMENT IN CASE OF ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 11 TH MARCH 2013, MAKING CERTAIN ADDITION/ DISALLOWANCE WHICH RESULTED IN DETERMINATION OF TOTAL INCOME AT RS. 107,22,30,810. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3 FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD. 5. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE TOOK A GROUND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THOUGH, THE ASSESSEE HAS MADE A CLAIM FOR DEPRECIATION ON GOODWILL CREATED DUE TO AMALGA MA TION WITH FRANKLIN TEMPLETON AMC LTD. THROUGH A COURT APPROVED SCHEME WITH RETROSPECTIVE EFFECT FROM 26 TH JULY 2002. SINCE , THE CONSIDERATION PAID BY THE ASSESSEE WAS IN EXCESS OF THE VALUE OF NET ASSET OF FRANKLIN TEMPLETON AMC LTD., THE ASSESSEE RECOGNIZED A GOODWILL OF RS. 247,60,32,231. THE LEARNED COMMISSIONER (APPEALS) FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S SMIFS SECURITIES LTD., [2012] 348 ITR 302 (SC), ALLOWED ASSESSEES CLAIM OF DEPRECIATION. 6. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, THE ASSESSEE HAS CLAIMED THE DEPRECIATION IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THE LEARNED COMMISSIONER (APPEALS) WAS NOT JUSTIFIED IN ALLOWING ASSESSEES CLAIM OF DEPRECI ATION. 7. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, AS FAR AS THE ALLOWABILITY OF DEPRECIATION ON GOODWILL IS CONCERNED, THE ISSUE STANDS SETTLED BY THE DECISION OF THE HON'BLE SUPREME COURT IN SMI F S SECURITIES LTD. (SUPRA) WHEREIN , IT HAS BEEN HELD THAT GOODWILL BEING AN INTANGIBLE ASSET AS DEFINED UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT DEPRECIATION IS ALLOW ABLE . LEARNED AUTHORISED REPRESENTATIVE 4 FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD. SUBMITTED, FRANKLIN TEMPLETON AMC LTD. AMALGAMATED WITH THE ASSESSEE THROUGH A COURT APPROVED SCHE ME W.E.F. 26 TH JULY 2002, AND THE AMOUNT PAID BY THE ASSESSEE IN EXCESS OF BOOK VALUE OF ASSET WAS RECOGNIZED AS GOODWILL WHICH AMOUNTS TO RS. 247.60 CRORE . LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, THE ASSESSEE CLAIMED DEPRECIATION ON THE AFORESAID AMOU NT OF GOODWILL IN ASSESSMENT YEAR 2005 06 AND THE TRIBUNAL WHILE DECIDING ADDITIONAL GROUND RAISED BY T HE ASSESSEE ON THE ISSUE IN ITA NO.4068/MUM./2011, DATED 3 RD AUGUST 2016, HAS HELD THAT ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE AMOUNT OF GOODW ILL ACQUIRED ON ACCOUNT OF ACQUISITION OF FRANKLIN TEMPLETON AMC LTD. ONLY FOR QUANTIFYING THE AMOUNT OF DEPRECIATION THE MATTER WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE ISSUE WHETHER GOODWILL IS AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION IS CONCERNED, IT IS NO MORE RES INTEGRA IN VIEW OF THE DECISIONS OF HON'BLE SUPREME COURT IN SMIFS SECURITIES LTD. (SUPRA) AND CATENA OF DECISIONS OF DIFFERENT HI GH COURTS INCLUDING THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL AS DIFFERENT BENCHES OF THE TRIBUNAL. IN FACT, IN ASSESSEES O WN CASE FOR ASSESSMENT YEAR 2005 06 , THE TRIBUNAL HAS UPHELD THE ENTITLEMENT OF THE ASSESSEE TO CLAIM DEPRECIATION ON GOODWILL. IN VIEW OF THE 5 FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD. AFORESAID, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IN ALLOWING ASSESSEES CLAIM OF DEPRECIATION. HOWEVER, AS COULD BE SEEN , IN ASSESSMENT YEAR 2005 06 THE TRIBUNAL HAS RESTORED THE ISSUE OF Q UANTIFICATION OF DEPRECIATION ON GOODWILL TO THE FILE OF THE ASSESSING OFFICER FOR COMPUTATION. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON GOODWILL IN THE IMPUGNED ASSESSMENT YEAR AFTER THE QUANTIFICATION OF DEPRECIATION ON GOODWILL IS MADE IN ASSESSMENT YEAR 200 5 06 AS PER THE DIRECTION OF THE TRIBUNAL. GROUNDS RAISED ARE DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017 SD/ - SD/ - S N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.12.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ ASSTT.REGISTRAR) ITAT, MUMBAI .