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2010 (6) TMI 523 - ITAT, MUMBAISlump sale or demerger - Depreciation – Addition u/s 40(a) and 43B - AO has observed that the scheme approved by the Hon’ble High Court u/s 391 to 394 of the Companies Act fulfils all the conditions stipulated u/s.2(19AA) of the Act - The AO has further held that s per Explanation 7A to Section 43(1), the actual cost to the assessee shall be taken to be same as it would have been if the demerged company had continued to hold the capital asset for the purpose of its own business - AO has held that the purpose of enhancement of the actual cost to the assessee is for the purpose of reduction of tax liability by claiming high depreciation - Company is not fulfilling the conditions laid down at clause (iii), (iv) & (v) to section 2(19AA), therefore, it cannot be held as a case of demerger - Therefore, the value adopted by the company on the basis of revaluation of the assets is to be considered for depreciation purpose Regarding depreciation on brand and goodwill u/s 32(1)(ii) – From the above it can be seen that trade mark or brand name has been used in conjunction and as an alternative to each other - Thus it can be concluded that even the legislature has intended that brand name or trade mark are similar intellectual properties - “Brand” falls within the ambit of section 32(1)(ii) of the I.T. Act and that the assessee is eligible for depreciation on the same - As far as goodwill is concerned, the assessee shall not be entitled to depreciation - Appeal is partly allowed Regarding the disallowance of expenditure - The AO has disallowed the claim of the appellant company on the plea that the company was started in the year under consideration and the question of allowing the expenditure incurred in the earlier years does not arise - Since the expenditure disallowed u/s. 40(a) and 43B of the I.T. Act is to be allowed on actual payment basis, therefore, it has to be allowed either in the case of the transferor company or the transferee company - Hon’ble Mumbai Tribunal has decided the issue in the case of M/s Anil Engineering Corporation vs. ITO 50 ITD 99 where it is held that the transferee of the business would be eligible to claim the deduction in respect of the liability taken over from the transferor for which the payment was made by the transferee subsequently - Therefore, this ground of appeal is allowed in appellant’s case
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