TMI Blog2017 (4) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... had decided the issue in favour of assessee, after holding that depreciation is allowable on intangible assets holding The two conditions mentioned in sec. 32 are that the assets should be owned by the assessee and should have been used for the purposes of the business or profession of the assessee. The sub-clauses thereto enumerate the deductions allowable u/s 32. Sub-clause (ii) thereof provides for a deduction at a prescribed percentage of the written down value of the block of assets. 5th proviso thereto provides that in respect of circumstances such as succession, amalgamation or demerger, the average deduction on account of depreciation on tangible or intangible assets shall not exceed, in any previous year, the deduction calculated at the prescribed rates as if the succession, amalgamation or demerger has not taken place - decided in favour of assessee - ITA No.1530/Bang/2016, ITA No.1531/Bang/2016 - - - Dated:- 28-4-2017 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER For the Appellant : Shri M.K. Biju, Jt. CIT(DR)(ITAT-3), Bengaluru. For the Respondent : Shri M. Gandhi, CA ORDER Per Sunil Kumar Yadav, Judicial Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 6. This appeal is preferred by the assessee against the order of CIT(Appeals) inter alia on the following grounds:- 1) The order of the Learned Assessing Officer in so far as it is prejudicial to the Interest of the Appellant is not justified in law and on facts and circumstances of the case. 2) As regards disallowance of depreciation on intangible assets to the extent of ₹ 29248420/- 1. The Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer in denying depreciation of ₹ 1,42,92,623/- on intangibles being brand names and trademarks valued at s.65.26.40,150/-. 2. The lower authorities have failed to appreciate that revaluation of the intangibles was effected by the erstwhile firm, before the succession, and not that of the Appellant and therefore, they were not justified in observing that the aforesaid intangible assets were under Section 47(xiii) of the IT Act. 3. The lower authorities have failed to appreciate that the assets (including the intangible assets) of the erstwhile firm were transferred to the Appellant in a succession as contemplated under Section 47(xiii) of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aspect regarding 'Taxation of Shares of Indian Companies allotted to non-residents in consideration for the purchase of machinery and plant delivered abroad under clause (vi/vii) of sub-section (1), thereby recognizing the acquisition of assets for consideration other than cash. 12. The lower authorities have failed to appreciate Schedule VI of the Companies Act, 1956 also recognizes the allotment of Shares for consideration other than cash. 13. The Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer, in disallowing the depreciation on intangible assets, when in fact, the existence of the aforesaid intangible assets and valuation thereof certified by a valuer has not been disputed by the Learned Assessing Officer. 14. The Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer in disallowing the depreciation, merely because his predecessor had not confirmed such disallowance earlier which was further confirmed by the Hon'ble ITAT vide its order no.ITA No.429 to 432/Bng/2013 for A Ys 2005- 06 to 2008-09 dated 10.01.2014 in the appellant's own case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted into a private limited company. The learned counsel for the assessee had placed reliance upon the decision of the Hon ble Supreme Court in the case of Kartikeya A.V Sarabhai (cited Supra) in support of his contention that the shareholders who buy shares will not have any interest in the property of the company which is entirely distinct from the shareholder and the true position of the shareholder in a company on buying the shares is that he becomes entitled to a percentage in the profits of the company if and when company declares, subject to memorandum of association that the profits or any portion thereof should be distributed as dividend amongst the shareholders and he has further right to percentage in the assets of the company which would be left-over after winding up. Thus, he tried to bring out distinction between the rights of the partners in a partnership firm which is joint and several in contrast to the rights and liabilities of the shareholders in a company. He has also relied upon the decision of the Hon ble Supreme Court in the case of Vodafone International holdings reported in 341 ITR 1 (SC) to bring out distinction between the holding company and wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon is allowable u/s 32(1)(ii) of the IT Act. The two conditions mentioned in sec. 32 are that the assets should be owned by the assessee and should have been used for the purposes of the business or profession of the assessee. The sub-clauses thereto enumerate the deductions allowable u/s 32. Sub-clause (ii) thereof provides for a deduction at a prescribed percentage of the written down value of the block of assets. 5th proviso thereto provides that in respect of circumstances such as succession, amalgamation or demerger, the average deduction on account of depreciation on tangible or intangible assets shall not exceed, in any previous year, the deduction calculated at the prescribed rates as if the succession, amalgamation or demerger has not taken place and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and amalgamated company or the demerged company and the resulting company as the case may be, in the ratio of days for which the assets were used by them. 18. In all the three circumstances above, the erstwhile company ceases to exist and a new company comes into existence. In the case on hand also, on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear in which the succession has taken place. This argument is accordingly rejected. 23. The other objection of the assessee is that though only the AO is entitled to invoke the provisions of Explanation 3 to sec. 43(1) of the IT Act, the CIT(A) has invoked the same which is impermissible. On perusal of the order of the CIT(A), we find that he has not invoked the provisions of Explanation 3 to sec. 43(1) of the IT Act but has only justified the action of the AO in questioning the claim of depreciation by citing the provision of sec. 43(1) and Explanation 3 thereof. Therefore, we seen no strength in this argument of the assessee. 24. Further, u/s 251 of the IT Act, the powers of the CIT(A) are co-terminus with that of the AO meaning that he can do what the AO could do and can also direct the latter to do what the latter failed to do as laid down by the Hon ble Supreme Court in the case of CIT Vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC). Therefore, we do not see any infirmity in the order of the CIT(A) which needs interference. Therefore, this argument of the assessee is also rejected. 25. In the result, the appeals filed by the assessee for all the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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