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2013 (9) TMI 188 - AT - Income TaxDepreciation applicable u/s 32(1)(ii) - intangible assets as goodwill Business Purchase Agreement('BPA') - Out of the total consideration of ₹ 62 crores, sum of ₹ 49.26 crores was apportioned towards brands, building, plant and machinery, furniture and fixtures, vehicles and current assets. The balance amount of ₹ 12.74 crores mainly representing the value attributable to the intangible assets comprising of licenses, permissions, health registrations, approvals, concessions, manufacturing know-how, specifications, marketing capabilities such as the distribution network comprising of wholesale stockists, information and documents in relation to products etc was recorded as goodwill in the books of account of the assessee. In respect of the said goodwill, depreciation was claimed under section 32(1)(ii) of the Act. Held that:- Amended provisions of section 32 of the Act w.e.f. 1.4.1999, ambit of depreciation has been enlarged to cover both the tangible and intangible assets Reliance has been placed on the Hon'ble Delhi High Court in Areva T and D India Ltd. Vs. DCIT [2012 (4) TMI 79 - DELHI HIGH COURT], wherein it has been held that the nature of "business or commercial rights" cannot be restricted to only the aforesaid six categories of assets, viz., knowhow, patents, trademarks, copyrights, licenses or franchises - The nature of "business or commercial rights" can be of the same genus in which all the aforesaid six assets fall - Intangible assets, viz., business claims; business information; business records; contracts; employees; and knowhow, are all assets, which are invaluable and result in carrying on the transmission and distribution business by the assessee, which was hitherto being carried out by the transferor, without any interruption. The aforesaid intangible, assets are, therefore, comparable to a license to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business Thus, intangible assets enables the assessee to access the market and has an economic and money value is a "license" or "akin to a license" which is one of the items falling in Section 32(1)(ii) of the Act. In the present case, schedules to Business Purchase Agreement (BPA) comprising of the list of Stockist Agreements, Distribution Agreements, Lease Agreements and also Distribution and Marketing Agreements, alongwith List of Licenses and Permissions and List of various Products, the name license and also the manufacturing know-how etc., alongwith List of employees are assets, which are invaluable and instrumental in carrying on the business of Animal Health Care and Diagnostics Business divisions acquired by the assessee from M/s Ranbaxy Laboratories Ltd. as per BPA Relying upon the judgment in the case of Areva T and D India Ltd. Vs. DCIT, it is held in the present case that consideration of ₹ 12.74 crores paid by the assessee was for acquisition of the intangible assets is entitled for depreciation under section 32(1)(ii) of the Act Decided in favor of Assessee. Nature of compensation received towards cancellation of share purchase agreement - Capital receipt (non taxable) or revenue receipt - failure to fulfill the terms of agreement - The contention of the assessee in this regard was that the agreement entered into by the assessee was for acquisition of the company and not for trading in shares of the said company - The acquisition of the business of Zydus was the intention of the assessee in order to start a new profit earning venture i.e. new source of income. - Held that:- In the facts of the present case, there was no loss of source of business income in the hands of the assessee as the assessee was only exploring the possibility of taking over the business of a concern in which it had no interest. The compensation received for failure of such decision being taken in the course of carrying on its normal line of business was rightly held to be taxable receipt in the hands of the assessee Decided against the Assessee.
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