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2015 (12) TMI 1467 - HC - Income TaxDisallowance u/s 40A(2)(b) - payment of sale value was in excess of the fair market value - related parties - Held that:- Section 40A(2)(a) of the Act provides that where the assessee incurs expenditure in respect of which payment has been made to any person referred to in clause (b) of that sub-section, and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefits derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. Therefore, for the purpose of disallowing a deduction, the Assessing Officer has to form an opinion not only that the expenditure is excessive or unreasonable, but that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made. As noticed hereinabove, the Commissioner (Appeals) has recorded a categorical finding of fact to the effect that the Assessing Officer has not brought any material on record to show that the payments in question exceeded the fair value of the services received. Insofar as the legitimate needs of such services etc. is concerned, the Commissioner (Appeals) has found as the matter of fact that as a result of utilising the employees of its sister concerns and on payment of service charges, the assessee company started making operational profits from assessment year 2001-02. Under the circumstances, it cannot be said that the services were not availed for any legitimate need. The Tribunal has concurred with the aforesaid findings of fact recorded by the Commissioner (Appeals). Essentially, therefore, the conclusion arrived at by the Tribunal is based upon findings of fact to the effect that there is no material to show that the payments made exceed the fair market value and that the services have been availed for legitimate needs of the assessee company. On behalf of the appellant nothing has been pointed out to show that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored. No contrary material has been brought to the notice of the court so as to dislodge the findings of fact recorded by the Tribunal. Under the circumstances, the conclusions arrived at by the Tribunal being based upon findings of facts recorded by it after appreciating the evidence on record.- Decided against revenue Depreciation on goodwill - ITAT allowed claim - Held that:- Section 32 of the Act provides for the deductions to be allowed in respect of depreciation of - (a) buildings, machinery, plant or furniture, being tangible assets; and (b) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets being acquired on or after the 1st day of April, 1998. Explanation 3 to section 32 provides that for the purposes of that sub-section, the expressions “assets” and “block of assets” shall mean (a) tangible assets, being buildings, machinery, plant or furniture; (b)intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. (a) While goodwill has not been specifically mentioned in the category of intangible assets under clause (b), in the case of CIT v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT ] has held that goodwill is an asset under Explanation 3(b) to section 32(1) of the Act. Under the circumstances, the controversy raised vide the second proposed question clearly stands concluded by the above decision. The Tribunal, therefore, did not commit any error in following the said decision. - Decided against revenue
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