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2016 (3) TMI 1347 - AT - Income TaxDepreciation on goodwill - depreciation on customer relationship rights (non-compete fees) which was considered as an intangible asset by the Appellant - slump sale - This asset was acquired by the Appellant as a part of business transfer agreement with MIS TVS Electronics Ltd. - Whether the expression "any other business or commercial right of similar nature" would include such "Customer Relationship Rights (Non-compete fees)", which is essential to carry on the business after the business transfer? - HELD THAT:- The transaction of purchase of contract manufacturing service division of TVS Electronics Ltd. by the assessee is slump sale as the consideration was agreed and paid in lump sum without assigning any value to specific assets. Therefore as per the agreement the consideration was paid lump sum without giving any details of payment for any specific assets. The business was purchased by the assessee and it was transferred by the TVS Electronics as an on going business/division. However, in its books of accounts the assessee has valued the fixed asset and intangibles as per the valuation made by the consultants. The assessee in its books of accounts has allocated sum to the intangible being customer relationship. Therefore, though the seller has agreed not to engage in any business for a period of three years or participate or engage as owner, partner shareholder, consultant, advisor or any other capacity solicit the employees of the CMS Business however in the absence of any intention of parties to pay consideration for such restrictive covenants in the agreement the payment in question cannot be regarded as non-compete fees The claim of the assessee is required to be considered by treating the said payment as goodwill. The learned Authorised Representative of the assessee has relied upon the judgment of Hon'ble Supreme Court in the case of CIT Vs. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] and submitted that in view of the said judgment of the Hon'ble Supreme Court, goodwill eligible for depreciation as per the Section 31(1)(ii) . Since the assessee did not claim depreciation on goodwill in the return of income and even not made any claim before the CIT (Appeals). Therefore, the issue of allowing depreciation on goodwill has not been examined by the authorities below. Additional ground in respect of depreciation on goodwill - The issue of ‘depreciation’ on goodwill is a legal issue and does not require any further investigation of fact as the Assessing Officer has not disputed or disturbed the valuation allocated/assigned by the assessee in the books of accounts to the fixed assets and intangibles including goodwill. Therefore we admit the additional ground raised by the assessee. Since this issue has been raised for the first time by the assessee before us, therefore we set aside this issue to the record of the Assessing Officer for deciding the same as per law. Appeal of the assessee is allowed for statistical purpose.
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