Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2007 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2007 (3) TMI 307 - AT - Income TaxDepreciation u/s 32(1) - under the head "Intangible assets being copyrights, business and commercial rights"- Professional expenses - Disallowance of deferred revenue expenditure - Production and telecasting of TV serials - HELD THAT:- We agree with the learned AO that 'goodwill' as it is, is not eligible for claim of depreciation. When the AO himself has computed the value of goodwill at Rs. 1,59,480, there is no reason for declining the claim of depreciation on the balance part of consideration paid for acquiring various tangible and intangible assets, rights, etc. There is no dispute for allowing depreciation on tangible assets. For intangible assets also, sub-cl. (ii) of s. 32(1) of the Act provides that know-how, patents, trademark, licenses, franchise or any other business or commercial rights of similar nature being intangible assets acquired on or after 1st day of April, 1998 are eligible for claim of depreciation. Expln. (2B) to s. 32(1) of the Act is also very much clear and provides for depreciation on these assets. Thus, we can conclude that total value of tangible and intangible assets transferred to the assessee company, as per the valuation arrived at by Anand Parikh & Co., amounts to Rs. 4.22 crores. While valuing the intangible assets in the form of copyright, telecast rights, etc., the price offered by Doordarshan to the assessee company was taken into consideration. After having a negotiation with the transferee firm, the entire deal was finalized at a purchase consideration of Rs. 3.32 crores, as against valuation of Rs. 4.22 arrived at by the valuer, which is also supported by the agreement dt. 31st March, 2000 entered into by the assessee with the transferee firm. Both the agreement as well as valuation report were submitted to the AO. The AO himself has carried out independent valuation of the goodwill as per the prescribed norms which works out to Rs. 1,59,480. We hereby accept the valuation of the goodwill as done by the AO, on which the assessee is not eligible to any claim of depreciation. After reducing the value of tangible assets amounting to Rs. 32.30 lacs and the value of goodwill arrived at Rs. 1.59 lacs, from the purchase consideration there remains a sum of Rs. 2.98 crores attributable to copyrights, telecast rights, commercial rights, etc. on which the assessee is entitled to allow depreciation as per Expln. (2B) to s. 32(1) of the Act. We direct accordingly. Allowance Of Professional charges - HELD THAT:- We found that expenses were incurred for increasing the capital base of the assessee company, the same were essential in the nature of capital expenditure. We are, therefore, inclined to agree with the ld DR, that no interference is warranted in the orders of the lower authorities, disallowing assessee's claim of professional expenses. Disallowance of deferred revenue expenses - HELD THAT:- As the expenses were incurred on production of films and no new assets were acquired by the assessee, the same is liable to be allowed deduction, notwithstanding the fact that part of such expenditure was carried to the balance sheet as "deferred revenue expenses". As the AO had already allowed 50 per cent of these expenses, which were debited to P&L a/c by treating the same as revenue expenses, there is no reason to disallow remaining 50 per cent of very same expenses, merely on the plea that it was treated by the assessee as deferred revenue expenses in the books of account. Mere entry in the books of account cannot disentitle the claim of deduction of expenses which the assessee is entitled to claim as per provisions of IT Act, 1961, while computing its taxable income for income-tax purposes. For the purpose of income-tax what is to be taxed is the real income hence deferred revenue expenditures were claimed in full in computation of income in spite of carried forward of fifty per cent of the deferred revenue expenditure in the books of account. Moreover, this method of accounting is being continuously followed by the company and the company has claimed deferred revenue expenditure in full in the income-tax computation in the asst. yrs. 2000-01 and 2002-03 as well besides 2001-02 which is in the appeal. As a matter of abundant caution, the AO may keep watch on such expenses in the subsequent years, which are now carried in the balance sheet as "deferred revenue expenses". The assessee is not entitled for any depreciation on such expenses being carried to the balance sheet. We direct accordingly. In the result, the appeal of the assessee is partly allowed.
|