TMI Blog2009 (8) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case and dealing with the legality of revision proceedings on the ground that the AO had allowed depreciation on goodwill, Pune A Bench of this Tribunal, in the case of Piaggio Vehicles (P.) Ltd. v. Dy. CIT [ 2009 (5) TMI 923 - ITAT PUNE] , We are in considered agreement with the views of the Co-ordinate Bench. As for ld DRs contention that the CIT cannot be a silent spectator to such a wrong grant of depreciation and that the CIT must safeguard the interests of the Revenue, all we can say is that, on the facts of the present case and particularly when CIT has withdrawn depreciation on goodwill on the ground that such a claim is patently inadmissible, we are unable to approve his stand on merits and we must also follow the Co-ordinate Benches which have decided the same issue, on materially identical facts, in favour of the assessee. As we have noted earlier in this order, Bharatbhai s case [ 2005 (8) TMI 279 - ITAT AHMEDABAD-C] dealt with a situation in which goodwill amount was paid to the retiring partner but it did not result in the acquisition of any assets which fit the description of section 32(1)( ii ). These facts are not similar to the case before us in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness or commercial rights of similar nature". It was in this backdrop, and vide notice dated 31-1-2006, that the assessee to show cause as to why the assessment order dated 31-3-2004 not be subjected to revision proceedings under section 263 of the Act. It was submitted by the assessee that there is no cause of action for revision proceedings as the assessment order in question is neither erroneous nor prejudicial to the interest of the revenue. It was submitted that what is termed as goodwill by the assessee is an intangible asset eligible for depreciation allowance. Attention was also invited to the submissions made during the assessment proceedings in response to specific questions of the Assessing Officer, as also to the extracts of notes submitted along with the income-tax return. The claim of the assessee was that the Assessing Officer has allowed depreciation on goodwill after due application of mind and after considering all the related aspects of the matter. Therefore, even if another view of the matter is possible, the Commissioner cannot take recourse to section 263 for adopting such other view. Reliance was placed on Hon ble Supreme Court decision in the case of Mal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 263 by the Commissioner. He further added that "whatever explanation of the term goodwill that the assessee may chose to give in the notes in Annexure IV of the audit report in Form 3CD, it will not lead to its coverage in above meaning of intangible assets". Learned Commissioner also observed that it is not the brought forward value on which the depreciation is claimed and the assessee has not filed evidence of the alleged payments for contracts, agreements, trading names etc. as is stated in the audit report. As regards the assessee s claim that the issue of admissibility of depreciation claimed to have been settled in the preceding years, there is no res judicata in the assessment proceedings and, in any event, additions in the current year are not substantiated. The Commissioner thus proceeded to hold that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue, that the Commissioner was justified in assuming revision jurisdiction under section 263, and that the depreciation of Rs. 7,063.93 lakhs, claimed on goodwill, needs to be withdrawn. Aggrieved by the stand so taken by the learned Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired after 1-4-1998." 9. In the backdrop of the above facts, the first thing that we need to examine is whether or not a claim of depreciation on what is termed as goodwill in the books of account but is stated to be in the nature of covered by the scope of any other business or commercial rights of similar nature ( i.e., know-how, patent, copyrights, trade marks, licences, franchises ) referred to in the definition of block of assets, is admissible at all. It is after all the very foundation of learned Commissioner s case that such a claim is a patently inadmissible claim. We find help and guidance from Tribunal s decision in the case of Skyline Caterers (P.) Ltd. v. ITO [2009] 116 ITD 348 (Mum.) (SMC). In this case, the assessee had shown goodwill of Rs. 25 lakhs but claimed depreciation on the ground that "the payment under the head goodwill in the books of account represented the rights acquired by the assessee under the contract acquired by the assessee which amounted to commercial rights and, therefore, the depreciation was allowable under section 32". This claim did not find favour with the Assessing Officer or with the Commissioner (Appeals) but when the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act the accounting treatment of a payment per se cannot govern its treatment in the income-tax proceedings. Even if an amount is termed as Goodwill in the books of account but it is a business or commercial rights in the nature of know-how, patent, copyrights, trade marks, licences, franchises, the claim of depreciation is indeed admissible thereon. It is not that goodwill is specifically excluded from the intangible assets eligible for depreciation, and, therefore, even if an asset is described as goodwill but it fits in the description of section 32(1)( ii ), depreciation is to be granted on the same; the true basis of depreciation allowance is the character of the asset not it s description. Learned Departmental Representative has also justified the action of the learned Commission by arguing that necessary enquiries were not made, but then as is held by Hon ble Punjab Haryana High Court in the case of CIT v. Jagadhari Electric Supply Industrial Co. [1983] 140 ITR 490 , while examining the validity of a revision order under section 263, Tribunal cannot substitute the ground on which the Commissioner has based his order. The very foundation of learned Commissioner s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is well settled in law that when Assessing Officer takes a possible view of the matter on merits, his order cannot be subjected to review merely because other view is possible, as held by the Hon ble Supreme Court in the case of CIT v. Malabar Industrial Co. Ltd. ( 243 ITR 83)." 11. We are in considered agreement with the views of the Co-ordinate Bench. As for learned Departmental Representative s contention that the Commissioner cannot be a silent spectator to such a wrong grant of depreciation and that the Commissioner must safeguard the interests of the Revenue, all we can say is that, on the facts of the present case and particularly when the learned Commissioner has withdrawn depreciation on goodwill on the ground that such a claim is patently inadmissible, we are unable to approve his stand on merits and we must also follow the Co-ordinate Benches which have decided the same issue, on materially identical facts, in favour of the assessee. Learned Departmental Representative s reliance on decisions in the cases of Swarup Vegetable Products Industries Ltd. (No. 1) v. CIT [1991] 187 ITR 412 (All.) and Ranbaxy Laboratories Ltd. v. Addl. CIT [2008] 110 ITD 428 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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