TMI Blog2013 (1) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee TDS on Subscription for e-magazine/journal Disallowance u/s 40(a)(ia) Held that:- Assessee made the payment for terminal charges for on line information and data base access and retrieval services and therefore, no TDS was required to be deducted as the payment was for a subscription of financial e-magazine In favour of assessee - ITA. No. 2948/Mum/2010 And ITA. No. 4851/Mum/2010 - - - Dated:- 12-12-2012 - D.K. Agrawal And N.K. Billaiya, JJ. Vijay Mehta for the Appellant. Pravin Kumar for the Respondent. ORDER N.K. Billaiya, Accountant Member - These cross-appeals by the assessee and the Revenue are directed against the very same order of the CIT(A) dated 23-3-2010 pertaining to the assessment year 2006-2007. As both these appeals are directed against the very same order, both were heard together and disposed of by this common order for the sake of convenience and brevity. 2. ITA.No.2948/Mum/2010 : The assessee has challenged the correctness of the Order of the CIT(A) by raising three grounds of appeal. At the very outset, Counsel for the assessee stated that he is not pressing ground No.3. Accordingly, ground No.3 is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicited independent business. As such, the question of transfer of any good will does not exist. The Assessing Officer pointed out that M/s. AFC was the exclusive sub-broker of the assessee vide agreement dated 13.10.2000. Due to regulatory changes brought by SEBI vide its circular dated 26th August, 2004 M/s. AFC could not carry on the business of share broker for the assessee independently and therefore, the agreement between M/s. AFC and the assessee dated 13.10.2000 was automatically terminated. 6. It is the say of the assessee that M/s. AFC had no other option but to link its business with some other Member Broker and re-negotiate terms and conditions for further conduct of the business in the same line, while on the other hand, assessee saw this as an opportunity for development and expansion of its business. Therefore, the assessee paid Rs. 2.5 crores to acquire the independent clientele business of M/s. AFC and also allotted 7.25% share in the company. This arrangement prompted the Assessing Officer to conclude that acquisition of business of another entity is not acquisition of goodwill. 7. Coming back once again to the provisions of section 32 (1) (ii) i.e., claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of M/s. AFC comes to an end and its Promoter-Director works for the appellant company. The CIT(A), finally concluded that the payment is not for goodwill at all nor is the payment for any commercial right. Therefore, the claim of depreciation on the consideration of Rs. 2.50 crores is found to be baseless and confirmed the disallowance of Rs. 62,50,000/-. 9. Aggrieved by the findings of the CIT(A), the assessee is in appeal before us. The Counsel for the assessee strongly contended that the revenue authorities have misunderstood and misinterpreted the provisions of section 32(1)(ii) of the Act. The assessee has very much acquired an intangible asset from M/s. AFC by paying the consideration of Rs. 2.50 crores and rightly claimed depreciation @ 25% which is the allowable rate of depreciation as per the provisions of the Act. It is incorrect on the part of the revenue authorities to state that no goodwill has been purchased by the assessee. By paying Rs. 2.50 crores, the assessee has acquired a right to directly deal with 3709 clients of M/s. AFC which in itself is a commercial right eligible for depreciation. 10. Per contra, learned D.R. relied upon the Orders of the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. 32. Depreciation.--(1) In respect of depreciation of-- (i) buildings, machinery, plant or furniture being tangible assets ; (ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession the following deductions shall be allowed-- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed. (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed 13. A perusal of the above provision suggests that certain intangible assets on which depreciation could be claimed are - knowhow, patents, copy rights, trade marks, licenses, franchise or any other business or commercial rights of similar nature. This expression "any other business or commercial rights of similar nature" by itself would mean to include all kinds of commercial rights. The language ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners, the nature and character of the business, its name and reputation, its location, its impact on the contemporary market, the prevailing socio economic ecology, or introduction to old customers and agreed absence of competition. 17. Commercial rights gain significance in the commercial world as they represent a particular benefit or advantage or reputation built over a certain span of time and the customer associate with such assets. 18. It would not be out of place to highlight the views expressed by the Hon'ble High Court of Delhi in the case of AREVA T D India Ltd. v. Dy. CIT [2012] 345 ITR 421. "In the present case, applying the principle of ejusdem generis, which provides that where there are general words following particular and specific words, the meaning of the latter words shall be confined to things of the same kind, as specified for interpreting the expression "business or commercial rights of similar nature" specified in section 32(1)(ii) of the Act. It is seen that such rights need not answer the description of "know-how, patents, trade marks, licences or franchises" but must be of similar nature as the specified assets. On a perusal of the meaning of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that section." 19. The I.T.A.T. Mumbai "G" Bench in the case of Dy. CIT v. Weizman Forex Ltd. [2012] 51 SOT 525 observed that the definition of the asset which is a subject matter of the transfer consists of all contract, licenses, franchise, distribution network, customer lists, marketing strategies and software and when the intangible asset being commercial/business rights diminished in value or physical wear and tear is not an essential condition for admissibility for depreciation, if the asset is used as a business tool for earning income. 20. In the light of the above discussion, it is not in doubt or dispute that purchase of the clientele business by the assessee from M/s. AFC is a right which can be used as a tool to carry on the business. It can also be seen from the angle of purchase of entire marketing network by the assessee from M/s. AFC even if considered from this angle the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts which can suggest that the payment was liable for TDS. In that view of the matter and considering the fact that the payment is nothing but a subscription for e-magazine/journal we do not find any infirmity in the finding of the CIT(A) and we confirm the same. Ground No.1 is accordingly dismissed. 27. Ground No.2 relates to the decision of the CIT(A) who held that on the facts of the case provisions of section 2 (22) (e) are not applicable. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has received Rs.1.40 crores as loan from its related enterprise Nich Financial Services Ltd. The Assessing Officer observed that Rs. 1 crore was received on 17.3.2006 and Rs. 40 lakhs was received on 13.3.2006. The Assessing Officer also noticed that a similar addition was made in the immediately preceding assessment year. In view of the same, the Assessing Officer went on to treat the loan of Rs. 1.40 crores as deemed dividend and taxed as income from other sources. 28. When the matter was agitated before the CIT(A), the CIT(A) observed that similar issue was discussed in detail in the case of the assessee in assessment year 2005-2006 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X
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