TMI Blog2013 (8) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years and the figure of goodwill is coming from the previous balance sheet - Addition of the words “business or commercial rights of similar nature” after the specified intangible assets clearly demonstrates intention of Legislature to provide depreciation to other categories of intangible assets which are not exhaustively enumerated. It is observed that in case of the assessee, intangible assets being Business claims; business information; business records; contracts; skilled employees; knowhow were invaluable and resulted in carrying on the transmission and distribution business by the assessee, without any interruption - Therefore, 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) and were accordingly eligible for depreciation. It is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation u/s 32(1)(ii) – Following decision of AREVA T & D INDIA LTD. Versus THE DEPUTY COMMISSIONER OF INCOME-TAX [2012 (4) TMI 79 - DELHI HIGH COURT] - Decided in favor of assessee. Disallowance u/s 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the relief as per grounds of appeal above may kindly be allowed to him and the appellant craves leave to add, amend, alter, chance, substitute, vary or raise any additional ground(s) of appeal if it becomes necessary to do so in the interest of justice either at the or before the date of hearing. 3. Apropos disallowance of Rs. 2,29,300/- on account of fee paid to the Registrar of Companies. In this case Assessing Officer noted that from the perusal of the records, it was found that a sum of Rs. 2,29,300/- paid as fee to ROC has been debited to the profit and loss account under the head "Rates and Taxes". Assessing Officer observed that the amount was paid for increase in authorized share capital. He held that the fee for increase in authorized share capital was capital in nature, as per the decisions of the Hon'ble Apex Court in the case of Punjab State Industrial Development Corporation Ltd. vs. C.I.T. [1997] 225 ITR 792 and Brooke Bond India Ltd. vs. C.I.T. [1997] 225 ITR 798. 4. Upon assessee's appeal Ld. Commissioner of Income Tax (A) referred to several case laws and affirmed the Assessing Officer's action. As regards assessee's alternative claim that amortization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As regards the nature of asset, the Assessing Officer has made elaborate discussion of the nature of goodwill as in intangible asset. The Assessing Officer noted that goodwill remains insubstantial in form and nebulous in character. Distinguishing it from other intangible assets mentioned in section 2(11) comprising knowhow, patents, copyrights, trademarks, licenses, franchises or any other business of commercial rights of a similar nature, the Assessing Officer opined that unlike these assets goodwill may or may not depreciate in value. In a progressing business, goodwill may increase and in a declining business it may decline. There being no certainly as to the erosion in value of goodwill with passage of time, the legislature chose not to include goodwill in the list of intangible assets when providing for depreciation on such assets in Finance Bill 1998-99. The exclusion of goodwill from the list of intangible assets despite being the oldest and foremost example of intangible assets clearly indicates that it was not the intent of Legislature to extend the benefit of depreciation to goodwill. The Assessing Officer was of the view that the provision of the Statute must be under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of ACIT vs. Jagdish C. Sheth [2006] 101 ITD 0360. He observed that in both these judgements, ITAT held that strict construction has to be applied to the provisions of section 32(1)(ii) and goodwill does not come under the expression of any other business or commercial rights in the nature similar to knowhow, patents, copyright, etc. and, therefore, deprecation on the ground of goodwill is not allowable. Accordingly, Ld. Commissioner of Income Tax (A) affirmed the disallowance made by the Assessing Officer . 9. Against the above order the Assessee is in appeal before us. 10. We have heard the rival contentions in light of the material produced and precedents relied upon. Ld. Counsel of the assessee submitted that the Assessing Officer has failed to appreciate the real facts due to which the amount was treated as 'goodwill' in the books of accounts of the assessee. This amount came into existence on account of the fact that the existing running unit was transferred by Minda Industries Ltd. to this newly formed company i.e. the assessee for a consolidated consideration of Rs. 2.75 crores and the difference between the net value of assets, which assets were recorded at boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that the Assessing Officer has relied upon the judgement of the Mumbai High Court in the case of C.I.T. Vs. Techno Shares and Stocks Ltd. He submitted that the said judgement of the High Court of Mumbai has been reversed by the Hon'ble Supreme Court as reported in 327 ITR 323. Therefore, the Ld. Counsel of the assessee submitted that the claim of depreciation made by the assessee were perfectly in order and in consonance with the judgements of the jurisdictional High Court and the Hon'ble Supreme Court of India. 10.3 Ld. Departmental Representative on the other hand, relied upon the orders of the Assessing Officer and Ld. Commissioner of Income Tax (A). She submitted that the case laws referred by the ld. Counsel of the assessee were distinguishable on the facts of the case. Ld. Departmental Representative referred to the following decisions for the proposition that goodwill on depreciation is not allowable. i) Borkar Packaging (P) Ltd. vs. ACIT - (2010) 131 TTJ 99. - ITAT, Panaji Bench. ii) Chowgule Co. (P) Ltd. vs. ACIT - {2011] 131 ITD 545 - ITAT, Panaji 10.4 We have carefully considered the submissions and perused the records. We find that the figure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 32(1)(ii)." The Hon'ble Delhi High Court has further held as under: - "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), it is seen that such rights need not answer the description of 'know-how, patents, trademarks, licenses or franchises' but must be of similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred in section 32(1)(ii) preceding the term 'business or commercial rights of similar nature - it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words 'business or commercial rights of similar nature' have been additionally used, clearly demonstrates that the legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer noted that assessee company has paid the sister concern M/s Minda Industries Ltd. [covered u/s. 40A(2)(b)] professional charges of Rs. 48,22,346/-. The company was asked to justify the payments. Assessing Officer noted that only explanation or reply filed by the assessee company dated 20.8.2008 reads as under:- "The payment was made towards the management services such as corp. planning and fin. Department, legal and secretarial dept. direct and indirect taxation, audit and finalization of accounts" 11.1 Assessing Officer noted that the above were not supported by any evidence or documents whatsoever as to how these arrangement of sharing of technical personnel / professionals with Minda Industries Ltd. is designed and operated and how costs have been distributed across sister concerns. Assessing Officer held that from the submissions of the assessee it is absolutely unclear as to why this payment can be allowed. Firstly, as a business expense and secondly as reasonable payment made to sister concern u/s. 40A(2)(b) for services rendered. Hence, the claim of Rs. 48,22,346/- as professional charges was disallowed. 12. Before the Ld. Commissioner of Income Tax (A) assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not produced any details either at the assessment stage or at the appellate stage, he found no reason to interfere with the findings of the Assessing Officer. 13. Against the above order the Assessee is in appeal before us. 14. We have heard the rival contentions and perused the records. Ld. Counsel of the assessee submitted that expense has been properly incurred. Ld. Counsel of the assessee placed reliance upon the following cases laws:- i) 2011-TII-18-Hon'ble High Court -DEL-INTL in the case of C.I.T. vs. M/s Nestle India Ltd. 337 ITR 103 ii) Delhi High Court in the case of C.I.T. Vs. Samsung India Electronics Ltd. 2011-TIOL-313-Hon'ble High Court -DEL-ITAT iii) Punjab and Haryana High Court - C.I.T. vs. Siya Ram Garg (HUF) [2011] 237 CTR 321. iv) Delhi High Court - in C.I.T. vs. Gautam Motors 184 Taxman 21 (Del.) v) Delhi High Court - in C.I.T. vs. Modi Revlon (P) Ltd. - 210 Taxman 161 (Mag. Section) 15. Ld. Counsel of the assessee in this regard further submitted that assessee and Minda Industries Ltd. are taxable at the same rate and therefore there was no motive to avoid the payment of any taxes; that there was no intention to evade taxes; that Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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