TMI Blog2013 (9) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... pany was formed on 19.2.1999. In support a certificate of incorporation is placed on record. The goodwill was acquired by the assessee in the Assessment Year 1999-2000 when the firm, as a going concern, was taken over by the company/ appellant along with all the assets. – Held that:- Reliance has been placed upon the judgment in the case of B. Raveendran Pillai, [2010 (9) TMI 434 - Kerala High Court]. Wherein it has been held that goodwill is certainly comparable with trade mark, franchisee, copy right, etc., hence, entitled for the depreciation – Respectfully following this decision wherein the doctrine of ejusdem generic is applied and held that the Goodwill is of like nature of intangible asset as prescribed, therefore, hold that under the totality of the facts and circumstances of the case the assessee is entitled for the claim of depreciation on the DWV of the goodwill for the year under consideration – Decided in favor of Assessee. Disallowance of interest on advance made to sister concern - Interest of ₹ 2,12,507/-, being interest @ 12% on advances made to sister concern amounting to ₹ 17,70,891/- - Interest free deposits to the tune of ₹ 204.04 were ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able as the same is not a depreciable asset. In these circumstances, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-Tax Act, 1961. 2.2 Thereafter, a notice u/s. 148 was issued on 10th of March, 2010, stated to be duly served upon the assessee. In compliance, the assessee vide a letter dated 22nd of March, 2010 had asked to give a copy of the reasons recorded for reopening of the assessment. Accordingly, the assessee was handed over the reasons recorded . The assessee's objection has also been entertained by the AO. An another fact has also been noted by us that although several notices were issued to the assessee but no compliance was made; hence, the impugned assessment order was passed u/s. 144 r.w.s 147 of IT Act, dated 6.12.2010. When this issue was carried before the first appellate authority, learned CIT(A) has considered the case of Kelvinator of India Ltd., 228 CTR 488 (SC) and Girdhar Gopal Gulati, 269 ITR 45 (Ald), as cited by the assessee, and thereafter held as under:- I have considered the appellant submissions. In this case, no assessment u/s 143(3) had been made, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. It was noted by the AO that the assessee has claimed depreciation of ₹ 2,60,289/- @ 25% on the WDV of the goodwill. According to the AO, as per the provision of Section 32 goodwill is not an asset on which depreciation is admissible. The AO has also placed reliance on Bharat T. Vyas, 97 ITD 248 (Ahd), wherein it was held that goodwill is not a right of similar nature as defined u/s. 32(1)(ii) of the Act. Resultantly, the claim of depreciation was disallowed. When the matter was carried before the first appellate authority, the action of the AO was confirmed in the following manner: I have considered the appellant's submissions. In the appellate order dated 23.08.2011 for the assessment year 2006-07 in appellant's own case in appeal No.CAB/III-124/10-11, I have held that the appellant is not eligible for depreciation on goodwill by stating as follows: So far as merit of the case is concerned the appellant has filed a detailed submission citing several case laws alongwith the copy of accounts. Along with the paper book filed by the appellant, the depreciation chart for the assessment year 1999-2000 has also been filed. A perusal of this dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by the company/ appellant along with all the assets. At the time of acquisition, the goodwill as an asset was purchased from the firm for a consideration of ₹ 24,67,926/-. Thereafter for A.Y. 1999-00, 2000-01 and 2001-02, the assessee company had claimed depreciation @ 25% as informed by learned AR, Mr. Sunil Talati. The WDV for the year under consideration is ₹ 10,47,157/- over which the depreciation @ 25% amounting to ₹ 2,60,289/- was claimed. On account of these facts, we hereby hold that the goodwill was acquired after 1st day of April, 1998 as required u/s. 32(1)(ii) of the Act. Now the only question left for our consideration is that whether goodwill can be considered for grant of depreciation. In this regard, a latest decision of Hon'ble High Court pronounced in the case of CIT Vs. SMIFS Securities, 348 ITR 302 is relevant wherein it was held as under: The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax, Act, 1961 ( the Act , for short). We quote hereinbelow Explanation 3 to section 32(1) of the Act: Explanation 3- For the purposes of this sub-section, the expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had advanced a sum of ₹ 17,70,891/- to its sister concern without charging any interest. On the other hand, the assessee had paid interest of ₹ 8,32,472/- on the secured and unsecured loans. The AO has calculated the interest @ 12% and added a sum of ₹ 2,12,507/- in the total income of the assessee by following the case of State Bank of Trovance, 158 ITR 102 (SC) and Western India Oil Distributing Co., 206 ITR 359 (Bom). When the matter was carried before the first appellate authority, the action of the AO was confirmed in the following manner: I have considered the appellant's submission and the AO's observations. In this case the AO has specifically asked the appellants to prove the nexus between the interest free advances made and the interest free fund available with the appellant. But the appellant has failed to do so. It has only filed general explanation regarding availability of interest free fund with it. Under such circumstances, the appellant's contentions are not acceptable. Hence the addition made by the AO is upheld and this ground dismissed. 11. From the side of the Revenue, learned DR has placed reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not emerging from the facts of the case. In our considered opinion, if the assessee is relying upon the theory of direct nexus then the onus is on the assessee to establish the same. Merely by stating that the funds are available, no practical purpose is served unless and until through bank statements it is established that the interest free funds have actually been disbursed to the sister concern. In certain precedents, even the Courts have held that if the assessee has sufficient interest free bank balance, other than interest bearing funds, then he has to prove that out of those interest free bank balance transferred the funds to a sister concern. In the absence of any direct evidence, we are affirming the findings of the Revenue Authorities. Further, we are also not inclined to intervene with the findings of the Revenue Authorities that the charge of interest @ 12% was reasonable. On both the counts, the ground raised by the assessee is hereby dismissed. 13. In the result, assessee's appeal is partly allowed. B. ITA 2296/Ahd/2012 (Revenue's Appeal) 14. Ground No.1 is reproduced below: On the facts and in the circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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