TMI Blog2014 (10) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... ints, specifications etc. to come within the ambit of know-how - the know-how is mainly with reference to industrial manufacturing process and not with reference to any innovative technique allegedly developed by the managing director of assessee company for better imparting of education to children - The assessee's claim, inter alia, is that academic gadgets developed by it constitute 'know-how' - since imparting of education in school cannot be equated with the information or technique helping in industrial manufacturing, we are of the opinion that technical know-how in the books of assessee acquired from M/s Little Kingdom Edutech Ltd. cannot be held to be entitled for depreciation in view of statutory provisions of section 32 – Decided against assessee. Penalty u/s 271(1)(c) – Inaccurate particulars furnished or not - Held that:- All the facts were accurately disclosed by assessee and the depreciation had been claimed treating the same as technical know-how - It is only because of difference of opinion on the scope of term 'know-how' as per Explanation 4 to section 32 that the assessee's claim was not accepted - assessee's claim was bona fide inasmuch as in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired running business of Little Kingdom Edutech Ltd.. The assessee company had acquired along with other assets technical know-how amounting to ₹ 4,75,00,000/- which also included software/ academic/ technical gadgets. The assessee company used various accounts of academic/ technical gadgets to equip and groom the child to take up the challenges of admission to reputed schools along this a proper emphasis was being put on child's mental and physical growth. (ii) In order to meet the requirements of such development, the assessee company had developed very innovative and technical academic gadgets and other techniques whereby the child can easily learn all these difficult things in a playful manner. (iii) In sum and substance the contention was that technical know-how consisted of academic gadgets as well as techniques developed over a period of time for imparting education through innovation and to lay the right foundation for the little kids by the founder of nursery school. 2.3. The assessing officer, after considering assessee's explanation pointed out that a partnership firm, Little Kingdom Nursery School, consisting of two partners, namely, Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence on record to indicate that any software was earlier purchased by the firm or developed by the founder in earlier years. He further pointed out that good-will and software were two separate assets and could not be matched in any way with the technical know-how. Further, he pointed out that evidently assets on which depreciation @ 25% is admissible on intangible assets as per Rule 5, does not include goodwill and software. The assessing officer pointed out that during the year assessee had purchased software worth ₹ 35,100/- on which depreciation had been claimed and allowed separately. Further, assessee had claimed depreciation on computers, gadgets and toys, education aid, music system etc., which were used by the school. He, therefore, disallowed the assessee's claim of depreciation of ₹ 1,18,75,000/-. The assessing officer determined the income at ₹ 21,37,110/-. 2.7. Ld. CIT(A) dismissed the assessee's appeal for the following reasons: (i) Changing the status of the same business under the same management appeared to be a decision with ulterior motives. (ii) The 'goodwill' and 'software developed' shown as an intangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT 301 ITR (AT) 1 (Del.)(SB) - Areva T D India Ltd. Vs. DCIT 345 ITR 421 (Del.); - CIT vs. Smifs Securities Ltd. 348 ITR 302 (SC); 3.1. As regards Goodwill , ld. Counsel submitted that this is an intangible assets and accordingly eligible for depreciation @ 25% for which relied on following decisions: - B. Raveendran Pillai Vs. CIT 237 CTR (Ker) 80; - Hindustan Coca Cola Beverages (P) Ltd. Vs. DCIT 132 TTJ (Del) 602; - The A.P. Paper Mills Ltd. Vs. ACIT 128 TTJ (Hyd.) 596. - Kotak Forex Brokerage Ltd. Vs. ACIT (2009) 33 SOT 237 (Mum.); - CIT Vs. Hindustan Coca Cola Beverages (P) Ltd. Vs. 331 ITR 192 (Del.); - CIT Vs. Ahmed Hussain Dildar Hussain 229 ITR 169 (All.); 3.2. Ld. Counsel also relied on following decisions for the meaning of technical know-how: - CIT vs. Elecon Engg. Co. Ltd. 96 ITR 672 (Guj.); - CIT Vs. Festo Elgi (P) Ltd. 129 ITR 499 (Mad.); - CIT Vs. Kar Valves Ltd. 204 ITR 490 (Ker.); - CIT Vs. Hindustan Insecticides Ltd. 253 ITR 520 (Del.); - Skyline Caterers (P) Ltd. Vs. ITO 116 ITD 348 (Mum). 3.3. In the alternative, ld. Counsel submitted that the whole amount sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oilwell or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). 5.2. In view of above statutory provision, we have to examine whether the assessee's claim come within the ambit of the expression know-how or not because in respect of other intangible assets the assessee has to specifically acquire them. Therefore, we have to confine only to the definition of knowhow. The definition of know-how clearly contemplates that some specific technique is to be developed which can assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits. 5.3. Hon'ble Gujarat High Court in the case of CIT Vs. Elecon Engg. Co. Ltd. 96 ITR 672 has observed as under: Know-how is a peculiar kind of assets. It is the accumulated fund of knowledge acquired by years of observation, research, experimentation and experience. The whole of it is not in an intangible form even while it is in the process of being acquired and very often it takes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the assessee's claim for depreciation on technical know how. 9. In the result, assessee's appeal is dismissed. 1881/Del/2011 ( penalty appeal u/s 271(1)(c) - A.Y. 2002-03): 10. Before assessing officer the assessee had submitted that penalty was not imposable as there was no concealment on the part of the assessee as all the facts were disclosed in the return of income. However, assessing officer did not accept the contention of the assessee and held that assessee had filed inaccurate particulars of income. 11. In first appeal, ld. CIT(A) deleted the penalty for the following reasons: (i) The assessee's conduct and the explanation offered showed that there was no conscious or intentional act of assessee to conceal or furnish inaccurate particulars of income. (ii) It is not the case of the assessing officer that concealment of income or inaccurate furnishing of income was detected by him during the assessment proceedings. This clearly implied that there was only difference of opinion on the relevant issue and therefore penalty was not leviable. He further pointed out that in view of controversy surrounding eligibility of claim of depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income . We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369] ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
