TMI Blog2014 (12) TMI 1059X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and employment thereafter with the assessee-company - the expenditure claimed by the assessee on higher education of the grand-daughter of the Managing Director of the assessee was not wholly and exclusively for the purpose of business of the assessee, the order of the CIT(A) is upheld – Decided against assessee. Depreciation on intangible assets disallowed – Intangible asset treated as goodwill – Held that:- The issue of allowance of depreciation on intangible asset in the form of “goodwill” is covered in favour of the assessee as held in Commissioner of Income-tax v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] – after going through the Memorandum of Transfer of Business, a copy of which has been filed in the compilation before us, which is dated 1.4.2001 wherein it is specifically provided that all the trade names, trade-marks, permits and licenses, goodwill and knowhow attached to the business carried on in India or elsewhere were transferred to the assignees i.e. the assessee-company - the goodwill is an intangible asset entitled to depreciation - The quantification of goodwill at ₹ 75 lakhs seems to be reasonable - The assessee has filed a copy of wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on disallowance of depreciation on goodwill, the disallowance itself has been deleted while deciding the quantum appeal of the assessee for the relevant AY 2004-05, thus, there remains no basis for imposition of penalty on the assessee - since the assessee has disclosed all the facts at the time of filing of the return itself, and claim of the assessee for depreciation on goodwill was bona fide, the penalty u/s 271(1)(c) could not be levied on the assessee – the order of the CIT(A) is upheld – Decided against revenue. - ITA No.3884/Ahd/2007, ITA No.870, 871, 872 and 873/Ahd/2010, ITA No.1846/Ahd/2010, ITA No.1600/Ahd/2010, ITA No.3288/Ahd/2011 - - - Dated:- 19-12-2014 - Shri G. C. Gupta And Anil Chaturvedi,JJ. For the Petitioner : Shri S.N. Soparkar with Shri J.M. Shah For the Respondent : Shri V.K. Singh, Sr.DR ORDER Per Bench: These appeals by the assessee and the Revenue for the different assessment years, are directed against the order of the CIT(A). These are being disposed of with this consolidated order. ITA No.3884/Ahd/2007 - Asstt.Year 2004-2005 (Assessee s appeal) 2. The ground no.1 of the appeal of the assessee is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no penalty clause in the MOU between the trainee and the assesseecompany that in case of failure of the trainee, what would be the penalty payable by the trainee to the assessee-company. He relied on the orders of the AO and the CIT(A). 5. We have considered rival submissions and have perused the orders of the AO and the CIT(A), and also contents of the MOU between the assessee-company and Payal N. Parikh (trainee) dated 9.8.2003, and also various decisions cited by the learned counsel for the assessee. We find that the decisions cited at bar on behalf of the assessee are distinguishable on facts. The learned counsel for the assessee could not controvert the submissions of the learned DR that it was an isolated case of sponsorship on higher education study given to a very close relative of the Managing Director of the assessee-company, and there is no such example during the relevant year or in the preceding or subsequent assessment years. We find that the AO has given amble opportunity to the assessee to lead evidence to justify the claim of the assessee, but the assessee has failed to avail the same. The Revenue has claimed that there was no resolution to this effect by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. He referred to the Memorandum of Transfer of Business, a copy of which has been filed in the compilation before us in support of his plea that the payment of goodwill for transfer of trade name, trademark, permits, licenses, goodwill and knowhow attached to the business carried on in India or otherwise was justified. He relied on the decision of the ITAT, Ahmedabad Bench in the case of Patel Printing Press Pvt. Ltd. Vs. ITO in ITA No.770 and 771/Ahd/2010 dated 8.3.2013 in support of his arguments. He relied on the decisions in Ashwin Vanaspati Industries v. Commissioner of Income-tax, 255 ITR 26 (Guj), Kotak Forex Brokerage Ltd. v. Assistant Commissioner of Income-tax, 33 SOT 237 (Mum) and ITAT, Ahmedabad s Third Member decision in Chitra Publicity Co. Pvt. Ltd., 127 TTJ 1 (Ahd)(TM) in support of the case of the assessee. 8. The learned DR has opposed the submission of the assessee. He submitted that the CIT(A) has passed a well reasoned order on this issue. He referred to para 4.1 onwards of the CIT(A) s order and submitted that whole scheme of affairs of capitalization of goodwill just prior to succession as structured series of transactions designed to evade taxes. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The order passed by CIT(A) is not dealing with all the objections makes the order in valid and bad in law. 12. The learned counsel for the assessee has not pressed this ground of the appeal of the assessee, which is accordingly dismissed. 13. The ground no.2 of the appeal of the assessee is as under: II. Disallowance of depreciation on goodwill ₹ 16,75,000/- 14. Both the parties before us submitted that the issue of depreciation on goodwill in this appeal is identical with the issue in the ground no.2 3 of the appeal of the assessee for A.Y.2004-05. We have considered rival submissions. In view of our decision while disposing of the ground no.2 and 3 in the assessee s appeal for A.Y.2004-05 in the foregoing paras of this order, we allow the ground no.2 of the assessee. ITA No.871/Ahd/2010 A.Y.2003-2004 (Assessee s Appeal) 15. The ground no.1 of the assessee is as under: 1. Invalid Bad order: The CIT(A) erred in not dealing with the grounds raised before him regarding invalid bad order. The order passed by CIT(A) is not dealing with all the objections makes the order in valid and bad in law. 16. The learned counsel for the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in this appeal is identical with the issue in the ground no.2 3 of the appeal of the assessee for A.Y.2004-05. We have considered rival submissions. In view of our decision while disposing of the ground no.2 and 3 in the assessee s appeal for A.Y.2004-05 in the foregoing paras of this order, we allow the ground no.2 of the assessee. ITA No.3288/Ahd/2011 A.Y.2007-2008 (Assessee s Appeal) 27. The ground no.1 of the assessee is as under: 1. Invalid Bad order: i) The CIT(A) erred in not accepting the contentions that the order is invalid bad: (a) As it is change of opinion only (b) As no notice u/s.143(2) was issued when time was available for issue of notice. (c) As no order is passed an accordance with the directions of the Supreme Court in GKN Drive Shaft (India) Ltd. ii)The order passed by CIT(A) is unjustified and bad on facts law. 28. The learned counsel for the assessee has not pressed this ground of the appeal of the assessee, which is accordingly dismissed. 29. The ground no.2 of the appeal of the assessee is as under: II. Disallowance of depreciation on goodwill ₹ 4,33,710/-; i) The CIT(A) erred in confirming disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have effected sales on behalf of the assessee-company, and the assessee company has paid commission at the rate of 1% of the sale amount, and necessary TDS was also made on the commission payments to various payees. He referred to the copy of the ledger account of the payees filed in the compilation by the assessee. 34. We have considered rival submissions and have perused the orders of the AO and the CIT(A), and also copy of various evidences filed by the assessee in its compilation before the Tribunal. We find that the payments were made to out-station parties per cheque. The commission was paid at the rate of 1% on the sale effected by these parties. The TDS as applicable was made at the time of making the payment of commission to the payees. Complete details of the payment of commission were maintained in the account books of the assessee. The assessee has also filed affidavits of the payees of the commission payment, copy of which has been filed in the compilation before us. The CIT(A) has recorded that the assessee has made a request to the AO to call for the concerned parties by issuing summons, but he has not considered this request. We find that the CIT(A) has rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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