TMI Blog2015 (2) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer by an order dated 28th January, 2005 passed under Section 143(3) of the Act in regular assessment proceedings allowed the claim for depreciation on Non-compete fees. In fact, the order dated 28th January, 2005 passed in regular assessment proceedings specifically discusses the Petitioner's claim for depreciation and disallows the excess depreciation claimed on buildings at 10% to the extent it is in excess of the prescribed 5%. This would be further evidence of the Assessing Officer having applied his mind to the depreciation claimed by the Petitioner in respect of its block of assets. Hence, it is clear that the reason recorded in support of the impugned notice seeking to deny depreciation on Non-compete fees has been issued on account of change of opinion. Thus, it lacks reasonable belief. Consequently, the impugned notice is not sustainable. There has been a change of opinion, is evident from the fact that for earlier assessment years as well as for subsequent assessment years, the depreciation has been allowed in respect of Non-compete fees as a part of block of assets, claiming depreciation at 25%. Where facts and law are identical over different years, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as the tax payable under the normal provisions was nil, the Petitioner was brought to tax under Section 115JB of the Act. 5. On 30th March, 2007, the impugned notice was issued by the Assessing Officer, seeking to re-open the assessment for the Assessment Year 2002-03. The reasons as furnished to the Petitioner for re-opening of the assessment reads as under:- On verification of the records it is seen that while computing the income of the year assessee company deducted an amount of ₹ 35,62,404/- on account of interest capitalized in accounts. Detailed examination of records shows that the assessee had borrowed funds from State Bank of India towards financing the capital projects and capitalized the interest portion before the assets were put to use. However, in computing the income of the year the assessee decided not to claim depreciation on the interest capitalized but claimed it as revenue expenditure in computing the income. Under the existing provision of the section 43(1) of the I.T. Act, 1961 actual cost means the actual cost of the assets to the assessee. As per explanation-8 to section 43(1), where an amount is paid or payable as interest in conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it is an accepted position that the first ground in the reasons recorded in support of the impugned notice is not sustainable. 9. Similarly, the Counsel are agreed that depreciation on Goodwill stands covered by the decision of the Supreme Court in Commissioner of Income Tax v/s. Smifs Securities Ltd., 348 ITR 302 in favour of the Petitioner. Therefore, the second ground in the reason recorded in support of the impugned notice, as agreed, is not sustainable to the extent of Goodwill. 10. Therefore, the only controversy that is to be resolved between the parties is with regard to depreciation claimed on Non-compete fees as part of the second ground in the reasons in support of the impugned notice. 11. Mr. Jain, learned Counsel in support of the Petition submits as under:- (a) The impugned notice with regard to depreciation claimed on Non-compete fees is without jurisdiction. This is so as it has been issued only on account of change of opinion as the Assessing Officer had duly considered the same while passing an order under Section 143(3) of the Act in regular assessment proceedings; (b) This is further evident from the fact that depreciation in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue, is in applicable for Assessment Year 2002-03. This on the ground that the principle of res judicta is inapplicable in the tax matters. 13. We have considered the submissions. In this case, the assessment sought to be re-opened is less than four years from the end of the relevant Assessment Year. In such a case also, the primary conditions for invoking jurisdiction under Section 147/148 of the Act has to be satisfied. However, the additional condition viz. failure to disclose fully and truly all material facts necessary for assessments as provided in the proviso to Section 147 of the Act which applies in cases of re-opening of assessments for extended period i.e. of four years and beyond from the end of the relevant Assessment Years, need not be satisfied. The primary conditions to be satisfied for seeking to re-open an assessment within a period of four years is two fold i.e. one there must be reason to believe and two - income chargeable to tax must have escaped assessment. Therefore, even if the re-opening of assessment is within a period of less than four years from the end of the relevant assessment year, the aforesaid twin pre-conditions must be satisfied. Thus, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason recorded in support of the impugned notice seeking to deny depreciation on Non-compete fees has been issued on account of change of opinion. Thus, it lacks reasonable belief. Consequently, the impugned notice is not sustainable. 16. One more fact which establishes that there has been a change of opinion, is evident from the fact that for earlier assessment years as well as for subsequent assessment years, the depreciation has been allowed in respect of Non-compete fees as a part of block of assets, claiming depreciation at 25%. It is not the case of the Revenue that Noncompete fees on which depreciation is being claimed is not a part of the block of assets. Nor is it the case of the Revenue in the reasons recorded that the written down value of the block of assets has to be adjusted under Section 32(l) of the Act. Thus, depreciation is to be allowed on the written down value of block of assets. In fact on the above basis, the Tribunal has upheld the claim for depreciation on Non-compete fees for Assessment Years 2003-04, 204-05 and 2005-06. It is pertinent to note that Revenue had not filed any appeal from the order of the Tribunal for Assessment Years 2003-04, 2004-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
