TMI Blog2015 (7) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded that 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) of the Act and were accordingly eligible for depreciation and also confirmed by the Hon'ble Apex Court. Therefore, we are of the considered opinion that the ld. CIT(A) has rightly adjudicated the issue and we do not find any infirmity therein. Also see CIT vs. Manipal Universal Learning Pvt. Ltd. (2013 (7) TMI 169 - KARNATAKA HIGH COURT ) by holding that Explanation 3 to section 32(1) of the Act defines expression “asset” to include intangible asset like goodwill and goodwill is an asset under Explanation 3(b) to section 32(1) of the Act, therefore, depreciation is allowable even on the goodwill. - Decided against revenue. - ITA No.497 & 498/LKW/2010 - - - Dated:- 10-6-2015 - SHRI SUNIL KUMAR YADAV AND SHRI. A. K. GARODIA, JJ. For The Appellant : Dr. Anant Kumar Agrawal, CIT (DR) For The Respondent : Shri. Ajay Vohra, Sr. Advocate with Shri. Abhishek Agarwal, Advocate ORDER PER SUNIL KUMAR YADAV: These appeals are preferred by the Revenue against the respective orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares of the assessee to the existing shareholders of JKSL of ₹ 7.44 crores. Clause (E) of the scheme which was titled as rehabilitation strategy provided that merger of the cement undertaking of JKSL into the assessee as a going concern on as is where is basis including all fixed assets and current liabilities. Clause H(e) of the scheme contemplated that the assessee would issue one paid up equity share of phase value of ₹ 10/- free of cost to all the existing shareholders of JKSL against ₹ 10/- equity shares of JKSL held by them. 4. The assessee in its original return of income claimed depreciation of ₹ 72,32,58,987/-. The assessee, however, filed a revised return enhancing the claim of depreciation to ₹ 73,26,86,528/-. Consequently, additional amount of depreciation of ₹ 94,27,541/- was claimed. According to the assessee, the scheme envisaged allotment of equity shareholders of JKSL, which was debited to the goodwill account in the books of the assessee. The assessee submitted that the aforesaid amount of ₹ 7.44 crores forms part of purchase consideration and depreciation was allowable on it. The Assessing Officer vide his order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments of the Hon'ble Apex Court and various High Courts and in support of this proposition of law, he has placed reliance upon the judgment of the Hon'ble Apex Court in the case of CIT vs. Smifs Securities Ltd., 348 ITR 302 and the judgment of the Hon'ble Delhi High Court in the case of Areva T and D India Ltd. vs. DCIT, 345 ITR 421 which was later on approved by the Hon'ble Apex Court by dismissing the SLP filed by the Department; and the judgment of Hon'ble Karnataka High Court in the case of CIT vs. Manipal Universal Learning Pvt. Ltd., 359 ITR 369 which was also later on approved by the Hon'ble Supreme Court. 8. The ld. counsel for the assessee has further contended that since the findings of the ld. CIT(A) are in consonance with the judgments of the Hon'ble Apex Court and various High Courts, the same deserves to be confirmed and no interference is called therein. 9. Having carefully examined the orders of the lower authorities; documents filed and judgments referred to by the respective parties in the light of the rival submissions, we find that undisputedly the assesseecompany acquired the cement undertaking of JKSL, a going concern w.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of shares allotted to the shareholders of JKSL is considered as the payment of purchase consideration towards cost of acquisition to the cement undertaking, then the assessee is eligible for depreciation of the said cost. The dispute was raised that it is not a part of payment of purchase consideration towards cost of acquisition of cement undertaking. It was rather called to be the cost of goodwill which was transferred to the assessee. In this regard, we have carefully perused the judgments referred to by the parties. 11. In the case of R.G. Keswani vs. ACIT (supra) and DCIT vs. Toyo Engineering India Ltd. (supra), the Mumbai Benches of the Tribunal have taken a view that no depreciation would be allowed on goodwill, but the controversy with regard to the allowance of depreciation on goodwill has been set at rest by the Hon'ble Apex Court in the case of CIT vs. Smifs Securities Ltd. (supra) in which their Lordships have held that the difference between the cost of an asset and amount paid constituted goodwill and that the assessee-company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factual finding. One more aspect which needs to be mentioned is that, against the decision of the Income-tax Appellate Tribunal, the Revenue had preferred an appeal to the High Court in which it had raised only the question as to whether goodwill is an asset under section 32 of the Act. In the circumstances, before the High Court, the Revenue did not file an appeal on the finding of fact referred to hereinabove. For the aforestated reasons, we answer question No. (b) also in favour of the assessee. 12. In the case of Areva T and D India Ltd. vs. DCIT (supra), the Hon'ble Delhi High Court has examined this issue in the light of legal provisions of the Act and various judgments of the Hon'ble Apex Court and finally concluded that 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) of the Act and were accordingly eligible for depreciation. Their Lordships has further held that even in the alternative the assessee is entitled for depreciation. The facts of that case are quite similar to the facts of the present case and we extract the findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) to section 32(1) has to take colour from the preceding words know-how, patents, copyrights, trade marks, licences, franchises . It was urged that the Supreme Court had clearly held in Techno Shares and Stocks Ltd. [2010] 327 ITR 323 (SC) that Our judgment should not be understood to mean that every business or commercial right would constitute a licence or a franchise in terms of section 32(1)(ii) of the 1961 Act . In the present case, 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) of the Act. It is seen that such rights need not answer the description of know-how, patents, trade marks, licences 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 to in section 32(1)(ii) of the Act preceding the term business or commercial rights of similar nature , it is seen that the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that section. In view of the above, it is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation under section 32(1)(ii) of the Act. In the circumstances, the substantial question of law is decided in the affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside. 13. This judgment of the Hon'ble Delhi High Court was approved by the Hon'ble Apex Court as the SLP filed by the Department was dismissed on merit also. 14. Similar view was expressed by the Hon'ble Karnataka High Court in the case of CIT vs. Manipal Universal Learning Pvt. Ltd. (supra) by holding that Explanation 3 to section 32(1) of the Act defines expression asset to include intangible asset like goodwill and goodwill is an asset under Explanation 3(b) to section 32(1) of the Act, therefore, depreciation is allowable even on the goodwill. 15. Again in the case of CIT vs. Hindustan Coca-Cola Beverages (P) Ltd., 331 ITR 192, the Hon'ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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