Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Asstt. Commissioner of Income Tax, Raigad Versus Johnson Matthey Chemicals India Pvt. Ltd. and Vica-Versa

Deduction u/s. 35D(2)(c)(iv) - CIT(a) allowed the claim - Held that:- It is a well settled law that the expenditure incurred on issue of fresh share and expansion of capital base is capital in nature. Thus, in view of the law laid down in the case of Brooke Bond India Ltd. Vs. Commissioner of Income Tax reported as [1997 (2) TMI 11 - SUPREME Court ] we are of the view that the Commissioner of Income Tax (Appeals) has erred in allowing deduction claimed by the assessee on expenditure for increasi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Held that:- Following the decision rendered in the case of Commissioner of Income Tax Vs. Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT ), the Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Birla Global Asset Finance Co. Ltd. (2012 (8) TMI 773 - BOMBAY HIGH COURT ) held that depreciation in respect of intangible assets constituting goodwill is allowable. - ITA No. 1317/PN/2010, ITA No. 7547/PN/2010 - Dated:- 1-1-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTH .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tha reforming catalysts and Gas reforming catalysts. For the impugned assessment year, the assessee filed return of income on 28-11-2003 declaring loss of ₹ 10,11,17,770/-. Thereafter, the assessee filed revised return of income on 29-10-2004 declaring loss of ₹ 9,54,93,860/-. The case of the assessee was selected for scrutiny and accordingly notice u/s. 143(2) was issued to the assessee on 25-11-2004. During the course of assessment proceedings, the Assessing Officer disallowed the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the case of Punjab State Industrial Development Corporation Ltd. Vs. Commissioner of Income Tax reported as 225 ITR 792 (SC): 93 Taxman 5 (SC). Aggrieved by the assessment order dated 28-02-2005, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the appeal of the assessee on account of claim of depreciation on goodwill and non-compete fees and confirmed the addition on both the counts. However, in respect of dis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

evenue in appeal has raised the solitary issue against allowing deduction of ₹ 6,03,900/- u/s. 35D(2)(c)(iv). The ground of appeal raised by the Revenue is as under: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A)-I, Thane has erred in allowing the deduction u/s. 35D(2)(c)(iv) of ₹ 6,03,900/- overlooking the fact that the assessee is a Pvt. Ltd. Co. and the expenditure has been incurred for issuing 4,19,90,000/- equity shares to M/s. Matthey Finance BV .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vour of the Revenue. The ld. DR placed reliance on the decision rendered in the case of Punjab State Industrial Development Corporation Ltd. Vs. Commissioner of Income Tax (supra). The ld. DR further submitted that a perusal of the provisions of section 35D(2)(c)(iv) would clearly show that such expenditure is not allowable. 5. On the other hand Shri P.J. Pardiwala and Basanti Patel appearing on behalf of the assessee vehemently supported the findings of Commissioner of Income Tax (Appeals) on t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

adjudicating this issue has held as under: 7. We do not consider it necessary to examine all the decisions in extensor because we are of the opinion that the fee paid to the Registrar for expansion of the capital base of the company was directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of a capital expenditure since the expenditu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

'ble Supreme Court of India later on in the case of Brooke Bond India Ltd. Vs. Commissioner of Income Tax reported as 225 ITR 798 (SC) after considering catena of judgments has reiterated the law laid down in the case of Punjab State Industrial Development Corporation Ltd. Vs. Commissioner of Income Tax (supra). The Hon'ble Apex Court in the case of Brooke Bond India Ltd. Vs. Commissioner of Income Tax (supra) has held : 6. Dr. Pal has, however, submitted that this decision does not cove .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ioner as well as before the Tribunal. It is no doubt true that before the Appellate Assistant Commissioner as well as before the Tribunal it was submitted on behalf of the assessee that the increase in the capital was to meet the need for working funds for the assessee company. But the statement of case sent by the Tribunal does not indicate that a finding was recorded to the effect that the expansion of the capital was undertaken by the assessee in order to meet the need for more working funds .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t would help in the business of the company and may also help in the profit making, the expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. Now, it is a well settled law that the expenditure incurred on issue of fresh share and expansion of capital base is capital in nature. Thus, in view of the law laid down by the Hon'ble Apex Court, we are of the view that th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sallowing depreciation claimed on payment of non-compete fees. In ground Nos. 4 to 6 the assessee has assailed the findings of Commissioner of Income Tax (Appeals) in disallowing depreciation claimed on goodwill u/s. 32(1)(ii). 9. The ld. AR submitted that during the period relevant to the assessment year under appeal the assessee had purchased catalyst business from M/s. ICI India Ltd. As part of takeover, the assessee paid a sum of ₹ 10,73,30,000/- on account of goodwill and ₹ 3,51 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nal Ind. Ltd., 227 Taxman 176 (Kar); ii. Serum Institute of India Ltd. Vs. Addl. Commissioner of Income Tax, 135 ITD 69 (Pune); iii. M/s. Schott Glass India Pvt. Ltd. Vs. DCIT, ITA No. 1698/Mum/2003 for the assessment year 1998-99 decided on 07-09-2011; and iv. Assistant Commissioner of Income Tax Vs. Real Image Tech. (P.) Ltd., 120 TTJ (Chennai) 983. In respect of claim of depreciation on goodwill the assessee placed reliance on the decision of Hon'ble Supreme Court of India in the case of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ies below in rejecting the depreciation claimed by the assessee on non-compete payment and goodwill. The ld. DR submitted that goodwill increase with the period of time in a growing business. It is only in the case where there is a sharp decline in the business, the value of goodwill may come down. In the case of assessee it is evident from the records that the assessee is having progressive business. Therefore, there is no question of goodwill getting depreciated. The ld. DR in support of is su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssioner of Income Tax Vs. Ingersoll Rand International Ind. Ltd. (supra). The decision of Hon'ble Delhi High Court in the case of CIT Vs. Hindustan Coca Cola Beverages P. Ltd. reported as 331 ITR 192 (Del) on which the Chennai Bench of Tribunal has placed reliance is on different set of facts. Therefore, the case laws on which the ld. DR has placed reliance will have no application. 12. We have heard the submissions made by the representatives of rival sides and have perused the orders of au .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nature of capital expenditure, depreciation is to be allowed on the non-compete fee as it constitutes a commercial or a business right under Sec. 32(1)(ii) of the Act? 13. The Hon'ble High Court after considering and discussing various judgments cited by the rival sides held as under: 7. Section 32 has been widened by the Finance Act No.2 (Act of 1998) whereby depreciation is allowed on intangible assets acquired on or after 1st April 1998. As per Sec.32(1)(ii), depreciation is allowable in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ises, but must be of similar nature as the specified assets. The fact that after 'the specified intangible assets', the words 'business or commercial rights of similar nature' have been additionally used, clearly demonstrates that the legislature did not intend to provide for depreciation only in respect of specified intangible assets, but also to other categories of intangible assets which were neither feasible nor possible to exhaustively enumerate. The words 'similar natur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o be seen is, what are the nature of intangible assets which would constitute business or commercial rights to be eligible for depreciation. In this regard, it is necessary to notice that the intangible assets enumerated in Sec.32 of the Act effectively confer a right upon an assessee for carrying on a business more efficiently by utilizing an available knowledge or by carrying on a business to the exclusion of another assessee. A non-compete right encompasses a right under which one person is p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

w, patents, copyrights, trade marks, licences, franchises is to carry on business against rivals in the same business in a more efficient manner or to put it differently in a best possible manner. The object of entering into a non-compete agreement is also the same ie., to carry on business in a more efficient manner by avoiding competition, atleast for a limited period of time. On payment of non-compete, the payer acquires a bundle of rights such as restricting receiver directly or indirectly p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for carrying on the business and therefore it is a business right. The word 'commercial'' is defined in Black's Law Dictionary as related to or connected with trade and commerce in general', 'commerce' is defined as 'the exchange of goods, productions or property of any kind; the buying, selling and exchanging of articles'. A right by way of non-compete is acquired essentially for trade and commerce and therefore it will also qualify as a commercial right. A r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of non-compete fee, the businessman gets his right what he is practically getting is kind of monopoly to run his-business without bothering about the competition. Generally, non-compete fee is paid for a definite period. The idea is that by that time, the business would stand firmly on its own footing and can sustain later on. This clearly shows that the commercial right comes into existence whenever the assessee makes payment for non-compete fee. Therefore that right which the assessee acquire .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e interpreted in such a way that it would have some similarities as other assets mentioned in Cl.(b) of Expln.3. Here the doctrine of ejusdem generis would come into operation and therefore the non-compete fee vests a right in the assessee to carry on business without competition which in turn confers a commercial right to carry on business smoothly. When once the expenditure incurred for acquiring the said right is held to be capital in nature, consequently the depreciation provided under Sec.3 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee are allowed. 14. The next issue raised in the appeal of the assessee is with regard to disallowance of depreciation claimed on goodwill u/s. 32(1)(ii) of the Act. In the case of Commissioner of Income Tax Vs. Smifs Securities Ltd. (supra) one of the question before the Hon'ble Apex Court for adjudication was: Whether goodwill is an asset within the meaning of section 32 of the Income Tax Act, 1961, and whether depreciation on goodwill is allowable under the said section? The Hon'bl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pril, 1998, assets and liabilities of YSN Shares & Securities (P) Ltd were transferred to and vest in the company. In the process goodwill has arisen in the books of the company." It was further explained that excess consideration paid by the assessee over the value of net assets acquired of YSN Shares and Securities Private Limited [Amalgamating Company] should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards the reputation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

[b] intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature." Explanation 3 states that the expression asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) [ CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     Latest Happenings     ↓  

Notification: Exempt certain supplies to NPCIL.

Notification: Seeks to amend notification No. 12/2017-CT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017

Notification: Seeks to amend notification No. 11/2017-CT(R) to reduce CGST rate on specified supplies of Works Contract Services.

Forum: 3B mistake

Forum: Excise duty credit on finished stock at additional place of business.

Forum: Input tax credit

Forum: Cess paid instead of SGST

Forum: Manpower Service provider

Forum: Construction of single unit bungalow

Forum: Duty Drawback & Input Credit - under GST

Article: SIMPLIFIED E-WAY BILL UNDER GST

Article: SERVICES UNDER REVERSE CHARGE UNDER GST REGIME

Highlight: Rate of exchange of conversion of the foreign currency with effect from 22th September, 2017 - Notification

Highlight: Companies (Acceptance of Deposits) Second Amendment Rules, 2017 - Notification

Highlight: Implementing Electronic Sealing for containers by exporters under self-sealing procedure prescribed by Circular 26/2017-Cus dated 1st July, 2017 and Circular 36/2017 dated 28 th August, 2017. — reg. - Circular

Highlight: Amendment to Paragraph 2.72 (b) of the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20 - Public Notice

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Circular: Amendment to Paragraph 2.72 (b) of the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20

Notification: Companies (Acceptance of Deposits) Second Amendment Rules, 2017

Notification: Rate of exchange of conversion of the foreign currency with effect from 22th September, 2017

News: Exchange Rate of Foreign Currency Relating To Imported and Export Goods Notified

Circular: Promote the officers of the Indian Revenue Service (Customs and Central Excise) to the grade of Principal commissioner of customs, GST & CX

Circular: Allocate the charges amongst the Members of the Central Board of Excise and Customs

Circular: Strategy for audits in 2017-18 consequent to GST - Audit by Central Excise and service Department to continue for the accounting year 2016-17 and for the past period

Circular: Appoint the IRS (C&CE) officers as Principal Commissioner (Revision Application) and ex-officio Additional Secretary

Circular: Time limit for filing intimation for composition levy under Rule 3(1) of the CGST Rules, 2017 extended to 16-8-2017

Circular: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017

Circular: C.B.E. & C. Advisory on Customs related matters on introduction of Goods and Services Tax regime

Circular: List of Reduced Tax Liabilities under GST regime in comparison to present combined Indirect Tax rates

Circular: Works Contract for construction of Flats, Complex — Builders to pass on GST benefit to buyer otherwise anti-profiteering provisions of Section 171 of GST Act to apply

Circular: Clarification regarding applicability of section 16 of the IGST Act, 2017, relating to zero rated supply for the purpose of Compensation Cess on exports – Regarding.

Circular: Clarification on Inter-state movement of various modes of conveyance, carrying goods or passengers or for repairs and maintenance- regarding

News: RBI Reference Rate for US $

Highlight: Addition u/s 23(1)(a) - deemed rent - once the property is let out and at any point of time this remained vacant during the same cannot be brought to tax under the head House properties income.

News: Haryana constitutes screening committee on anti-profiteering

Highlight: Valuation of imported goods - it is necessary to re-examine the matter of both license agreement as well as supply contract simultaneously, to see if the enhanced royalty was in the guise of adjustment of the price of components.

Notification: Levy of anti dumping duty on New/unused pneumatic radial tyres with or without tubes and/or flap of rubber (including tubeless tyres) having normal rim dia code above 16 originating in, or exported from China PR

Highlight: Cenvat credit availed on Club Membership for the Director is not admissible as it cannot be said to be remotely connected with the activity of manufacture

Circular: Amendments in Hand Book of Procedures 2015-20 –reg.

News: Jaitley asks biz not to wait till last day to file GST returns

Circular: Implementing Electronic Sealing for containers by exporters under self-sealing procedure prescribed by Circular 26/2017-Cus dated 1st July, 2017 and Circular 36/2017 dated 28 th August, 2017. — reg.

Article: 20 Things You must know about E Way Bills in GST Law

Article: ‘DUTY DRAWBACK’ CANNOT BE EQUATED WITH ‘REBATE OF DUTY’

Highlight: Notification regarding GST rate for branded cereal, pulses and flour

News: Notification regarding GST rate for branded cereal, pulses and flour

Highlight: Anti-dumping duty on import of bus/truck tyres from China

Highlight: Cabinet approves Extension of time period of the Scheme "Special Industry Initiative for J&K" (Sll J&K) - Udaan

Highlight: Non-payment of service tax - maintenance and repair charges - appellants had knowingly and deliberately shown the repair charges as job work charges to mislead about their taxability - demand confirmed.

Highlight: BAS - execution of the project of smart card for vehicle registration – implementing the SOC-VRC project - The fact that the Government has outsourced some part of the work and paid certain consideration for such outsourced work, does not make the activity subject to service tax.

News: Cabinet approves Extension of time period of the Scheme "Special Industry Initiative for J&K" (Sll J&K) - Udaan



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version