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2016 (5) TMI 151 - ITAT MUMBAI

2016 (5) TMI 151 - ITAT MUMBAI - TMI - Depreciation on goodwill - Held that:- The issue whether goodwill is an capital asset coming within the term intangible asset as provided u/s. 32(1)(ii) of the Act is no more res integra in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT ), wherein after interpreting the explanation (3) to section 32(1) held that “goodwill would fall under the expression any other business or c .....

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he assessee of ₹ 4,13,56,352/- is obviously on account of goodwill. Even accepting that such amount is a balancing figure but still it being in the nature of goodwill, the assessee is eligible to claim depreciation. Further it is also in accordance with the accepted accounting principle and Accounting Standard as brought on record by the learned counsel for the assessee. Even otherwise such balancing figure is on account of goodwill. - Decided in favour of assessee.

Allowance of .....

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y considering additional evidence brought on record. The learned counsel for the assessee had submitted before us that the amount claimed towards distribution expenses which are subject matter of ground nos. 2 & 3 are also part of the expenditure claimed for A.Y. 2006-07. The aforesaid factual aspect has not been opposed or disputed by the learned DR. Considering the fact that similar issue has arisen in A.Y. 2006-07, which is pending for adjudication before the CIT(A), we deem it proper to remi .....

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that though the AO accepts the fact that the Hon’ble Jurisdictional High Court has decided the issue in assessee’s favour for A.Y. 2003-04, but stating that the department has preferred an SLP in the case of Star Plus India Pvt. Ltd. before the Hon’ble Supreme Court has disallowed a part of the advertisement and sales promotion expenses amounting to ₹ 2,75,75,739/-. In our view, this is not a valid ground to disallow part of the expenditure when the issue has been decided in favour of the .....

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Irani For the Respondent : Shri Airiju Jaikarau ORDER Per Saktijit Dey, Judicial Member These cross appeals by the assessee and the department are against the order dated 16.10.2012 of learned CIT(A)-3, Mumbai pertaining to A.Y. 2008-09. 2. Ground no.1 is against the disallowance of claim of depreciation of ₹ 69,53,343/- on goodwill. Briefly stated, the assessee, an Indian company, is engaged in the business of marketing of advertising air time, distribution of television channels and pro .....

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,44,00,309/- against which the assessee paid total consideration of ₹ 4,13,53,652/- to Network18. As per the agreement, the additional amount of ₹ 69,55,343/- paid to Network18 was on account of goodwill. Though, in the original return of income filed for the assessment year the assessee had not claimed depreciation on the amount of ₹ 69,53,343/- paid to Network18 towards goodwill, but in the course of assessment proceedings the assessee vide letter dated 8.11.2011 put its clai .....

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ideration and fixed assets plus current assets of the assessee is termed as goodwill. He therefore, disallowed assessee s claim of deduction towards depreciation. Being aggrieved with such decision of the AO, the assessee preferred appeal before the CIT(A). The learned CIT(A) while concurring with the aforesaid reasoning of the AO also held that assessee s claim cannot also be allowed as it is not made through a revised return u/s. 139(5). 4. The learned counsel for the assessee taking us throug .....

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of the business as per balance sheet. He submitted, business consideration as per terms of the agreement would mean the complete sale consideration of ₹ 1,76,89,500/- (US $ 4,50,000/-). The learned counsel submitted, when the net current asset value of the company is ₹ 2,36,64,152/- along with fixed assets of ₹ 1,07,36,157/- amounts to ₹ 3,44,00,309/- the balance of ₹ 69,53,343/- has to be on account on goodwill. The learned counsel submitted, when the AO has not d .....

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case of CIT vs. Smifs Securities Ltd. (2012) 24 taxmann.com 222 and the decision of Hon ble Delhi High Court in the case of Areva T & D India Ltd. vs. DCIT [2012] 20 taxmann.com 29. The learned counsel submitted, in the aforesaid two decisions, the Hon ble Courts have also addressed the issue of claim of depreciation on balancing figure as alleged by the AO. As far as the observation of the CIT(A) that assessee s claim cannot be allowed as such claim was not made through the revised return, .....

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ct is no more res integra in view of the decision of the Hon ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (supra), where the Hon ble Apex Court after interpreting the explanation (3) to section 32(1) held that goodwill would fall under the expression any other business or commercial right of a similar nature and, hence has to be considered as a asset under Explanation (3b) to section 32(1). Same view has been expressed by Hon ble Delhi High Court in the case of Areva T & D .....

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amount towards goodwill but is a balancing figure. In this context, on a reference to the business transfer agreement it is seen that the assessee has acquired business from Network 18 as a going concern. As per the meaning of business under the business transfer agreement it will also include business goodwill and business IPR. Similarly, net current asset value would mean the value of net current asset of the business as per the balance sheet. Thus, if we examine the facts of the case with re .....

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he assessee is eligible to claim depreciation. Further it is also in accordance with the accepted accounting principle and Accounting Standard as brought on record by the learned counsel for the assessee. Even otherwise, in the decision referred to above, the Hon ble Courts have held that such balancing figure is on account of goodwill. Thus, the assessee is entitled to claim depreciation. As far as the finding of the learned CIT(A) that as assessee has not made the claim through revised return .....

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allowance of distribution expenses of ₹ 28,23,279/- and ₹ 20,47,237/- disallowed in the A Y 2006-07 on account of non-deduction of tax u/s. 40(a)(i) in AY 2006-07. Briefly, the facts are in the AY 2006-07, the assessee had claimed distribution expenses of ₹ 5,55,28,565/- on account of payment made to MTV Asia and other channels. The AO on referring to the assessment made in case of MTV Asia found that the distribution revenue received was in the nature of royalty as per India .....

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ssessee was liable to deduct tax at source on the entire amount of ₹ 5,55,28,565/- paid towards royalty but out of which the assessee had not deducted tax on amount of ₹ 2,23,04,019/- hence, same is liable to be disallowed u/s. 40(a)(i). The learned CIT(A) also upheld such disallowance. Being aggrieved of the order of the CIT(A) the assessee carried the matter in appeal before the ITAT. The Tribunal, taking note of the fact that the additional evidence brought on record by the assess .....

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wed in AY 2008-09 wherein the expenses were also reversed, remitted the matter back to the file of the CIT(A) for considering afresh. The learned counsel for the assessee submitted before us that in view of the decision of the Tribunal for A.Y. 2006-07, the matter relating to distribution expenses may be remitted back to the file of the CIT(A) for deciding afresh along with A.Y. 2006-07, which is still pending before him. The learned DR has no objection if the issue is remitted back to the CIT(A .....

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hearing before the Tribunal the assessee made a specific claim that either they have to be allowed in A.Y. 2006-07 or in A.Y. 2008-09. Considering such claim of the assessee, the Tribunal remitted the matter back to the file of the AO for deciding assessee s claim afresh by considering additional evidence brought on record. The learned counsel for the assessee had submitted before us that the amount claimed towards distribution expenses which are subject matter of ground nos. 2 & 3 are also .....

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nd no.4 being consequential is not required to be adjudicated at this stage. Thus this ground is dismissed as infructuous. 10. In the result, the assessee s appeal is partly allowed. ITA 265/Mum/2013 for A.Y, 2008-09 11. The only issue raised in the departmental appeal pertains to deletion of addition of ₹ 2,79,26,769/- made by the AO on account of advertisement and sales promotion expenses. 12. Briefly stated, the assessee during the year claimed expenditure of ₹ 6,06,60,269/- on ac .....

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s to the AEs in India. He opined that there should not be any attempt on the part of the assessee to utilize the expenses to claim deduction which he would not have otherwise been eligible for. He stated that the assessee has debited advertisement and sale promotion expenses, which does not commensurate with the income. He also noted that this particular issue has been a matter of dispute from the preceding assessment year. Though he noted that the jurisdictional High Court has decided the issue .....

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