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2016 (7) TMI 180 - ITAT DELHI

2016 (7) TMI 180 - ITAT DELHI - TMI - Depreciation on technical know-how - Held that:- The assessee company entered into Memorandum of Understanding (MOU) for transfer of business as going concern with M/s Premium Energy Transmission Ltd. (PET Ltd.). The assessee claimed to have acquired technical know-how. It was disclosed in the accounts and financial statements as an asset and depreciation was claimed on the same for the A.Y. 2005-06. The return was processed u/s 143(1). Thus the depreciation .....

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ical know-how fees was not disturbed. - During this year the A.O. for the reasons given in his order, seeks to disturb the opening written down value. In our considered view this is not permitted in law. Thus the order of the First Appellate Authority, to the extent of his decision to allow depreciation on technical know-how fees is to be upheld. - Decided in favour of assessee - Rate of depreciation on computer peripherals - Held that:- The issue is covered by the decision of Hon’ble De .....

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by the amount of excise duty while adopting inclusive method. While doing so, he should have reduced the excise duty actually paid by the assessee of ₹ 1,71,31,908/- as it has been already included. In view of the above discussion we uphold the order of the First Appellate Authority in deleting the addition - Decided in favour of assessee - ITA No. 4686/Del/2012, Cross Objection no. 422/Del/2012, ITA No. 4687/Del/2012, Cross Objection no. 423/Del/2012, ITA No. 1261/Del/2013 - Dated:- 28-6- .....

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of the case are culled out at Para 5 of the Ld.CIT(A) s order is extracted for ready reference. Ground nos. 1 of A Y. 2007-08 and 3 of A.Y. 2008-09 are directed against the disallowance of ₹ 38,67,188/- and ₹ 29,00,391/- for A.Ys. 2007-08 and 2008-09 respectively on account of depreciation on technical know-how. As per the facts of the case, the appellant company is engaged in the business of manufacturing of cement bricks, blocks and slabs and other building materials The appellant .....

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elow: Particulars Amount (Rs.) Land 1,20,00,000 Building 3,80,00,000 Plant & Machinery 4,75,00,000 Intangible Assets (Technical Know How) 2,75,00,000 Net Current Assets 1,25,00,000 Gross Consideration 13,75,00,000 The appellant also obtained a valuation report dated 06.12.2004 from M/s Vastuki Consultants Pvt. Ltd., Architects and Government Approved Valuers, as per which the value of the various assets was determined as under: Particulars Amount (Rs.) Land 1,20,57,000 Building 3,89,45,713 P .....

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sets as mentioned above, has fully disallowed depreciation in respect of technical know-how on the ground that there was a difference in the cost of acquisition of the said technical know-how between the appellant's books wherein it was shown at ₹ 2,75.00,000/- and the valuation report wherein it was valued at ₹ 2,50,00,000/- The AO has also doubted the nature of the intangible asset and has mentioned that the Balance Sheet of the seller company did not show any asset in the natu .....

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e A.Y. 2007-08 and 2008-09. 1. The Ld.CIT(A) erred on facts and in law on allowing depreciation in respect of technical know-how amounting to ₹ 32,42,187/-. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 4.1. The Cross Objections were filed by the assessee on the following grounds for these two Assessment Years (hereinafter referred to as the A.Y.). The respondent .....

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ng the addition of ₹ 21,75,293/- on account of depreciation on technical know-how. 2. Whether the Ld.CIT(A) has erred on facts and in law in deleting the addition of ₹ 1,08,565/- made on account of depreciation on computer peripherals ignoring the fact that the computer and computer software are eligible for depreciation of 60% and the same cannot be extended to computer accessories and peripherals. 3. Whether the Ld.CIT(A) has erred on facts and in law in deleting the addition of &# .....

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venue and Shri P.C.Yadav, the Ld.Counsel for the assessee. 6. On a careful consideration of the facts and circumstances of the case, perusal of material on record, orders of lower authorities, case laws cited, we hold as follows. 7. Shri KK Jaiswal, the Ld.D.R. submitted that : a. No specific agreement vis-a-vis valuation of each of the asset transferred by the seller to assessee was there which would show the value of each of the asset transferred in a specific manner. b. The MOU did not specif .....

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aluer as technical know-how are an imaginary asset and hence not entitled for depreciation. In absence of any agreement relating to transfer of a specific technology no value could be assigned to know-how. g. The mere declaration of sale of knowhow by seller in its ROI could not create an imaginary asset ( know-how). By creating asset like know-how the assessee has in fact reduced the cost of land, on which no depreciation is allowable and further the assessee has created intangible asset for cl .....

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e a yard stick for allowing depreciation in this year. 7.1. He relied on the order of the A.O. and submitted that the same be upheld. 7.2. The Ld.Counsel for the assessee submitted that : a. There is no provision under law to disturb opening written down value. b. The impugned asset was part of the block initially for the A.Y. 2005-06 and the assessee s claim for depreciation for the A.Y. 2005-06 and 2006-07 were allowed in these years. c. The seller has offered the amount received on sale of te .....

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e during the year cannot be tinkered with, by the Ld.CIT(A), based on the value fixed by the Valuing Officer. 8. After hearing rival submissions we hold as follows. 9. The assessee company entered into Memorandum of Understanding (MOU) for transfer of business as going concern with M/s Premium Energy Transmission Ltd. (PET Ltd.). The assessee claimed to have acquired technical know-how. It was disclosed in the accounts and financial statements as an asset and depreciation was claimed on the same .....

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now-how and claiming depreciation thereon. The assessment order was passed by the A.O. u/s 143(3) of the Act and the claim of depreciation on technical know-how fees was not disturbed. 9.1. During this year the A.O. for the reasons given in his order, seeks to disturb the opening written down value. In our considered view this is not permitted in law. 9.2. The Mumbai Bench of the ITAT in the case of HSBC Asset Management (India) Pvt. Ltd Vs DDIT in ITA No 2028/Mum/2009, wherein the Hon ble Bench .....

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ssee that the order under section 143(3) for A.Y 2003-04 continues to exist and has not been disturbed by any proceedings under the Act. We are therefore, of the view that it was not possible for the AO in the present assessment year to take a stand different from the one taken in the earlier assessment year. Having allowed the depreciation in the immediately preceding year it is not open to the AO to take different stand for the year under consideration. On this short ground, we direct that the .....

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y, to the extent of his decision to allow depreciation on technical know-how fees is to be upheld. 9.4. Even otherwise, on merits, we find that the First Appellate Authority has rightly come to a conclusion that the assessee has purchased technical know-how. The seller company had also offered this amount to tax. Under these circumstances the conclusions of the A.O. have rightly been vacated by the First Appellate Authority. In the result the appeals of the Revenue for the A.Y. 2007-08 and 2008- .....

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tten down value of the asset of technical know-how. In the result the Cross Objections are allowed. 11. We now take up the appeal of the Revenue for the A.Y. 2009-10 in ITA 1261/Del/2013. 12. Ground no.1 of the Revenue is on the issue of allowability of depreciation on technical know-how. 12.1. Consistent with the view taken for the A.Y. 2007-08 and 2008-09 we dismiss this ground of the Revenue. 13. Ground no.2 is on the issue of rate of depreciation on computer peripherals. The issue is covered .....

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6.2 I have carefully considered the submission made by the Ld AR and have gone through the assessment order. From the memorandum trading account u/s 145A prepared on inclusive method as appearing on page no 4 of the assessment order, it is seen that the assessing officer has included the amount of excise duty in opening stock of goods, sales, purchases and closing stock of goods. The assessing officer has increased the amount of sales ₹ 41.75 crores by the amount of excise duty ₹ 2.7 .....

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