TMI Blog2016 (7) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant had not posted Form ITR-V within the prescribed time limit. The Hon’ble Bombay High Court in the case of Crawford Bayley & Co. v. UOI, [2011 (12) TMI 64 - BOMBAY HIGH COURT ] , held that the action of the AO declaring return of income invalid for non-receipt of ITR-V was invalid. Respectfully following this decision, we hold that the AO is not justified in treating the original return of income as invalid for belated receipt of Form ITR-V. We therefore direct the AO to grant the benefit of the determined business losses for future years.- Decided in favour of assessee. - ITA Nos.918 & 919/Bang/2013 - - - Dated:- 13-7-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri Nageshwar Rao, Advocate For The Respondent : Shri Sunil Kumar Agarwala, Jt. CIT(DR) ORDER Per Inturi Rama Rao, Accountant Member These are appeals filed by the assessee company directed against the different orders of CIT(Appeals)-I, Bangalore dated 27.3.2013 for the assessment years 2008-09 2009-10. Since common issues are involved in both these appeals, we proceed to dispose of the same vide this consolidated or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts, while disregarding the submissions of the Appellant without citing any valid reasons for the same. Ground 3: Carry forward of losses 3.1 The learned CIT(A) has erred in disallowing the Appellant's claim for carry forward of losses amounting to ₹ 2,58,76,063 under the head of 'Profits gains from Business or Profession' and ₹ 1,22,41,530 under 'Income from Capital Gains' and wrongly upheld the order of the learned AO. 3.2 The learned CIT(A) erred in disregarding the valid return filed by the Appellant, within statutory time, by reference to inapplicable provisions and notifications while ignoring the relevant provisions, notifications and circulars. Without prejudice, the learned CIT(A) failed to appreciate that the return was filed within time and in any case reasonable time as applicable to the year under consideration. 3.3 The learned CIT(A) failed to appreciate that there was no time limit specified, for filing of the physical copy of the return post electronic filing, during the year under consideration. 3.4 The learned CIT(A) erred in wrongly disallowing the appellant's valid claim, for carry forward of losses base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutes intangible asset in the light of the very undisputed fact that it is a self generated asset as held by the Supreme Court in the case of M/s B.C. Srinivas Setty vs. CIT (128 ITR 294(SC) ) which may or may not appear in balance sheet and it normally appreciates in its value throughout the period of assessee's business. Actually, there is no negative growth for the goodwill . Hence, whether there is a prescribed rate for intangible asset or not for an asset like goodwill in the I.T. Rules, 1962, the asset like goodwill will not qualify for depreciation allowance. Under these circumstances, and by following above legal and accountancy principles, I hold that the assessee is not entitled to depreciation allowance on his asset (viz., Goodwill ). In view of this, I disallow the deduction claim for depreciation allowance on goodwill of ₹ 2,76,85,547/- and add the said amount to the total income declared. 5. The AO also had not allowed the carry forward losses under the head capital gains of ₹ 1,22,41,530 and business loss of ₹ 2,58,76,063 by holding that the Form of verification of return of income in ITR-V was received beyond the stipulated tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3 The appellant relied on the decision of the Apex court in the case of SMIFS Securities Ltd. (348-ITR-362 (SC) and argued that goodwill is an intangible asset as per the decision and eligible for depreciation. The appellant also relied on the decision of the Mumbai High Court in the case of Birla Global Asset Finance Co. Ltd. (TS-791-HC-2012(BOM) on the ground that brand equity was also eligible for depreciation as an intangible asset. It is already mentioned in the above paras the appellant acquired certain rights / assets which are distinguishable from goodwill , therefore, the above decisions are not applicable to the present facts of the case. The appellant had made elaborate discussion about how it had incurred a cost of ₹ 64,25,62,688/- towards the purchase of business of sole proprietorship which included the above said intangible rights. The appellant explained that the intangible assets were acquired as a part of the sale consideration paid by way of issuance of shares to the proprietor. Thus, it was argued that the appellant incurred a cost by paying in terms of allotment of shares and eligible for depreciation. As per the facts of the said decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is rejected and the AO's action is upheld. 7. The CIT(Appeals) also upheld the denial of carry forward losses vide para 10, which reads as under:- 10. I have considered the facts and submissions of appellant and also the reasons given by the A.O. It is undisputed fact that the ITR-V was filed by the appellant beyond the period of l5 days from the date of electronically filing the return of income. Thus, the appellant failed to comply with the terms of the above said notification dated 27.07.2007. The said notification was issued by the Central Board of Direct Taxes, New Delhi in exercise of the powers conferred by sub-section (1B) of sections 139 and 139D the Income-tax Act, 1961 (43 of 1961) read with sub-rule (3) of rule 12 of the Income tax Rules, 1962. In view of this, the said notification is binding on all Income Authorities mentioned in Sec. 116 of the IT Act. In absence of any waiver of the said stipulated condition, delay in filing of ITR-V can not be accepted. Therefore, A.O's action is fully justified. The reliance on circular no. 3/2009 dated 21. 05. 2009 by the appellant is misplaced because the said circular is applicable for the A.Y 2009-10 onwards. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovet Ltd. v. ACIT, ITA No.1629/Mum/2009. He also relied on the decision of the Hon ble Supreme Court in the case of CIT v. Mahindra Mills, 243 ITR 56 (SC) . He further submitted that w.e.f. 1.4.2002, the AO was duty bound to allow depreciation even without the claim from the appellant as per law. 13. On merits, the ld. counsel for the appellant submitted that the issue whether goodwill is eligible for depreciation is no longer res integra in the light of the decision of Hon ble Supreme Court in the case of CIT v. Smifs Securities Ltd., 348 ITR 302 (SC) . He also placed reliance on the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Manipal Universal Learning Pvt. Ltd. in ITA No.61 of 2007 dated 1.4.2013 and coordinate Bench decision in the case of Padmini Products Pvt. Ltd. v. DCIT in ITA Nos.429 to 432/Bang/2013, order dated 10.1.2014. 14. On the issue of carry forward losses, the ld. counsel for the appellant submitted that it is only a procedural delay in filing the Form ITR-V. He further submitted that delay has occurred on account of transmission. The notification prescribing the time limit for receipt of Form ITR-V cannot override t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of take over had clearly mentioned that all assets including the goodwill was taken over by the company. Even accepting the view of the CIT(Appeals) that there were no commercial rights acquired, now the Hon ble Supreme Court in the case of CIT v. Smifs Securities Ltd., 348 ITR 302 (SC) held that purchase consideration paid over and above the net value of the assets constitutes goodwill. Even the Hon ble Delhi High Court recently in the case of Triune Energy Services (P.) Ltd. v. DCIT, 65 taxman.com 288 (Delhi) held that the excess of the amount paid over net value of assets constitutes goodwill . In coming to this conclusion, the Hon ble Delhi High Court relied on Accounting Standards AS-10 issued by the ICAI. That apart, when the company was taken over as a going concern with all the assets liabilities for a slump consideration, it is neither permissible nor possible to apportion the consideration paid against different assets as held by the Hon ble Supreme Court in the case of CIT v. Mugneeram Bangur Co., 57 ITR 299 (SC) . Thus, in our considered view, the view of the CIT(Appeals) that there was no goodwill as no commercial rights were acquired, cannot be accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and scope are explained in several Court judgments. In the case of Khushal Khemgar Shah v. Mrs. Khorshed Banu Dadiba Boatwalla AIR 1970 SC 1147, the Supreme Court has explained goodwill as follows : It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in customers. It is the magnetic quality of a particular trade of business which attracts customers to it as a matter of course. This quality springs from and is developed by various contributing factors that earn a reputation for honest dealing, quality and standard. It is an intangible asset being the whole advantage of the reputation and connections formed with the customers together with the circumstances which make connections durable. It is the component of total value of the undertaking which is attributable to the ability of the concern to earn profits over a course of years because of its reputation, location and other features. In B.C. Srinivasa Setty s case ( supra ), the Supreme Court held that in a progressing business goodwill tends to show progressive increase and in a failing business it may begin to wane. 24. The Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the factors producing it. It is also impossible to predicate the moment of its birth. It comes silently into the world, unheralded and unproclaimed and its impact may not be visibly felt for an undefined period. Imperceptible at birth it exists enwrapped in a concept, growing or fluctuating with the numerous imponderables pouring into, and affecting, the business. 25. The issue whether depreciation is allowable on goodwill is no longer res integra as the Hon ble Supreme Court in the case of CIT v. Smifs Securities Ltd. (supra) had resolved this issue and held that goodwill is an asset within the meaning of section 32 of the Income-tax Act, 1961 and depreciation on goodwill is allowable. The Hon ble Supreme Court held as follows:- The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 ['Act', for short]. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: Explanation 3.- For the purposes of this sub-section, the expressions 'assets' and 'block of assets' shall mean-- [a] tangible assets, being buildings, machinery, plant or furniture; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electronically shall be the date of furnishing of return, if the Form ITR-V is furnished in the prescribed manner and within the period specified. Further ITR-V was required to be furnished within a period of 15 days from the date of filing the return of income electronically. It is worth noting that AO has not rejected the claim on account belated receipt of Form ITR-V. It is undisputed fact that there was no communication of any kind either from the Central Processing Unit or the AO intimating the appellant that ITR-V was not received within time. In fact, the AO acted upon the return of income filed by the appellant. It implies that the AO had condoned the delay in receipt of Form ITR-V, as the Notification dated 4.1.2012 empowers the Commissioner to condone the delay in receipt of Form ITRV. In fact, we are told at the Bar that the CBDT had issued general Notifications extending the date of receipt of ITR-V. Furthermore, the provisions of sub-section (9) of section 139 provides that where the AO considers that return of income furnished by the assessee is defective, he may intimate the defect to the assessee and afford an opportunity to rectify such defect within a period of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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