2015 (10) TMI 2566
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....s own case for AYs 2005-06 & 2006-07 in which the Tribunal has categorically held that assessee is entitled for depreciation on good will. The copy of the order of the Tribunal is placed on record on pages 268 to 279 of the compilation of the assessee. The relevant observations of the Tribunal in this regard are extracted hereunder:- "10. Our attention was also invited to Explanation 3 below section 32(1) of the Act. While allowing the claim of the assessee, the ld. CIT(A) has held that issuance of shares for Rs. 7.44 crores was a part payment of purchase consideration towards cost of acquisition of cement undertaking, therefore, the cost of shares issued to the shareholder of JKSL is eligible for depreciation and the ld. CIT(A) has also held that even if it is considered to be the cost of goodwill of JKSL, still the assessee is entitled for depreciation. During the course of hearing of the appeal, the ld. D.R. has placed emphasis that this cost of shares issued to JKSL is not part of purchase consideration towards cost of acquisition of cement undertaking but it is a cost of goodwill and is not eligible for depreciation. There is no quarrel on the proposition of law that if the c....
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....nterpreting the said expression which finds place in Explanation 3(b). In the circumstances, we are of the view that "goodwill" is an asset under Explanation 3(b) to section 32(1) of the Act. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income-tax (Appeals) ("the 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 P. Ltd. were transferred to the assessee for a consideration ; that the difference between the cost of an asset and the 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-company stood increased. This finding has also been upheld by the Income-tax Appellate Tribunal ("the ITAT", for short). We see no reason to interfere with the factual finding.....
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....business claims, (ii) business information, (iii) business records, (iv) contracts, (v) skilled employees, (vi) knowhow. It is also observed that the Assessing Officer accepted the allocation of the slump consideration of Rs. 44.7 crores paid by the transferee, between tangible assets and intangible assets (described as goodwill) acquired as part of the running business. The Assessing Officer, however, held that depreciation in terms of section 32(1)(ii) of the Act was not, in law, available on goodwill. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal approved the reasoning of the Assessing Officer thereby holding disallowance of depreciation on the amount described as goodwill. It was thus argued on behalf of the assessee-company that section 32(1)(ii) would mean rights similar in nature as the specified assets, viz., intangible, valuable and capable of being transferred and that such assets were eligible for depreciation. On behalf of the respondent it was argued that applying the doctrine of noscitur sociis the expression "any other business or commercial rights of similar nature" used in Explanation 3(b) to section 32(1) has to take colour from th....
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....siness by the assessee, which was hitherto being carried out by the transferor, without any interruption. The aforesaid intangible assets are, therefore, comparable to a licence to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd. [2010] 327 ITR 323 (SC) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a "licence" or "akin to a licence" which is one of the items falling in section 32(1)(ii) of the Act. In view of the above discussion, we are of the view that the 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 a....
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....course of hearing, the Ld. DR simply placed reliance upon the order of the AO on this issue, whereas the Ld. counsel for the assessee has placed heavy reliance upon the aforesaid order of the Tribunal. Since no contrary view has been brought before us by the Revenue, we find no justification to differ from earlier view taken by the Tribunal on this issue, we accordingly following the order of the Tribunal decide the issue in favour of the assessee. Consequently, the order of the CIT(A) in this regard is confirmed. 4. The next ground in these appeals relate to the nature of interest subsidy received by the assessee. The facts born out from the records are that the assessee company, M/s J.K. Cement has purchased cement division of J.K. Synthetics Ltd. The assessee company has taken loan from various financial institutions in order to buy cement division, which are already engaged in production of cement. As per the scheme of the Rajasthan Government known as Raj Investment Promotion Policy- 2003, assessee has applied for subsidy and Rajasthan Government has granted 5% interest subsidy and 50% exemption from electricity duty. The exemption granted for electricity duty has declared as....
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.... has placed reliance on various Tribunal orders before the CIT(A), in support of his contention that since the subsidy was received for the repayment of the loans obtained for acquiring the capital assets it should be treated to be capital receipt. The CIT(A) has reexamined the issue in the light of detailed submission of the assessee. Being convinced with it, the CIT(A) has treated the receipt of interest subsidy as capital receipt. Accordingly, the addition made by the AO was deleted. The relevant observations of the CIT(A) are extracted hereunder for the sake of reference: "ll.l After having considered the matter and having perused the various judgments, the scheme as pronounced by the Rajasthan Govt. etc., I am of the view that the AO has failed to correctly apply the ratio-decidendi of the Hon. SC in the case of Ponni Sugars (supra). It has been rightly argued by the appellant that it would make no difference if the unit was a sugar unit or a cement unit. One should examine the scheme under which the subsidy is granted. If the purpose of the scheme of subsidy is to give by way of assistance to the assessee in carrying on of his trade or business, it has to be treated as tradi....
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....strate that the object of the subsidy was to assist the assessee in acquiring the capital assets. Therefore, the nature of subsidy is a capital receipt in the light of the judgment of the Hon'ble Apex Court in the case of Sahney Steel Works Ltd. Vs. CIT reported in 228 ITR 253 (S.C.) and in the case of Ponni Sugars and Chemicals Ltd. Vs. CIT reported in 306 ITR 392 (SC). Besides Ld. counsel for the assessee has also placed reliance upon the following judicial pronouncements of which copies are placed on record: i) ACIT Vs. Shree Cement Ltd. ITA No.614, 615& 635/JP/2010. ii) DCIT Vs. Sutlej Textiles and Industries Ltd. ITA No. 5142/Del/2013 iii) Sutlej Textiles and Industries Appeal No.386/11-12 iv) Shree Balaji Alloys Vs. CIT reported in 198 Taxman 122 v) CIT Vs.Sham Lal Bansal ITA No. 472 of 2010 vi) CIT Vs. Birla VXL Ltd. 215 Taxman 117 vii) Maruti Suzuki India Ltd. Vs. ACIT ITA No. 5120/Del/2010 6. Having carefully examined the orders of the lower authorities, in the light of rival submission, we find that as per Raj Investment Policy 2003 appearing at page nos. 38 to 49 of the compilation of the assessee, the scheme will be applicable to all new investments and investme....
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....r which the subsidy is given. The source of the fund is quite immaterial. If the purpose is to help the assessee to set up its business or to complete a project, the monies must be treated as to have been received for capital purpose. But if the money is given only after and conditional upon commencement of production, such subsidies must be treated as assistance for the purpose of the trade. In the case of Ponni Sugars and Chemicals Ltd. their lordship has held that the nature of subsidy is to be determined in respect of purpose for the subsidy is granted. The character of subsidy is to be determined with respect to subsidy is granted. In other words one has to apply the purpose test. The point of time as subsidy paid is not relevant. The source is immaterial if the object of the subsidy is to enable the assessee to run the business more profitably then the receipt is of revenue receipt. On the other hand, object of the assistance under the subsidy scheme is to enable the assessee to setup a new unit or to expend an existing unit then the receipt of the subsidy is a receipt in capital account. Their lordship has further held that after reversing the judgment of the High Court that....