TMI Blog2016 (12) TMI 1628X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of assessee for Asst. Year 2007-08, 2008-09 and for Asst. Year 2009- 10 decided by the Co-ordinate Bench pronounced in the year 2016, we are of the view that assessee’s claim of depreciation on noncompete fees has rightly been allowed by ld. CIT(A). We therefore, find no reason to interfere with the order of ld. CIT(A) and we uphold the same. This ground of Revenue is dismissed. Addition on account of prior period expenses - CIT-A deleted the addition - Held that:- There is no dispute to the fact that an amount of ₹ 11,236/- was paid to Central Depository Services Ltd. towards Custodial fees pertaining to the period F.Y.2008-09. However, as submitted by ld. AR that the Custodial fees is legitimate business expenditure and there is no dispute to it being a revenue in nature. We are, therefore, of the view that liability of the assessee of ₹ 11,236/- being Custodial fees crystallized during the F.Y.2009-10 and the same should not be treated as prior period expenditure as there is no postponement of liability. We, therefore, find no reason to interfere with the finding of ld. CIT(A). Accordingly, this ground of Revenue is dismissed. Depreciation on Goodw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and on facts in directing the Assessing Officer to allow the claim of the Assessee, amounting to ₹ 7,19,01,743/- on account of depreciation on Goodwill arising on Amalgamation, which was never claimed in the Return of Income filed by the Assessee. 7). On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the Assessing Qfficer. 8). It is therefore, prayed that the order of the Ld. Commissioner of Income- Tax (Appeals)-XIV, Ahmedabad may be set-a-side.-and that of the order of the Assessing Officer be restored. 2. Briefly stated facts of the case are that assessee is a limited company engaged in the business of manufacture and sale of neutraceuticals and trading in low calorie and cosmecueticals products. Assessee disclosed total income of ₹ 71,60,49,078/- in the return of income filed on 16.9.2010. Case was selected for scrutiny assessment. Notices u/s 143(2) 142(1) of the Act were issued and necessary details were called for and duly supplied by the assessee. Income was assessed at ₹ 71,66,21,650/- after making various additions mainly relating to disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished compete details of employees who had travelled abroad, duration of visit, countries visited, nature and amount of expenses and purpose of travel. He has also noted that the evidences placed on record include the correspondences made with the travel agents and the expenses were reasonable as compared to the total turnover of the company. Before us, Revenue has not brought any material on record to controvert the finding of ld. CIT(A). We, thus, find no reason to interfere with the order of ld. CIT(A). Thus, this ground of Revenue is dismissed. 10. We further find that the Co-ordinate Bench vide its order dated 6.4.2016 has deleted the disallowance on account of trade mark expenditure by observing as follows :- 19. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) while deleting the addition on account of web designing charges has given a finding that no asset has been created but web designing is only a tool for facilitating the business of the assessee as it provides the means for managing the information about the assessee. With respect to trade mark expenses, he has given a finding that the expenses did not create any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. Year 2009-10. Thus we find no reason to interfere with the order of ld. CIT(A) and dismiss these three grounds. 13. Ground no.5 reads as under :- 5). The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of ₹ 1,05,468/- made on account of depreciation on non-compete fees. 14. The Assessing Officer while framing the assessment denied the claim of depreciation of ₹ 1,05,468/- made by assessee on the w.d.v. of intangible asset of ₹ 4,21,875/-. Assessee carried the matter before ld. CIT(A). The same was decided in favour of assessee by following the decision of Co-ordinate Bench, Pune in the case of Serum Institute of India Ltd. [135 ITD 69(Pune)] dated 18.01.2012. 15. Aggrieved, Revenue is now in appeal before the Tribunal. 16. Ld. DR vehemently argued supporting the order of Assessing Officer and also relied on the judgment of Hon. Delhi High Court in the case of Sharp Business System vs. CIT-III (2012) 27 taxmann.com 50 (Delhi) wherein Hon. Court decided a similar issue in favour of Revenue by observing that in the case of non-competition agreement, advantage is a restricted one in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. The appellant has submitted that noncompete fee was capitalized as an intangible asset in F. Y. 2006-07 and the depreciation was allowed in three earlier assessment years i. e. A. Y. 2007-08, 2008-09 2009-10. Accordingly, the depreciation @ 25% was claimed in this year also. The appellant has also relied on the decision of Chennai Bench in the case of ITO Vs. Medicorp Technologies Pvt. Ltd. [122 TTJ 394 (Che.)] wherein it was held that non-compete fee wps an intangible asset and was covered by the provision of section 32 (1)(ii) of the Act. It has further relied on the recent decision of Serum Institute of India Ltd. [135 ITD 69(Pune)] dated 18/01/2012 wherein non-compete fee was held to be an intangible asset and the noncompete right acquired by the company was held to be eligible u/s. 32(1 )(ii) of the Act. The A. O. on the other hand has relied on the judgment of Chennai Bench in the case of Srivatsan Surveyors Pvt. Ltd. [32 SOT 268] wherein it was held that no prescription for allowance of depreciation in respect of non - compete fee was there. After considering the reasoning given by the A. O. and that of the appellant, I am inclined to agree with the submission made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such rights are intangible ones and they are covered by the provisions of clause (ii) of section 32(1). [Para 14] In such circumstances, the assessee must win on this issue in view of the cited ratio in the case of Real Image Tech. (P.) Ltd. (supra). Further, it is a settled issue that the non-compete fee is intangible and depreciable asset.(para 15) 21. We further observe that the Co-ordinate Bench Pune in the case of Serum Institute of India Ltd. (supra) has also held that noncompete right acquired by assessee company is eligible for depreciation, by observing as follows :- The words 'being intangible assets' appear in clause (ii) of section 32(1) by way of a nomenclature, to contradistinguish the items appearing in clause (ii) from those appearing in clause (i). One can also say that clause (ii) contains an 'inclusive' definition of 'intangible assets', for the purpose of section 32. [Para 19] It was an admitted fact that the payment of ₹ 2 crores was made by the assesseecompany to ward off competition in the export business which was acquired by it from MS. Therefore, it could be safely concluded, without any further discussion, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or period expenditure by observing as follows :- 3.3 Decision: I have carefully considered the facts of the case and the submissions made by AR of the appellant. The fact remains that the genuineness of expenditure has not been disputed. It is concluded by the AO that the expenditure should have been claimed in A. Y, 2009-10. However, as per facts there is no postponement of liability by the appellant. Having not claimed expenditure in A. Y. 2009-10, the appellant has paid more income tax in A. Y. 2009-10. In view of ratio laid down by Hon' ble Bombay High Court decision in the case of CIT vs. Nagri Mills reported in 33 ITR 681 (Bom), the disallowance made by the AO is directed to be deleted and the ground of appeal is accordingly allowed. 26. We further observe that there is no dispute to the fact that an amount of ₹ 11,236/- was paid to Central Depository Services Ltd. towards Custodial fees pertaining to the period F.Y.2008-09. However, as submitted by ld. AR that the Custodial fees is legitimate business expenditure and there is no dispute to it being a revenue in nature. We are, therefore, of the view that liability of the assessee of ₹ 11,236/- b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; is an asset under Explanation 3(b) to section 32(1) -Held, yes - During relevant assessment year, one Y Ltd. amalgamated with assessee-company - According to assesses, excess consideration paid by it over value of net assets acquired of 'Y' ltd. amounted to goodwill on which depreciation was to be allowed - Authorities below recorded a finding that assets and liabilities of 'Y' Ltd. were transferred to assessee for a consideration; that difference between cost of an asset and amount paid constituted goodwill and that assessee-company in process of amalgamation had acquired a capital right in form of goodwill because of which market worth of assessee-company stood increased - Accordingly, assessee's claim was allowed - Whether since revenue could not rebut factual findings recorded by authorities below, impugned order passed by them was to be upheld - Held, yes [Para 8] [In favour of assessee] II. Section 32 of the Income-tax Act, 1961 - Depreciation -Allowance /Rate of - Whether stock exchange membership card is an asset eligible for epreciation under section 32 -. Held, yes [Para 1] [In favour of assessee] The claim of the appellant can be entertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. acquired the Consumer Products Division of Cadila Healthcare Ltd. including the Brands Sugar-free and Ever Youth and related intangible assets of the said business, which came to be accounted for as Goodwill in the books of accounts of Zydus Wellness Ltd. The value of the said Goodwill, acquired at ₹ 28.76 crores, stood duly reflected in the Annual Accounts of the Company for F.Y.2008-09 as the excess of the agreegate face value of the Equity Shares issued over the excess of the Assets and Liabilities. At the time of filing of return income in Asst. Year 2010-11 the issue of claiming of depreciation on goodwill was debatable and uncertain. It was only after the judgment of Hon. Supreme Court in the case of CIT vs. Smiffs Securities Ltd. (supra) wherein Hon. Court had an occasion to deal wih the issue of claiming depreciation on goodwill, similar to the case of assessee wherein goodwill was paid on account of amalgamation. Hon. Court held as under :- 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court. The Supreme Court held as under:- 5. In CITv. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, : 1922 which is almost identical to Section 251(l)(a). The court held - asunder: (ITR p. 229) If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. [Para 11] Further the observation of the Supreme Court in the case of Jute Corpn. of India Ltd. (supra) to the effect 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the : assessment order was made....' or 'that the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz., 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs. (Para 22) It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. (Para -: 23) The Appellant, therefore, prays that in any case, your Honour, as the first appellate authority is empowered to entertain the Appellant's claim for Depreciation on Goodwill, respectfully following the ratio of the Apex Court in the case of Smijfs Securities (supra). 37. Respectfully following the judgment of Hon. Apex Court in the case of CIT vs. Smiffs Securities Ltd. (supra), and the judgment of Hon. Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders (supra) we are of the view that ld. CIT(A) has rightly allowed the justifiable correct claim of depreciation on goodwill made by the assessee through revised computation of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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