TMI Blog2007 (2) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... odwill was acquired prior to April 1, 1998, and accordingly in the tax audit report for the assessment year 1999-2000, no depreciation is claimed on the goodwill. Thus, there were mutual contradictions in the tax audit report and the return of income filed by the petitioner regarding the date of acquisition of the goodwill. In these circumstances, we find it difficult to accept the contention that the petitioner had made full and true disclosure of material facts. In view of this apparent contradiction in the material facts, it is difficult to hold that in the assessment order passed u/s 143(3) of the Act, a conscious decision was taken to the effect that the goodwill was acquired after April 1, 1998. As stated earlier in the absence of any finding recorded by the Assessing Officer to the effect that in spite of the fact that the tax audit report shows that the goodwill was acquired prior to April 1, 1998, in the facts of the present case the goodwill must be held to be acquired after April 1, 1998, it is difficult to hold that a conscious decision was taken in the matter by the Assessing Officer. In our opinion mutual inconsistencies in the tax audit report and the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21,50,000 was paid on April 1, 1998, and that the goodwill was effectively transferred on June 25, 1998, and used in the full year after June 25, 1998, and, therefore, depreciation at the rate of at 25 per cent. thereon is allowable as per section 32(1)(ii) and Explanation 3 thereto. 6. Accordingly, in the assessment order passed on March 18, 2002, under section 143(3) of the Act depreciation on goodwill at 25 per cent. was allowed. 7. Thereafter, by the impugned notice dated October 26, 2005, issued under section 148 of the Act, the Assessing Officer sought to reopen the assessment for the assessment year 1999-2000 by recording reasons, which read thus : For the assessment year 1999-2000 the assessee has claimed depreciation on goodwill of Rs. 1,12,87,600. Assessment order under section 143(3) was completed on March 18, 2002, by the DCIT, Circle (2), Pune. Depreciation on goodwill is not an allowable deduction under section 32(1)(ii) of the Income-tax Act. As per section 32(1)(ii) knowhow, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow, patents, copyrights, trade marks, licences, franchises. Therefore, goodwill is not an intangible asset as per section 32(1)(ii). Therefore, depreciation on goodwill is not allowable as per section 32(1). Therefore, I am of the opinion that the assessee' s claim of depreciation on goodwill of Rs. 1,12,87,500 is not an allowable deduction. Therefore, I am of the opinion that income escaped assessment, in the assessee' s case for the assessment year 1999- 2000. 8. The assessee objected to the reopening of the assessment, however, the same was rejected by the Assessing Officer by his order dated July 28, 2006. Hence, this petition. 9. Ms. Vissanji, learned counsel appearing on behalf of the petitioner submitted that the notice dated October 26, 2005, issued under section 148 of the Act beyond four years from the end of the assessment year 1999-2000 cannot be sustained because : (a) The petitioner had disclosed all the relevant material in respect of its claim for depreciation on intangible assets including goodwill . In the course of assessment proceedings, agreements dated March 30, 1998, were produced and on a query raised, it was pointed out that stamp duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the apex court in the case of Alapati Venkataramiah v. CIT reported in [1965] 57 ITR 185 and the decision of this court in the case of Evans Fraser and Co. Ltd. (In Liquidation) v. CIT reported in [1982] 137 ITR 493, learned counsel for the petitioner submitted that the fact that the petitioner had entered into an agreement to acquire goodwill on March 30, 1998, cannot be a ground to deny depreciation, especially when the Assessing Officer after due verification had arrived at a conclusion that though the agreement is dated March 30, 1998, the goodwill was actually acquired after April 1, 1998. Accordingly, it is submitted that the impugned notice issued without jurisdiction be quashed and set aside. 11. Though the arguments advanced on behalf of the petitioner appear to be attractive, in the facts of the present case, we find it difficult to accept the same. 12. Depreciation on intangible assets became available under section 32 of the Act only if the intangible assets were acquired after April 1, 1998. In other words, depreciation is not allowable where the intangible assets are acquired prior to April 1, 1998. 13. In the present case, though the goodwill was acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot explained the said discrepancy. Moreover, there is no discussion whatsoever in the assessment order regarding the discrepancy in the deed of acquisition of the goodwill. As noted earlier, in the tax audit report, it is shown that the goodwill at Rs. 4.30 crores was acquired prior to April 1, 1998, whereas in the return of income it was claimed that the goodwill was acquired on or after April 1, 1998. In view of this apparent contradiction in the material facts, it is difficult to hold that in the assessment order passed under section 143(3) of the Act, a conscious decision was taken to the effect that the goodwill was acquired after April 1, 1998. 16. The ratio laid down by the apex court in the case of Alapati Venkataramiah [1965] 57 ITR 185 does not support the case of the petitioner. In that case, it was held that the goodwill is an intangible asset and ordinarily passes along with transference of the whole business. In the present case, whether the goodwill is an intangible asset is not the issue. In the present case, the issue is whether there was full and true disclosure of material facts. The decision of this court in the case of Evans Fraser and Co. Ltd. [1982] 137 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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