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TMI Blog2018 (7) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... wing it. The Special Bench espoused the matter. It was put forth on behalf of the assessee that the Tribunal allowed depreciation on goodwill in the case of a related concern, namely, CLC Global Pvt. Ltd., and the Revenue took the matter before the Hon'ble High Court, which was still pending. The assessee prayed that the hearing of the Special Bench be kept in abeyance as its decision can impinge on the issue either way before the Hon'ble High Court. The Special Bench acceded to the request made on behalf of the assessee and vide its order dated 19.03.2010, inter alia, reframed the following question for consideration and decision by the Special Bench:- "Whether on the facts and in the circumstances of the case, the assessee is entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audhary, Shri Mukund Chaudhary, Shri Kapil Chaudhary, Smt. Romila Chaudhary and Smt. Ritu Chaudhary. On taking over the partnership firm, the first three partners of the firm were appointed as directors of the assessee company. On being called upon to explain the basis of valuation of goodwill of the partnership firm, the assessee company furnished a Valuation report dated 25.01.2000, computing the amount of goodwill on the basis of six years' purchase of super profits. Such calculation of goodwill has been set out on page 7 of the assessment order. The AO found certain infirmities in such calculation by observing that : (i) Profit before tax of various years taken by the Valuer was excessively high and unrealistic; (ii) The Valuer had wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r business or commercial rights of similar nature" employed in section 32(1) did not encompass goodwill of a business as the same was different in nature from know-how, patent, copyrights and trade marks etc., used by the legislature in the earlier part of the provision. Ex consequenti, the AO disallowed depreciation of Rs. 2.50 crore claimed by the assessee on the amount of goodwill. The ld. CIT(A) countenanced the view taken by the AO on this point. 4. Before espousing the question posed before the Special Bench, it is apposite to note that the AO made other additions/disallowances in the assessment order, which have also been assailed before the Tribunal. Besides, the assessee has not only challenged the view taken by the authorities th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed- ....' 7. It is overt from the command of clause (ii) of section 32(1) of the Act that depreciation is permissible in respect of intangible assets listed herein, acquired on or after 01.04.1998. This clause contains certain specified and unspecified species of intangible assets. Whereas the specified intangible assets enshrined in the provision include know-how, patent and copyrights etc., the unspecified intangible assets have been described with the expression 'or any other business or commercial rights of similar nature.' It is nobody's case that goodwill is a specified intangible asset. The assessee has sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove that the A.O. has classified discussion on the issue of depreciation on goodwill in two broader limbs. Firstly, he held that no depreciation can be granted on genuine goodwill in terms of section 32(1) of the Act, which opinion stands overturned hereinabove. Secondly, he held that in the facts and circumstances of the instant case, a firm has been succeeded by a company and net assets of the firm have vested in the company, and consequently there is no transfer of goodwill in real sense and further the valuation of goodwill done by the assessee in the instant case was erroneous. Both the sides candidly accepted that the second broader limb involved in the instant appeal does not precisely emanate from the substance of the question refer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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