TMI Blog2012 (12) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to ₹ 62,50,000/-. Ground No.2 is an alternative plea to ground No.1 by which the assessee claims that if no depreciation is allowed on capital expenditure incurred on intangible asset, then the same should be allowed as revenue expenditure. 4. Facts giving rise to the grievance raised by ground No.1 show that during the course of the assessment proceedings, the Assessing Officer noticed that the assessee is a share broker and the main source of income is generated through brokerage. The Assessing Officer further observed that during the year the assessee has purchased entire clientele business of M/s. Ashmavir Financial Consultants Pvt. Ltd. (hereinafter called as M/s.AFC ) by assigning all clients to the appellant company for a consideration of ₹ 2.50 crores . The Assessing Officer noticed that the assessee has booked these expenses as purchase of goodwill and has claimed 25% of depreciation amounting to ₹ 62,50,000/- thereon. 5. The Assessing Officer sought explanation from the assessee to justify its claim on depreciation of such purchase of clientele business. The assessee filed a detailed reply. In its reply, the assessee also took an altern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that the case of the assessee does not fall in any of the category to make it eligible for depreciation under this clause. The Assessing Officer was of the opinion that depreciation is allowable only to assets which are kept depreciating over a period of time due to damage, wear and tear and obsolescence whereas, client do not depreciate and moreover, they are tangible. Therefore, do not fulfill the conditions of intangibility. The Assessing Officer concluded that any capital asset tangible or intangible has to be put to use. The commercial right that the assessee company has claimed to have purchased has not been put to use during the year and accordingly, disallowed the claim of depreciation on account of goodwill at ₹ 62,50,000/-. 8. The assessee agitated this matter before the CIT(A) and reiterated that it has purchased an intangible asset in the form of clientele business of M/s.AFC and therefore, eligible for depreciation under section 32 (1) (ii) of the Act. After considering the facts and submissions, the CIT(A) was of the view that the disallowance of depreciation of ₹ 62,50,000/- is found to be correct for the following reasons : (a) The paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has grossly failed to substantiate its claim for depreciation. 11. We have heard the rival submissions and perused the Orders of the lower authorities. We have also gone through the copy of the Deed of Assignment of Business, Sale of Goodwill and Master Services Agreement. By virtue of Clause (1) of the said Deed, it is provided as under ( 1) Assignment and Consideration : ( a) That in consideration of the sum of ₹ 2,50,00,000/- (Rs. Two crore and Fifty Lacs Only) paid by the Assignee to the Assignor-1 on the execution of these presents, receipt whereof the Assignor-1 do hereby admit, the Assignor-1 as beneficial owner, irrevocably assigns, conveys, sells, grants and transfers onto the Assignee without limitation and in perpetual, all the said retail Clientele of the Assignor-1 in stock broking business including the existing business associates (a List of Retail Clientele/Business Associates is enclosed as Annexure-A), together with the Goodwill attached thereto with all the rights and benefits belonging thereto to hold the same and all the said retail Clientele hereby assigned on to the Assignee absolutely; as on 1st September, 2005. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l kinds of commercial rights. The language in section 32 (1) (ii) clearly invites the application of the Rule of EJUSDEM GENERIS which means that words of a general nature following specific and particular words should be constitute as limited to things which are of same nature as those specified. The specific words in section 32 of the Act reveal the similarity in the sense that all the intangible assets specified are tools of the trade which facilitates the assessee to carry on the business. Therefore . the expression , any other business or commercial rights of similar nature would include such rights which can be used as a tool to carry on the business. This view finds support from the decision of the Tribunal in the case of Skyline Caterers P ltd v/s ITO 306 ITR [AT] 369 Mumbai. 14. In the light of these observations, it cannot be denied that by getting a right over 3709 clients of M/s. AFC , such right is used as a tool to carry on the business by the assessee. Merely because the assessee showed the payment to be on account of goodwill in the books of account, no adverse inference could be drawn against the assessee. 15. Even assuming that the payment has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified assets. On a perusal of the meaning of the categories of specific intangible assets referred to in section 32(1)(ii) of the Act preceding the term business or commercial rights of similar nature , it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words business or commercial rights of similar nature have been additionally used, clearly demonstrates that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of business or commercial rights cannot be restricted to only the aforesaid six categories of assets, viz., know-how, patents, trade marks, copyrights, licences or franchises. The nature of business or commercial rights can be of the same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets that form part of the tool of trade of an assessee facilitating smooth carrying on of the business. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see from M/s. AFC even if considered from this angle the assessee is eligible for depreciation as held by the Tribunal. In ITA.No.181/Mum/2008 in the case of M/s. Jyoti India Metal Industries Pvt. Ltd. vs. ACIT. The Hon ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (2012) 24 Taxmann.com 222 has held that goodwill is an asset eligible for depreciation. 21. In our considerate view, after considering the entire gamut of facts of instant case, we have no hesitation to hold that the assessee is entitled for depreciation on payment of ₹ 2.50 crores @ 25% which comes to ₹ 62,50,000/- as claimed by the assessee. The Assessing Officer is accordingly directed to allow the depreciation. Ground No.1 is accordingly allowed. 22. Ground No.2 is an alternative plea claiming the payment of ₹ 2.50 crores as a revenue expenditure. As we have already held that it is a capital expenditure eligible for depreciation, ground No.2 becomes otios and accordingly dismissed. 23. In the result, assessee s appeal is partly allowed. 24. ITA.No.4851/Mum/2010 : Revenue has shown its grievance by raising two grounds. Ground No.1 relates to the deletion of the addition m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) observed that similar issue was discussed in detail in the case of the assessee in assessment year 2005-2006 wherein it was held that the advance or loan by M/s. Nitch Financial services Pvt. Ltd. to the assessee was in the ordinary course of business where the lending of money is substantial part of the business of the company and in view of clause (ii) to section 2 (22) (e) such advance or loan are not dividend. The CIT(A) concluded that the facts and circumstances for the year under consideration being the same, following the decision in assessment year 2005-2006, deleted the entire addition made by the Assessing Officer. 29. Before us, the Counsel drew our attention to the decision of the Tribunal in assessee s own case in ITA.No.1496/Mum/2009 and ITA.No.949/Mum/ 2009 pertaining to assessment year 2005-2006 and submitted that the Tribunal has dismissed Revenue s appeal holding that section 2 (22) (e) is applicable in the case of deemed dividend only in the hands of shareholder. In the case under consideration the assessee-company is not share holder of NFSPL. Therefore, in the light of judgment of jurisdictional High Court in the case of Universal Medicare 190 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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