TMI Blog2019 (12) TMI 1518X X X X Extracts X X X X X X X X Extracts X X X X ..... rtization of intangible assets, including goodwill, fee paid to consultants and expenses incurred for acquisition of business of DC Gupta construction Pvt. Ltd while computing book profit under section 115JB of the Act. We noted that the AO made addition in the book profit of the assessee but the facts are that the provisions of Sec. 115JB of the Act requires that net profit should be prepared in accordance with Part II and III of Schedule VI to Companies Act. In the instant case, because of specific accounting treatment followed by the assessee pursuant to High Court order, the financial statements are not showing true and fair view and are contrary to Accounting Standards, provisions of Companies Act and Schedule VI thereto. In the instant case, what has been done pursuant to High Court scheme is not affect the accounting to be made as per companies Act while arriving at the true profit as per Part II of Schedule VI and hence, the assessee is entitled to make necessary adjustment in order to incorporate the impact of the said observation to the Profit as shown in the profit Loss account to arrive at correct Book Profit under section 115JB of the Act. Hence, the CIT(A) has ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company for acquiring Customer Contracts even though such payment made by the assessee company could not be considered as purchase of goodwill or any other business or commercial right within the meaning of Section 32(1)(ii) of the Income-tax Act, 1961? 3. Briefly stated facts are that the assessee is a Public Limited Company and wholly owned subsidiary of Blue Star Limited which is incorporated on 22.06.2010. The assessee is engaged in the business of providing contractual services relating to plumbing and fire-fighting projects acquired by its parent company from DS Gupta Constructions Private Limited (DSGCPL) on a slump sale basis via business purchase agreement dated 31.05.2010 and later assigned to the assessee under the Deed of Adherence dated 01.09.2010. Under the business projects agreement dated 01.09.2010 intangible assets comprising of customer contracts, non-compete fee, business and technical knowhow, trade mark, goodwill will acquire by assessee for a sum of ₹60 crores and recorded in the books of accounts of the assessee based on valuation report from an independent valuer. The assessee claimed depreciation under section 32 of the Act for an amount of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.11 as under: - 5.11 I have carefully considered the submission made on behalf of the appellant. In the instant case, the appellant has claimed depreciation on the customer contracts being intangible asset. Considering the relevant judicial decisions cited by the AR, it is clear that, the Customer contract falls under the expression any other business or commercial rights of similar nature as defined in Explanation 3 to Sec. 32(1)(ii) at hence eligible for depreciation. Respectfully following jurisdictional ITAT, Mumbai in the case of Indian Capital Markets P. Ltd. and also following the Hon'ble in the case of Smifs Securities Ltd. 2012 348 ITR. I am of the considered the opinion that the contract ratio agreed by the appellant company is found to be untangible asset and therefore depreciation should be allowed and accordingly this ground of appeal is allowed. The aforesaid view is in accordance with the decision of the jurisdictional Tribunal in the case of Indian Capital Markets P. Ltd (Supra). Thus, the appellant is eligible for depreciation and the addition made by the A.O. is hereby deleted. This ground is thus allowed. Aggrieved, now Revenue is in appeal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held by the Tribunal. In ITA.181/M/2008 in the case of M/s. Jyoti India Metal Industries P. 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. After considering the entire gamut of facts of instant case, it was held that the assessee is entitled for depreciation on payment of ₹ 2.50 crores at 25 percent which comes to ₹ 62,50,000/-as claimed by the assessee. The AO is accordingly, directed to allow the depreciation Ground No.1 is accordingly allowed. 6. It is specifically held that the customer contract falls under the expression any other business or commercial right on similar nature as defined in explanation-3 to Section 32 (1)(ii) of the Act and hence eligible for depreciation. The factual position is also the same in the instant case also wherein the assessee company which is subsidiary of Blue Star Ltd. (including ₹ 60 Crs. for Intangible Assets Goodwill) from D.S. Gupta Construction Pvt. Ltd. and thereafter the Blue Star Ltd. under a Deed of Adherence, assigned the business to the assessee company and the assessee company claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slump consideration of ₹ 44.7 Crores paid by the transferee, between tangible assets and intangible assets (described as goodwill) acquired as part of the running business. The AO, however, held that depreciation in terms of Section 32(1)(ii) of the Act was not, in law, available on goodwill. The CIT(A) and the ITAT approved the reasoning of the AO 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 the preceding words knowhow, patents, copyrights, trademarks, licenses, franchises . It was urged that the Supreme Court had clearly held in Techno Shares Stocks Ltd. ( supra) that Our judgment should not be understood to mean that every business or commercial right would cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted the claim of the assessee and decided in favour of the assessee by observing in Para 7.9 and 7.10 as under: - 7.9 I have carefully considered the submission made by the appellant and gone through the relevant judicial decisions cited by the appellant with respect to the admissibility of fresh claims. In view of the various judicial decisions, it is clear that the Commissioner of Income Tax (Appeals) has plenary power in disposing off an appeal. Similar view has been taken by the Apex Court in Jute Corporation (supra), wherein the Apex court, in the context of section 251(1)(a) of the 1961 Act, held that there is no reason as to why the appellate commission cannot modify the assessment order or admit an additional ground even if not raised before the ITO. According to the Apex Court, no exception could be taken to this view as the Act does not place any restriction nor limitation on the exercise of appellate power Thus, additional claim of the appellant is admitted and is decided below on merits. 7.10 After perusing the submissions made and judicial decisions relied on by the appellant, it is being prepared in noted that the provisions of Sec. 115JB requires th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 5242/Mum/2017 for AY 2013-14 is as regards to the order of CIT(A) allowing the claim of reimbursement of expenses to Blue Star Limited amounting to ₹1,1,98,917/-. For this Revenue has raised the following ground: - 3. Whether on the facts and in the circumstances and in law, the Ld. CIT(A) was justified in allowing reimbursement of expenses to Blue Star Limited amounting to ₹1,15,98,917/-, without considering the facts that assessee has failed to produce any documentary proof for allowing the expenses? 15. The AO disallowed the claim of reimbursement expenses by stating that the assessee has not filed the details including bills and vouchers by observing as under: - 6. . Assessee vide its letter dt.04/03/2016, submitted only a chart of date wise vouchers of expenses amounting to ₹1,15,98,917/-. However, no documentary evidences e.g. copy of agreement for sharing of expenses, how it is determined that these expenses incurred are related to the assessee and how these expenses incurred and attributable to the business of the assessee etc. are given by the assessee. Therefore, it is concluded that assessee does not have any docum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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