TaxTMI 
TaxTMI 
2009 (8) TMI 838
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....this. The assessee before us is a domestic company engaged in the business of manufacturing and distribution of aerated and non-aerated beverages. Its assessment under section 143(3) was completed on 31-3-2004 at a net loss of Rs. 4,35,28,17,620. However, when learned Commissioner called for and examined the assessment records, she was of the view that "the assessment was erroneous insofar as it was prejudicial to the interests of the revenue since depreciation under section 32 had been claimed and allowed to the extent of Rs. 70,63,93,292 on 'goodwill' treating it as an "intangible asset" whereas "from a plain reading of Explanation 3 to section 32 of the Income-tax Act, 1961, it was clear that 'goodwill' is not covered in the meaning of the intangible assets which meant only know-how, patent, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature". It was in this backdrop, and vide notice dated 31-1-2006, that the assessee to show cause as to why the assessment order dated 31-3-2004 not be subjected to revision proceedings under section 263 of the Act. It was submitted by the assessee that there is no cause of action for revisio....
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....inter alia, these and other submissions, learned Commissioner was urged to drop the revision proceedings. 4. Learned Commissioner was, however, not impressed by the submissions so made by the assessee. While he took note of the fact that the assessee had, by way of a note to the accounts, justified and reasoned that what has been termed as goodwill is infact a valuable commercial asset similar to other intangibles mentioned in the definition of block of assets, he also stated that the "meaning of the term 'intangible assets' was clearly spelt out in the Act and the 'goodwill' did not find mention therein". Learned Commissioner observed that since the view taken by the Assessing Officer was unsustainable in law. Hon'ble Supreme Court's decision in the case of Malabar Industrial Co. Ltd. (supra) infact supports the assumption of jurisdiction under section 263 by the Commissioner. He further added that "whatever explanation of the term 'goodwill' that the assessee may chose to give in the notes in Annexure IV of the audit report in Form 3CD, it will not lead to its coverage in above meaning of intangible assets". Learned Commissioner also observed that it is not the brought forward v....
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....ing in the nature of know-how and depreciation was allowable on the same. Please justify your claim." 8. In response to the aforesaid question, the assessee, vide letter dated 8-1-2004, had submitted as follows :- "Goodwill is the consideration paid to various bottlers for marketing and trading reputation, trading style and name, marketing and distribution territorial know-how and information of territory. It includes know-how related to acquired business, customer database, distribution network, contracts and other commercial rights. Intangible assets like know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, acquired after 1-4-1998, are eligible for depreciation. Your assessee has, accordingly, claimed depreciation on goodwill acquired after 1-4-1998." 9. In the backdrop of the above facts, the first thing that we need to examine is whether or not a claim of depreciation on what is termed as goodwill in the books of account but is stated to be in the nature of covered by the scope of 'any other business or commercial rights of similar nature (i.e., 'know-how, patent, copyrights, trade marks, licences, fr....
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....al gave a categorical finding that the goodwill was paid only for retirement of a partner and "without acquisition of any intangible asset as contemplated under section 32(1)(ii)". The facts of the present case, in which the payment is made towards business acquired on slump price and a part of the price so paid is allocated to the intangible assets covered under the head 'goodwill', are materially different and have no resemblance to the case before the Ahmedabad Bench. The allocation of amount paid as a slump price is not in dispute and the fact that a part of consideration represents consideration for rights, as detailed in the audit report notes extracted above, is also not in dispute. The case of the Commissioner mainly is that depreciation is not admissible on goodwill but the fact the accounting treatment of a payment per se cannot govern its treatment in the income-tax proceedings. Even if an amount is termed as 'Goodwill' in the books of account but it is a business or commercial rights in the nature of know-how, patent, copyrights, trade marks, licences, franchises, the claim of depreciation is indeed admissible thereon. It is not that 'goodwill' is specifically excluded ....
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....ection 263. In these circumstances, in our considered view, from the fact that the Assessing Officer has not discussed the claim of depreciation on goodwill in the assessment order even though the same claim was allowed in the earlier years and even though the Assessing Officer had before him detailed explanation in support of legal claim, it cannot be inferred that the Assessing Officer did not apply his mind to the matter. His decision to accept the submission of the assessee may have been incorrect, but right now that is not the issue before us. The Assessing Officer decided not to reject the claim, admittedly after having had an opportunity to peruse the detailed submissions, and this stand by itself cannot imply that there was no application of mind. It is well settled in law that when Assessing Officer takes a possible view of the matter on merits, his order cannot be subjected to review merely because other view is possible, as held by the Hon'ble Supreme Court in the case of CIT v. Malabar Industrial Co. Ltd. ( 243 ITR 83)." 11. We are in considered agreement with the views of the Co-ordinate Bench. As for learned Departmental Representative's contention that the Commissio....