TaxTMI 
TaxTMI 
2009 (7) TMI 1099
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.... this lump sum payment of Rs. 50 lakhs as an item of "intangible asset" and claimed depreciation. The depreciation amount was worked out to Rs.6,25,000. The Assessing Officer found that the assessee has not acquired any intangible asset in the nature of know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. The Assessing Officer found that the assessee has merely obtained the right to use the premises let out by M/s. M. M. Rubber Co. Ltd. as its Chennai office. The Assessing Officer further noticed that the agreement entered into between the assessee and M/s. M. M. Rubber Co. Ltd. prohibits the assessee from exploiting its tenancy right in any commercial manner and the right itself was not transferable. Accordingly the Assessing Officer came to a conclusion that it was only a case of rent advance/lease deposit and therefore the payment of Rs. 50 lakhs cannot be treated as paid for acquisition of any intangible asset. When the matter travelled through the Commissioner of Income-tax (Appeals), in first appeal, she accepted the contention that the payment of Rs. 50 lakhs made by the assessee company to M/s. M. M.....
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....issioner of Income-tax (Appeals) ought to have held by applying the principle of noscitur a sociis that the word `licences' used in Explanation 3 to section 32 refers to a right to manufacture or produce things and that it does not apply to a licence to occupy an immovable property. The learned Commissioner of Income-tax (Appeals) ought to have realised that the sum of Rs. 50 lakhs given by the assessee was only a rent advance which was refundable to the assessee on the expiry of the licence." Shri M. K. Gopinathan, the learned Assistant Commissioner of Incometax, appearing for the Revenue invited our attention to clause (b) of Explanation 3 given under section 32(1). The said explanatory clause provides that "intangible assets" means being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. He explained that the meaning of the expression "licences" should be read in the company of the preceding words like know-how, patents, copyrights, trade marks, which by themselves form a separate class by virtue of its commercial value. The expression "licences" provided in clause (b) cannot be equated with leave and ....
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.... intangible asset owned wholly or partly and used for the purpose of business. As per Explanation 3 to section 32, the expressions "assets" and "block of assets" shall include intangible assets being licences or any other business or commercial rights of similar nature. From the assessment year 1999-2000 onwards, depreciation is allowable on intangible assets. The learned chartered accountant further explained that the property was taken on lease on March 20, 2003 for Rs. 50 lakhs, which was paid as consideration, as per clause 3(a) of the agreement. On payment of this sum, the assessee received the licence and in the nature of business commercial right for occupying the property and carrying on the business. He is relying on the judgment of the Supreme Court in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775, wherein the Supreme Court has held that section 32 confers a benefit and the provision should be so interpreted and the words used therein to be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature. The learned chartered accountant explained that the term "owned" must be assigned a wider meaning. Anyone in....
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....ts Ltd. [1997] 227 ITR 779 (Ker) ; CCAP Ltd. v. CIT [2004] 270 ITR 278 (Cal) ; 193 CTR 74 ; Amway India Enterprises v. Deputy CIT [2008] 301 ITR (AT) 1 (Delhi) ; 111 ITD 112 ; Vyomit Shares, Stocks and Investments v. Deputy CIT [2007] 290 ITR (AT) 227 (Mumbai) ; 106 ITD 408. We heard both sides in detail. Section 32(1)(ii) provides for depreciation on intangible assets acquired on or after the 1st day of April, 1998. Clause (ii) of sub-section (1) of section 32 explains the nature of intangible assets as know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature being intangible assets acquired on or after the first day of April, 1998. A reading of the provisions of law contained in section 32(1)(ii) provides that the intangible assets entitled for depreciation are a specific set of assets/rights of similar nature. In addition to that, the intangible assets must be acquired by an assessee either in full ownership or partial ownership. In furtherance of the main provisions of law contained in section 32(1)(ii), Explanation 3 again throws light on the concept of intangible asset. While explaining the expressions ....
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....to presume that the expression licence, provided in section 32(1)(ii) is an endless expression and even a tenancy right can be brought under it. The expressions licence and business or commercial rights appearing in the company of know-how patents, copy rights, trade marks, etc., cannot be singled out and imputed with a different meaning. Ejusdem generis is the rule of a generic word following more specific ones. The rule is that when general words follow specific words of the same nature, the general words must be confined to the same kind as those specified. The specific words must form a distinct genus or category. This rule reflects an attempt to reconcile incompatibility between specific and general words. The specific words provided in section 32(1)(ii) conform a distinct genus or category inasmuch as all those expressions relate to exploitable know-how patents, copyrights, trade marks, etc. which are always acclaimed as business and commercial properties. In such circumstances, the expressions licence and business or commercial rights also should be read along with the meaning of those specific words forming themselves into a special category. If this principle of interpret....
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....ght of occupancy of the property, there cannot be any refund of the deposit. It is only on termination of the tenancy right that occasion arises for the refund of deposit/advance. That does not make the payment non-refundable. That only decides the point of time of refund. But otherwise, the payment of Rs. 50 lakhs is refundable when the lease and licence agreement is terminated. It is stated in the agreement that it is a lease agreement for a period of three years, which can be extended from time to time on the basis of the agreement to be arrived at between the assessee and M/s. M. M. Rubber Co. Ltd. The assessee does not acquire any commercial licence which could be exploited for producing or manufacturing a new product or doing any other business or operational activities. Basically, it is a transaction of a right in an immovable property. Immovable property can be let out on rent or leave and licence basis or on lease. These are different modes that the owner of an immovable property allows a tenant or lessee to exercise a right over the property over a specific period for a specified purpose. In common parlance, the relation is nothing but landlord and tenant. What the asses....