TaxTMI 
TaxTMI 
2010 (8) TMI 439
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....tion 32(1)(ii) of the Act defines Block of Assets to mean Intangible assets being know-how, patents, copy-rights, trade-marks, licenses, franchises or any other business or commercial rights of similar nature. The order passed by the Assessing Officer allowing, depreciation on goodwill was prima facie erroneous and also prejudicial to the interests of revenue as there is no mention of such asset as 'goodwill' in the said provisions. The Assessing Officer had allowed the depreciation without application of mind as the order was completely silent about this aspect. Hence he issued a notice for revision under section 263 of the Act, dated 11-2-2008 to show cause as to why the assessment order dated 8-12-2006 passed under section 143(3) of the Act should not be revised or cancelled or modified within the terms of section 263 of the Act. The assessee vide letter dated 5-5-2008, contended that the issue regarding depreciation on goodwill was specifically raised by the Assessing Officer during the assessment proceedings vide question No. 3 of the questionnaire dated 24-10-2006, for which the assessee filed written submission vide letter dated 22-11-2006 and since the issue was already exa....
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.... by the ld. Assessing Officer is erroneous and prejudicial to the interest of the revenue. (3) On the facts and in the circumstances of the case, the ld. CIT has legally erred in passing the impugned order in violation of the principles of natural justice." 4. At the time of hearing the ld. Counsel for the assessee at the outset submits that in the year under consideration the assessee has claimed depreciation Rs. 19,62,53,970 including depreciation Rs. 80,90,318 at the rate of 25 per cent under section 32(1)(ii) on intangible assets on opening WDV of Rs. 3,23,61,272 vide chart of computation appearing at pages 88, 89, notes to the return of income at page 98 (item No. 4) of the assessee's paper book. He further submits that in the immediately preceding year i.e., assessment year 2003-04 the similar claim was made vide chart of computation of income appearing at pages 5, 6, notes to the return of income at page 16 (item No. 12) of the assessee's paper book. He further submits that in the immediately preceding year i.e., for assessment year 2003-04 the Assessing Officer has issued a questionnaire annexed to notice under section 142(1) of the Act dated 16-8-2005 wherein in....
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....rroneous nor prejudicial to the interests of the revenue. He further submits that since the depreciation on goodwill has already been allowed for the assessment year 2003-04 and in the year under consideration the claim of depreciation on goodwill was made on opening WDV which has been allowed by the Assessing Officer after due examination. 5. On the allowability of depreciation on goodwill the ld. Counsel for the assessee submits that as table and chair form part of the furniture on which depreciation is allowable likewise all these items which have been mentioned by the ld. CIT in para 5 of his order do constitute intangible asset being goodwill as provided under section 32(1)(ii) of the Act on which the depreciation was claimed and allowed by the Assessing Officer. He, therefore, submits that the assessee's case falls outside the jurisdiction of section 263 of the Act. 6. The reliance was also placed in Hindustan Coca Cola Beverages (P.) Ltd. v. Dy. CIT [2009] 34 SOT 171 (Delhi), for the proposition that 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 he had be....
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....ssue is bad in law. Further, mere lack of discussion of the issue in the assessment order would not render the said order erroneous. Merely because Assessing Officer does not meticulously deal with the issue, merely because the assessment order is brief, the said order cannot be treated as erroneous. 10. Reliance was also placed on the decisions in CIT v. Max India Ltd. [2004] 268 ITR 128 (Punj. & Har.) affirmed by the Hon'ble Apex Court in CIT v. Max India Ltd. [2007] 295 ITR 282 and Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) for the proposition where two views are possible and Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of the Revenue. He therefore, submits that in the light of the above facts and law, the ld. CIT was not justified in setting aside the assessment order passed by the Assessing Officer to be made afresh and, therefore, the order passed by the Assessing Officer be restored. 11. On the other hand, the ld. DR while relying on the order of the ld. CIT submits that at no stage during the course of assessment proceeding the Assessing Officer has not obtain....
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.... the view that : "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with the expression 'erroneous' order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated a prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law." 15. Keeping in mind the interpretation of the Hon'ble Apex Court (supra), it is necessary to go into the factual aspects of the matter. We are reproducing the order passed by the revisional authority, the relevant para is as under :- "5. The explanation filed by the representative of the assessee was carefully considered. On perusal of the list of these assets which were treated as goodwill by the assessee on which depreciation was claimed it is seen that thes....
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....ed 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. We are in considered agreement with the view of the Co-ordinate Bench. As for learned Departmental Representative's contention that the CIT cannot be a silent spectator to such a wrong grant of depreciation and that the CIT must safeguard the interest of the Revenue, all we can say is that, on the facts of the present case and particularly when the CIT has withdrawn depreciation on goodwill on the ground that such a claim is patently inadmissible, we are unable to approve his stand on merits and we must also follow the Co-ordinate Benches which have decided the same issue, on materially identical facts, in favour of the assessee. In view of the above discussions, and for the detailed reasons set out above, CIT indeed erred in invoking jurisdiction under section 263. The impugned order is, therefore, set aside." 18. In A.P. Paper Mills Ltd. (supra), it has been observed and held as under :- "As per scheme ....
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....parties and perused the material on record. The issue is as to whether the depreciation claimed on goodwill has rightly been allowed by the learned CIT(A). The learned CIT(A), while allowing the claim of depreciation, held that the Assessing Officer, after having allowed the claim of depreciation in the assessment year 2002-03, could not have taken a different stand in the succeeding assessment year. It was observed that in the preceding assessment year, the Assessing Officer had accepted the goodwill per se as a block of assets, on which, depreciation was allowed at Rs. 1,87,50,000 and that thus, the written down value of the assets at the beginning of the year under consideration was Rs. 5,62,50,000. It was also observed that the assessee had acquired licence, goodwill, contracts, stock, as a result of demerger of the Textile division of M/s. CLC & Sons (P.) Ltd., with Apro Biochem & Engg. Ltd., as the assets and liabilities of M/s. CLC & Sons taken over by the assessee company. 7. We do not find any error in the order of the ld. CIT(A). Firstly, in the immediately preceding assessment year, i.e., assessment year 2002-03, the assessee claimed depreciation on goodwill acquired ....
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.... revisional authority that no depreciation is allowable on such items of intangible assets or the depreciation allowed by the Assessing Officer on such assets is not permissible under the law or such items do not fall either under the category of revenue expenditure or capital expenditure. It is also not the case of the revenue that the said items are personal in nature. Further, in the case of CLC Global Ltd. (supra), it has also been observed and held by the Tribunal in that case that what the assessee acquired was licence, continuation of agreement with mills, contract etc. These assets, even though they are termed as 'goodwill' cannot be said not to be intangible assets as specified in section 32(1)(ii) of the Act. This being so we are of the view that the approvals/registrations etc., amount to intangible assets entitled for depreciation under section 32(1)(ii) of the Act. 21. In this connection, it is useful to the analogous provision contained in the Central Excise and Salt Act (1 of 1944). The Hon'ble Supreme Court while considering the abovesaid provision held that the authority while exercising such power cannot direct the lower authority to complete the assessment in ....