TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 132
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....aluable intangible asset, the appellant is entitled to depreciation as permitted u/s 32 of the Income-tax Act. 4. That the learned CIT(A) ought to have seen that the definition of "block of assets: read with Appendix 1 of Income Tax Rules clearly permits the appellant to avail depreciation on intangible assets deployed by it in its business. " I.T.A. No.2890/Del./2009-AY 2005-06 1. "That on the facts and circumstances of the case, the learned CIT(A) has erred in confirming the reduction of loss declared by the appellant, by concurring with the Assessing Officer that certain items of expenditure/allowance are not allowable to it. 2. That the learned CIT(A) ought to have seen that the payment of goodwill arose in the appellant's case at the time of acquisition of a running business and it being a valuable intangible asset, the appellant is entitled to depreciation as permitted u/s 32 of the I.T. Act. 3. That the learned CIT(A) ought to have seen that the definition of "block of assets" read with Appendix 1 of Income Tax Rules clearly permits the appellant to avail depreciation on intangible assets deployed by it in its business. 4. That in any view of the matter, the action of ....
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....f statutes.. 3.1 Similarly, in the AY 2005-06, the AO disallowed the claim for depreciation of Rs.32,01,477/- on goodwill. 4 On appeal, the ld CIT(A) decided the appeal for the AY 2005-06 first and upheld the findings of the AO in the following terms:- "4.4 I have considered the submissions made by the learned AR. First of all, it shall be necessary to look into the facts of the case laws on which the appellant relied. In the case of S.C. Cambatta & Co. Pvt. Ltd. vs. Commissioner of Excess Profit Tax (supra), the issue related to Excess Profit Tax Act and the issue in that case is not at all relevant and applicable to the* facts of the instant case. In the case of CIT vs. B. C. Srinivasa Shetty (supra), the assessment year involved was 1966-67 and the issue at hand was whether transfer of the goodwill of a newly commenced business can give rise to a capital gain taxable under section 45 of the Act. There is no discussion on the provisions of section 32 and whether depreciation is allowable on goodwill or not. In view of the above, I hold that the ratios of these two case laws are not applicable to the instant case. 4.5 The statutory expression of the provision granting d....
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.... business or commercial rights of similar nature" also must be in the same genesis or, category with specific and elucidated identity of commercial or business nature. Therefore, in the light of the statutory provisions contained in Section 32(1) (ii), the goodwill acquired by the assessee does not come under the expression of any other business or commercial rights of the nature similar to knowhow, patents, copyrights, etc. Another argument advanced by the learned AR is that even though the consideration is stated to be paid for acquiring the goodwill, the assessee has specified the rights acquired by the assessee, more particularly, in the agreement which included all business and commercial rights". The expression "all business and commercial rights" used in the agreement is too a generic expression which does not find similarity with the specific expressions like know-how, patents, licences, etc. Therefore, such a very general expression of business and commercial rights cannot be equated with the expression of "any other business or commercial rights of similar nature" occurring in Section 32(1) (ii). In support of above, reference can be made to the case law of R.G. Keswani....
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....was paid towards the reputation which the Amalgamating Company was enjoying in order to retain its existing clientele. The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 [Rs.Act', for short]. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: "Explanation 3.-- For the purposes of this sub-section, the expressions Rs.assets' and Rs.block of assets' shall mean-- [a] tangible assets, being buildings, machinery, plant or furniture; [b] intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature." Explanation 3 states that the expression Rs.asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words Rs.any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression Rs.any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while inter....
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....5-06, relating to disallowance of expenses, we find that the AO disallowed prior period expenses of Rs.9,60,563/- on account of freight and breakage without analyzing to as to when the liability for these expenses crystallized. Similarly an amount of Rs.50,000 was added back towards expenses incurred in earning exempt dividend income of Rs.3,67,288/- in terms of provisions of sec. 14A of the Act ,following his decision in the preceding assessment year. 9. On appeal, the ld. CIT(A) upheld the disallowance of prior period expenses on the ground that the assessee was following mercantile system of accounting. As regards disallowance in terms of provisions of sec.14A of the Act, the ld. CIT(A) followed the decision in ITO vs. Daga Capital management (P) Ltd.,26 SOT 603(Mumbai)(SB) and upheld the disallowance. 10. We have heard the ld. DR and gone through the facts of the case.As regards disallowance of prior period expenses, as is apparent from the aforesaid facts, the AO disallowed the amount without analyzing as to how the liability for each of the expenditure comprised in the amount of Rs.9,60,563/- crystallised in the year under consideration . There is nothing to suggest as to w....
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.... recorded his specific findings as to how the liability for each of the expenditure comprised in the amount of Rs.9,60,563/- crystallised in the year under consideration or otherwise. In these circumstances and in the interest of justice and fair play, we vacate the findings of the ld. CIT(A) and restore the issue raised in ground no.1 of appeal to his file, with the directions to readjudicate the issue in the light of our aforesaid observations and the judicial pronouncements and thereafter, dispose of the matter in accordance with law after allowing sufficient opportunity to both the parties ,bringing out clearly as to whether or not the liability for each item of the expenditure comprising the amount of Rs.9,60,563/- , really crystallized in the hands of the assessee during the year under consideration. Needless to say that while redeciding the appeal, the ld. CIT(A) shal l pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act . With these directions, ground no. 1 in the appeal o relating to prior period expenses is disposed of, as indicated hereinbefore. 11. As regards disallowance in terms of provisions of sec. 14A of the Act,....
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....ce Mfg. Co. Ltd. v Dy. CIT [2010] 328 ITR 81, wherein it has, inter alia, been held that the provisions of Rule 8D of the said Rules has prospective effect and shall apply with effect from assessment year 2008-09 onwards. 36. Insofar as sub-sections (2) and (3) of Section 14A are concerned, they have also been introduced by virtue of the Finance Act, 2006 with effect from 01.04.2007. This is apparent, first of all, from the Notes on Clauses of the Finance Bill, 2006 [Reported in 281 ITR (ST) at pages 139-140]. The said Notes on Clauses refers to clause 7 of the Bill which had sought to amend Section 14A of the said Act. It is specifically mentioned in the said Notes on Clauses that:- "This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years." 37. Furthermore, in the Memorandum explaining the provisions in the Finance Bill, 2006 [281 ITR (ST) at pages 281-281], it is once again stated with reference to clause 7 which pertains to the amendment to Section 14A of the said Act that:- "This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the ass....