TaxTMI 
TaxTMI 
2015 (1) TMI 421
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....of the Act on the facts and circumstance of the case, thereby the assessment is void-ab-initio. 3) That the Hon'ble CIT(A) erred in upholding the order of the learned AO in making an addition of Rs. 15,926,686 on account of disallowance of depreciation claimed on intangible assets recorded as Goodwill in the books of accounts; 4) That the Hon'ble CIT(A) has erred in law by not providing an opportunity to the Appellant for representation and passing an ex-parte order despite the written request made by the Appellant to keep the matter in abeyance till the disposal of appeal by the Hon'ble Bench for the AYs 2007-08 and 2008-09 involving identical grounds; 5) Even if the order is passed ex-parte, the Hon'ble CIT(A) has erred by not considering the Hon'ble Supreme Court decision in the case of Commissioner of Income-tax Vs SMIFS Securities Limited (348 ITR 302); 6) That the Hon'ble CIT(A) erred in law by holding that the reassessment was vali....
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.... in the case of Commissioner of Income-tax Vs SMIFS Securities Limited (348 ITR 302); 5) That the Hon'ble CIT(A) erred in law and on facts by disregarding the contention of the Appellant that the Goodwill recorded in the books represents intangible assets eligible for depreciation under section 32(1 )(ii), although the same was recorded as Goodwill in the books of accounts; 6) That the Hon'ble CIT(A) erred in law and on facts by holding that depreciation on 'Goodwill' is not allowable since the same does not find a mention in the words used in section 32(1 )(ii) of the Act, although the Appellant has submitted that the amount recorded as 'Goodwill' in fact represents amount paid towards intangible assets eligible for depreciation; and 7) That the Hon'ble CIT(A) erred in law and on facts by granting restrictive meaning to section 32(1)(ii) of the Act;" 4. Both these appeals relating to the same assessee on similar issue of disallowance of depreciation on goodwill/intangible assets were hea....
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....tered into a Business Purchase Agreement with RAnbaxy Laboratories Limited for purchase of the entire Animal Health Care and Diagnostics Business Division of Ranbaxy. As per the claim of the assessee As a part of the BPA, all the assets, personnel, marketing capabilities, licenses, permits, leases, tenancy rights, contracts and all other rights and powers etc related to the Allied Business divisions were transferred by Ranbaxy to RFCL for a consideration of Rs. 62 Crores. Further, the above consideration comprised the value for both tangible as well as intangible assets. The intangible assets acquired by RFCL were in the nature of trademarks and brand names, client portfolio consisting of the detailed list of wholesale stockists and all marketing and promotional information and documents in relation to the products, all licenses, covenants, permissions, health registrations, approvals and concessions from any Government authority for carrying on the Allied Business, all other information and technology in relation to the Allied Business including without limitation the manufacturing know-how, in particular the specifications a....
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....nbaxy by the assessee, though during the financial year 2005-06 and referred to various clauses of the Business Purchase Agreement entered into between the assessee and transferor and had also considered various aspects of the issue, bifurcation of total value between different assets and also the nature of intangibles acquired by the assessee in line with Business Purchase Agreement entered into with M/s Ranbaxy Laboratories. The Tribunal vide paras 19 to 30 had observed as under: "19. The issue arising before us is whether the assessee is entitled to the claim of depreciation on the said acquisition of intangible assets in line with the acquisition of business of Animal Health Care and Diagnostics Business divisions of Ranbaxy and/or also whether the assessee is entitled to the claim of depreciation on the amount booked under the head goodwill simpliciter. 20. Under the amended provisions of section 32 of the Act w.e.f. 1.4.1999, ambit of depreciation has been enlarged to cover both the tangible and intangible assets. The depreciation on buildings, machinery plant of fu....
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....ademarks, licenses or franchises" but must be of similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred in Section 32(1)(ii) of the Act preceding the term "business or commercial rights of similar nature", it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words "business or commercial rights of similar nature" have been additionally used, clearly demonstrates that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of "business or commercial rights" cannot be restricted to only the aforesaid six categories of assets, viz., knowhow, patents, trademarks, copyrights, licenses or franchises. The nature of "business or commercial rights" can be of the same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets that form part of the tool of trade of ....
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....A.T. Mumbai "G" Bench in the case of DCIT vs. Weizman Forex Ltd. in ITA.No.3571/Mum/2011 observed that the definition of the asset which is a subject matter of the transfer consists of all contract, licenses, franchaise, distribution net work, customer lists, marketing strategies and software and when the intangible asset being commercial/business rights diminished in value or physical wear and tear is not an essential condition for admissibility for depreciation, if the asset is used as a business tool for earning income." 24. The above said ratio was referred to by Mumbai Bench of the Tribunal in M/s India Capital Markets P. Ltd. Vs. DCIT (supra) wherein the purchase of clientele business by the assessee from M/s AFC was held to be right which could be used as a tool to carry on the business and the consideration paid for which was held eligible for depreciation. 25. As pointed out in paras hereinabove the assessee in addition to building, plant & machinery, furniture, fixtures, vehicles and net current assets alongwith brands valued at Rs. 49.26 crores had also acqui....
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.... Act. 27. The second aspect of the issue is that the assessee had booked the said consideration of Rs. 12.62 crores as goodwill in its books of account. In this regard also the assessee is entitled to the claim of depreciation on the goodwill as the Hon'ble Supreme Court in CIT Vs. SNIFS Securities Ltd. (supra) held that the goodwill by itself was an intangible asset under Explanation 3(b) to section 32(1) of the Act and is eligible for deduction. The relevant portion of the ratio laid down by the Hon'ble Supreme Court is as under: "The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 ['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 'assets' and 'block of assets' shall mean-la] tangible assets, being buildings, machinery, plant or Furniture; [b] ....
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....see was wholly owned subsidy of the seller company and perusal of paras of the BPA reflects that the payment of the purchase price by the assessee would make it entitle to all rights, titles and interest of the seller in the allied business. We find no merit in the plea of the learned D.R. for the Revenue in this regard. The assessee having paid composite amount for acquisition of complete allied business of Ranbaxy Laboratories Ltd. and auditors having allocated the value to the tangible assets, the brands and balance to goodwill, establish the case of the assessee that it had paid the consideration for acquisition of the enlisted assets i.e. the list of stockists, distribution and marketing agreements, lease agreements, list of employees, various licences and manufacturing know-how of the allied business and the assessee was entitled to claim of depreciation on value of such assets under section 32(1)(ii) of the Act. The next stand of the learned D.R. for the Revenue that goodwill was covered in the agreement and is described as part of the agreement establishes the case of the assessee that it had contributed part of the consideration for acquisition of the goodwill of the busin....
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....l on various acquisitions and the Assessing Officer had disallowed the claim of the assessee following his earlier order in assessment years 2007-08 and 2008-09. During the year under consideration the Assessing Officer had disallowed depreciation to the tune of Rs. 2,82,19,950/-. We find that the facts of the present case are identical to the facts in assessment year 2008-09 wherein the assessee in addition to the earlier acquisition of Animal Health Care and Diagnostics Business of Ranbaxy Laboratories Ltd. had further acquired entire biomed division of Wipro Ltd. and entire Medical Diagnostics business of Godrej Industries. We find that the Tribunal in ITA No.294/Chd/2012 alongwith lead order in ITA No.293/Chd/2012 had addressed the facts of acquisition made by the assessee vide paras 30 to 38 of the order dated 2.4.2013. The Tribunal vide paras 30 to 38 vide order dated 2.4.2013 directed the Assessing Officer to allow depreciation on intangible assets booked as goodwill in line with the decision in ITA No.294/Chd/2012. The relevant paras of the order of the Tribunal (supra) are as under: "30. The facts of the case in....
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....re biomed division of Wipro Ltd. comprising of Diagnoostices, Medical systems and life sciences business (hereinafter referred to as "the Allied Business"). Clause 2.2 of the BAA details the assets, rights, titles, etc of M/s Wipro Ltd. that were conveyed to the assessee in consideration for the purchase price as a going concern on a slump sale basis. The relevant extract of clause 2.2 is as under: "2.2 The Seller shall according to the provisions of this Agreement on the Closing Date, as part of the Specified Business, transfer all rights, title and interest of the Seller in the Specified Business, together with the said Movable Assets, Current Assets, Assumed Liabilities, sake Employees, said Contracts, goodwill, consumables and all other rights and privileges in relation thereto to the Purchaser." 35. The allied business of M/s Wipro Ltd. was purchased by the assessee for a consideration of Rs. 13.297 crores. The list of trademarks, contracts and licenses, employees, insurance policies etc that were acquired by the assessee as ....