2016 (2) TMI 84

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....A) has erred on facts and in law in deleing addition of Rs. 1,73,50,000/- on account of depreciation on goodwill. 2. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 58, 15,200/- on account of royalty paid. " 2. Briefly sated, the facts of this case are: during the processing of return of income filed by the assessee qua the Assessment Year 2008-09, declaring a loss of Rs. 1,25,40,533/-, the case was subjected to scrutiny and consequently, notices U/S 143(2) and 142(1) along with questionnaire, were served upon the assessee and in response thereto, Mrs. Vandana Gopal Sharda, CA/ AR appeared on behalf of the assessee, filed necessary details. 3. The assessee company is into the business of manufacturing and fabr....

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....the parties, gone through the material placed on record in the light of facts and circumstances of the case and orders of authorities below. 6. Ld. D.R. challenging the impugned order contended inter alia that Ld. CIT(A) has erred in deleting the addition of Rs. 1,73,50,000/- on account of depreciation on goodwill and deleting the addition of Rs. 58,15,200/- on account of royalty paid; that since the assessee was having enduring benefit of goodwill and the claim was made for non compete fee, the assessee was benefited so, the Assessing Officer has rightly disallowed the depreciation on 'goodwill. Ld. D.R. relied on the order passed by Assessing Officer. Ld. D.R. relied on the decision of Hon'ble Supreme Court in the case entitled ....

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....the assessee company has paid an amount of Rs. 6.94 crores for the purchase of right to use the brand name 'CARYAIR' on the basis of non assignable licence. 10. Now the first question arises for determination in this case is, "as to whether the consideration of Rs. 6.94 crores paid by the assessee for purchase of 'goodwill' is in the nature of intangible asset falling in the classification of assets as per Section 32(1 )(ii) of the Act for the use of trade mark 'CARYAIR'." 10.1 Similar issue arose before Income tax Appellate Tribunal, Delhi Bench 'E', New Delhi in the case cited as DCIT Vs Nitrex Chemicals India Ltd. in I.T.A. No. 3388IDelf2009 (supra) and has decided the issue in favour of the assessee by ....

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.... 3: For the purposes of this sub- section, the expressions 'assets' and '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 '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 any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression (any o....

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....rsity in the findings returned by Ld. CIT(A) hence, ground No.1 is determined against the Revenue. 12. Ground No.2: The assessee has debited an amount of Rs. 58,15,2001- in the P & L account under the head "administrative and other expenses' on the gourd that the same has been paid on account of 'royalty' as per the technical services and licence agreement between and CEIPL under Articles 4 and 6 of the agreement. However, Assessing Officer disallowed the claim of assessee by relying upon the judgement cited as Southern Switch Gear Ltd. V s CIT, 232 ITR 359 by holding that the right to manufacture certain goods exclusively in India should be taken to be an independent right, secured by the assessee from the foreign co., which....