2012 (9) TMI 975

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....09,375/-. 1.1. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in upholding the disallowance carried out by the AO in respect of depreciation claimed on the marketing network acquired by the appellant without appreciating that the marketing network was eligible for depreciation as an intangible asset u/s 32(1)(ii). 2. Disallowance of depreciation on Goodwill Rs. 8,43,750/-. 2.1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in upholding the disallowance carried out by the Assessing Officer in respect of depreciation on goodwill acquired by the appellant without appreciating that the goodwill was eligible for depreciation as an intangible asset u/s 32(1)(ii)."....

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....tion was confirmed by the CIT (A). As per the authorities below, the specified list of intangible assets given in section 32(1)(ii) does not contain distribution network and therefore, the claim of the assessee was not allowable. Aggrieved with the above, the assessee filed the present appeal with the ground given above. 5. During the proceedings before us, learned Counsel mentioned that the same is a covered issue in favour of the assessee vide the order of this Tribunal dated 30.3.2012 delivered in the case of Weizmann Forex Ltd. vs. DCIT 51 SOT 525. From the 'headnote' of the said decision of the Tribunal, learned Counsel read out proposition that "Whether since assessee paid consideration for purpose of enhancing its network in field o....

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....ansfer services being the representative of Western Union network including rights of AFL, qua sub representative. After the transaction of transfer the assessee acquired the right to become representative of Western Union in place of AFL and consequently to deal with and to do the business through the sub representative earlier working with AFL. In this way, the assessee gets the rights to have access with the marketing network consisting of sub representative having infrastructure, customer lists, marketing strategies etc. Hence, by virtue of agreement of transfer, the assessee acquired the rights to avail the infrastructure of the networking earlier available to AFL for doing the business of money transfer being representative Western Un....

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.... 32 of the Act has to be understood in the context of purpose of such rights obtained as for effectively carrying on the business and commerce. We find that the said decision was taken after considering the decision of the Tribunal, Mumbai Bench in the case of Skyline Caterers (P) Ltd. vs. ITO (2008) 20 SOT 266 (Mum) (SMC) and other reported decisions in the cases of CIT vs. Hindustan Coca Cola Beverages (P) Ltd (2011) 331 ITR 192 and CIT vs. Elecon Engg. Co. Ltd (1974) 96 ITR 672, which was subsequently upheld by the Hon'ble Supreme Court in 166 ITR 66 for the proposition that diminution in value of the asset is not a relevant factor for allowing the depreciation u/s 32 of the Act. Thus, the facts of the instant case of the assessee are co....

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....uote hereinabove Explanation 3 to section 32(1) of the Act: "Explanation 3-For the purposes of this subsection, the expression '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, licenses, 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, licenses, 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 good will wou....