TaxTMI 
TaxTMI 
2016 (2) TMI 706
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....marketable, manufacturing right as well as trade name. Therefore, the surplus amount paid by the assessee would represent the payment made for commercial rights required by the assessee in connection with taking over of the unit from Ashok Leyland Limited. Therefore, according to the Ld. counsel, the assessee is entitled for depreciation on the goodwill in connection with takeover of the unit by the assessee. The Ld.counsel placed his reliance on the judgment of Apex Court in CIT v. SMIFS Securities Ltd. ((2012) 348 ITR 302. According to the Ld. counsel, goodwill is like intangible asset, therefore, entitled for depreciation at the rate of 25%. 4. On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee purchased the unit called "Ductron Castings Unit" during the financial year 2005-06 relevant to assessment year 2006-07, as going concern from Ashok Leyland Limited, for a total consideration of Rs. 62 Crores. The assessee-company apportioned the said payment of Rs. 62 Crores between tangible and intangible assets. The assessee has apportioned Rs. 147.57 lakhs towards goodwill, other than net current asset of Rs. 2237.15 lakhs. All ....
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....ssee over the value of net asset to be considered as goodwill arising on amalgamation. However, the Assessing Officer found that the goodwill is not an asset. However, the Apex Court found that the assessee had acquired a capital right in the form of goodwill because of which the market worth of the assessee-company stood increased. In those circumstances, the Apex Court found that the assessee is entitled for depreciation on the goodwill which is in the nature of commercial asset. In the case before us, it is not in dispute that the assessee has purchased Ductron Castings Unit from M/s Ashok Leyland Ltd. The assessee has paid over the value of net asset to the extent of Rs. 147.57 lakhs and claimed the same as cost of the goodwill. However, the Assessing Officer disallowed the claim of the assessee on the ground that the payment does not fall within the meaning of know-how, patent or copyright. The Assessing Officer has not considered the judgment of Apex Court in SMIFS Securities Ltd. (supra). The Apex Court, after considering the provisions of Explanation 3 to Section 32(1) of the Act found that the word "any other business or commercial rights of similar nature" in clause (b) o....
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....te source of income being independent undertakings. The Ld. D.R. further submitted that the new units at Sriperumbudur and Hyderabad were only in a formative stage and yet to become operational, therefore, the expenditure incurred by the assessee in the nature of salary, wages, professional and consultancy charges, travelling and conveyance expenditure will be in the nature of capital expenditure or pre-operative expenditure which will be capitalized. At the best, the assessee may claim the same over a period of five years at the rate of 1/5th per year under Section 35D of the Act. According to the Ld. D.R., the expenditure said to be incurred by the assessee is not for the business of the assessee. It is for setting up of new industrial undertakings. The new units established by the assessee may earn profit in the future. Therefore, there is no provision in the Income-tax Act to allow the expenditure incurred by the assessee in connection with setting up of new industrial undertaking. According to the Ld. D.R., the expenditure incurred by the assessee in setting up of new industrial undertakings should not be allowed as expenditure in the year in which the business activity or the....
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....dur and Hyderabad as revenue expenditure. 11. For the assessment years 2007-08, 2009-10 and 2010-11, the assessee has raised one more ground with regard to additional depreciation. 12. We have heard Ld.counsel for the assessee and the Ld. Departmental Representative. It is not in dispute that new machinery was installed during the year under consideration and the Assessing Officer has allowed 10% of depreciation since the machinery was put in use for less than six months. The assessee is claiming balance of 20% as depreciation in the year under consideration. Now the question arises for consideration is whether the additional depreciation which could not be allowed in the earlier year can be allowed during the year under consideration or not? This issue was examined by the Cochin Bench of this Tribunal in Apollo Tyres Ltd. v. ACIT (2014) 64 SOT 203. The Cochin Bench found that the additional depreciation can be allowed in the next year in case the same cannot be allowed in the earlier year. In fact, the Cochin Bench has observed as follows:- "9. We have considered the rival submissions on either side and also perused the material available on record. Section 32(1)(ii....
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....eciation which is equivalent to 20% of the actual cost of such machinery. The dispute is the year in which the depreciation has to be allowed. The assessee has already claimed 10% of the depreciation in the earlier assessment year since the machinery was used for less than 180 days and claiming the balance 10% in the year under consideration. Section 32(1)(iia) does not say that the year in which the additional depreciation has to be allowed. It simply says that the assessee is eligible for additional depreciation equal to 20% of the cost of the machinery provided the machinery or plant is acquired and installed after 31-03-2005. Proviso to section 32(1)(iia) says that if the machinery was acquired by the assessing during the previous year and has put to use for the purpose of business less than 180 days, the deduction shall be restricted to 50% of the amount calculated at the prescribed rate. Therefore, if the machinery is put to use in any particular year, the assessee is entitled for 50% of the prescribed rate of additional depreciation. The Incometax Act is silent about the allowance of the balance 10% additional depreciation in the subsequent year. Taking advantage of this pos....
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....deny the benefit of balance of 50% when the new machinery and plant were acquired and used for less than 180 days. One time benefit extended to assessee has been earned in the year of acquisition of new machinery and plant . It has been calculated @15% but restricted to 50% only on account of usage of these plant & machinery in the year of acquisition. In section 32(1)(iia), the expression used I "shall be allowed". Thus, the assessee had earned the benefit as soon as he had purchased the new machinery and plant in full but it is restricted to 50% in that particular year on account of period usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of machinery and plant . In view of this matter, we set aside the orders of the authorities below and direct to....
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.... of the assessee on the ground that the assets obtained by the assessee as a result of payment is only a land. The Assessing Officer allowed the claim in respect of the building. The Assessing Officer disallowed the claim of depreciation on the land. According to the Ld. counsel, the land development charges were paid for developing the area by laying roads, constructing culverts, providing electrical lines and other amenities required for setting up of industrial unit for which the land was allotted. According to the Ld. counsel, the roads, bridges, etc. are on par with the factory buildings, therefore, the assessee is eligible for depreciation at 10%. Therefore, according to the Ld. counsel, the assessee is eligible for depreciation at the rate of 10% which is applicable for building. 15. On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that for claiming depreciation, the assessee should be the owner of the land and the building. In this case, the assets said to be established by SIPCOT are not owned by the assessee. The assessee has neither developed asset such as roads, bridges, etc. nor owned them. The amount collected from the assessee....