2016 (5) TMI 151

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....bution rights. As per the terms of agreement, the assessee acquired net current assets of the concern at the value of Rs. 3,44,00,309/- against which the assessee paid total consideration of Rs. 4,13,53,652/- to Network18. As per the agreement, the additional amount of Rs. 69,55,343/- paid to Network18 was on account of goodwill. Though, in the original return of income filed for the assessment year the assessee had not claimed depreciation on the amount of Rs. 69,53,343/- paid to Network18 towards goodwill, but in the course of assessment proceedings the assessee vide letter dated 8.11.2011 put its claim for depreciation on goodwill. The AO rejected the assessee's claim of depreciation on goodwill for two reasons. Firstly, he observed that goodwill is not a capital asset let alone being an intangible asset. Secondly, he observed that the amount claimed towards goodwill is actually a balancing figure and not paid for acquiring any intangible asset as provided u/s. 32(1)(ii). He observed that from the computation furnished by the assessee it is clear that the difference between the purchase consideration and fixed assets plus current assets of the assessee is termed as goodwill. He ....

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....d counsel for the assessee submitted, in view of the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers & Sharesholders Pvt. Ltd. 349 ITR 336, the observation of the CIT(A) is not valid. The learned DR relied on the order of the CIT(A). 5. We have considered the submissions of the parties and perused the material on record. The issue whether goodwill is an capital asset coming within the term intangible asset as provided u/s. 32(1)(ii) of the Act is no more res integra in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (supra), where the Hon'ble Apex Court after interpreting the explanation (3) to section 32(1) held that "goodwill would fall under the expression any other business or commercial right of a similar nature" and, hence has to be considered as a asset under Explanation (3b) to section 32(1). Same view has been expressed by Hon'ble Delhi High Court in the case of Areva T & D India Ltd. (supra). In view of the law laid down by the Hon'ble Supreme Court we cannot accept the contention of the departmental authorities that goodwill is not an asset or for that matter is not an intangible ass....

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.... u/s. 40(a)(i) in AY 2006-07. Briefly, the facts are in the AY 2006-07, the assessee had claimed distribution expenses of Rs. 5,55,28,565/- on account of payment made to MTV Asia and other channels. The AO on referring to the assessment made in case of MTV Asia found that the distribution revenue received was in the nature of royalty as per India Singapore DTTA. It was also noticed that the assessee had not deducted tax at source, though it is in the nature of royalty. He therefore called upon the assessee to explain why the expenses claimed should not be disallowed u/s. 40(a)(i). In response to the query it was stated by the assessee that it had deducted tax at source on the amount, which is subject to the deduction of tax in terms of section 197. But the AO not being convinced with the submissions of the assessee held that though the assessee was liable to deduct tax at source on the entire amount of Rs. 5,55,28,565/- paid towards royalty but out of which the assessee had not deducted tax on amount of Rs. 2,23,04,019/- hence, same is liable to be disallowed u/s. 40(a)(i). The learned CIT(A) also upheld such disallowance. Being aggrieved of the order of the CIT(A) the assessee car....

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.... to remit this issue to the file of the CIT(A) for deciding afresh along with similar issues pending for AY 2006-07 after due opportunity of being heard to the assessee. Grounds raised are allowed for statistical purposes. 9. Ground no.4 being consequential is not required to be adjudicated at this stage. Thus this ground is dismissed as infructuous. 10. In the result, the assessee's appeal is partly allowed. ITA 265/Mum/2013 for A.Y, 2008-09 11. The only issue raised in the departmental appeal pertains to deletion of addition of Rs. 2,79,26,769/- made by the AO on account of advertisement and sales promotion expenses. 12. Briefly stated, the assessee during the year claimed expenditure of Rs. 6,06,60,269/- on account of advertisement and sales promotion. When the AO called upon the assessee to justify the business expediency for incurring such expenditure the assessee as per its reply reproduced in the assessment order justified its claim by stating that it was wholly and exclusively for the purpose of business. The AO however, was not convinced with the same. He was of the view that by incurring such huge expenditure the assessee has promoted the brand of the associated ente....