TaxTMI 
TaxTMI 
2019 (12) TMI 1518
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of Section 32(1)(ii) of the Act. For this, in both the years, facts and circumstances are exactly identical and Revenue has raised identically worded grounds. Hence, we will take the facts and grounds raised in AY 2011-12 in ITA No. 6412/Mum/2016, the relevant ground Nos 1 and 2 read as under: - "i. Whether, on the facts and circumstances of the case, the CIT(A) was justified in holding that rights acquired for acquisition of Customer Contracts falls within the expression "any other business or commercial rights of similar nature" as defined in Explanation 3 to Section 32(1)(ii) of the Income-tax Act, 1961 and thus eligible for depreciation under section 32 of the Income-tax Act, 1961. ii. Whether, on the facts and in the circumstances of the case, the CIT(A) was justified in allowing depreciation on amount paid by the assessee company for acquiring Customer Contracts even though such payment made by the assessee company could not be considered as purchase of goodwill or any other business or commercial right within the meaning of Section 32(1)(ii) of the Income-tax Act, 1961?" 3. Briefly stated facts are that the assessee is a Public Limited Company and wholly owned su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment and the client/customer. Therefore, the assessee's claim depreciation on customer contracts is not acceptable. Further, the decision cited in the case of Indian Capital Market Pvt. Ltd. has not been accepted by the department. The departmental appeal is pending before the Hon'ble High Court, Bombay. 6. In view of the above, the depreciation claimed on customer contracts of Rs.29,99,75,000/- @25% which works out to Rs.7,49,93,750/- is hereby disallowed and added to the total income. The penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 is initiated for furnishing inaccurate particulars of income." Aggrieved, assessee preferred the appeal before CIT(A). 4. The CIT(A) relying on the Tribunal's decision of India Capital Market Pvt. Ltd vs. DCIT (2013) 56 SOT 32 (Mum.) allowed the claim of the assessee by observing in Para 5.11 as under: - "5.11 I have carefully considered the submission made on behalf of the appellant. In the instant case, the appellant has claimed depreciation on the customer contracts being intangible asset. Considering the relevant judicial decisions cited by the AR, it is clear that, the Customer contract falls under the expressio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he earlier year order dated 29.07.2016 of the assessee which has been mentioned while passing the order and highlighted as italic above. The CIT(A) has decided the matter of controversy on the basis of decision in the case of India Capital Markets P. Ltd. Vs. DCIT (2013) 56 SOT 32 (Mum), Brembo Brake India (P.) Ltd. Vs. DCIT (2015) 68 SOT (Pune) & CIT Vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC). The relevant finding has been given in para no. 20 which is reproduced below: - "20. It is not in doubt or dispute that purchase of the clientele business by the assessee from M/s. AFC is a right which can be used as a tool to carry on the business. It can also be seen from the angle of purchase of entire marketing net work by the assessee from M/s. AFC even if considered from this angle the assessee is eligible for depreciation as held by the Tribunal. In ITA.181/M/2008 in the case of M/s. Jyoti India Metal Industries P. Ltd. Vs. ACIT. The Hon'ble Supreme Court in the case of CIT Vs Smifs Securities Ltd. (2012) 24 Taxmann.com 222 has held that goodwill is an asset eligible for depreciation. After considering the entire gamut of facts of instant case, it was held that the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ets (assets minus liabilities) acquired was recorded in the balance sheet of the transferor as on the date of transfer as Rs. 28.11 Crores. The said assets and liabilities were recorded in the books of transferee at the same value as appeared in the books of the transferor. The balance payment of Rs. 16,58,76,000/- over and above the book value of net tangible assets, was allocated by the transferee towards acquisition of bundle of business and commercial rights, clearly defined in the slump sale agreement, compendiously termed as "goodwill" in the books of accounts, which comprised, inter alia, the following:- (i) Business claims, (ii) Business information, (iii) Business records, (iv) Contracts, (v) Skilled employees, (vi) knowhow. It is also observed that the AO accepted the allocation of the slump consideration of Rs. 44.7 Crores paid by the transferee, between tangible assets and intangible assets (described as goodwill) acquired as part of the running business. The AO, however, held that depreciation in terms of Section 32(1)(ii) of the Act was not, in law, available on goodwill. The CIT(A) and the ITAT approved the reasoning of the AO thereby holding disallowance of deprecia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO during the course of assessment proceedings noticed that the assessee has made claim of exclusion of amortization of intangible assets, including goodwill, fee paid to consultants and expenses incurred for acquisition of business of DC Gupta construction Pvt. Ltd while computing book profit under section 115JB of the Act amounting to Rs.42,38,11,308/-. During the course of assessment proceedings, the AO noted that the above claim of the assessee made during the assessment proceedings cannot be allowed in term of the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) and hence, the claim of deduction was disallowed in the absence of revise return of income. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) admitted the claim of the assessee and decided in favour of the assessee by observing in Para 7.9 and 7.10 as under: - "7.9 I have carefully considered the submission made by the appellant and gone through the relevant judicial decisions cited by the appellant with respect to the admissibility of fresh claims. In view of the various judicial decisions, it is clear that the Commissioner of Income Tax (Appeals) h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee pursuant to High Court order, the financial statements are not showing true and fair view and are contrary to Accounting Standards, provisions of Companies Act and Schedule VI thereto. In the instant case, what has been done pursuant to High Court scheme is not affect the accounting to be made as per companies Act while arriving at the true profit as per Part II of Schedule VI and hence, the assessee is entitled to make necessary adjustment in order to incorporate the impact of the said observation to the Profit as shown in the profit & Loss account to arrive at correct Book Profit under section 115JB of the Act. Hence, the CIT(A) has rightly deleted the addition made by the AO. This ground of Revenue's appeal is dismissed. 14. The next issue in ITA No. 5242/Mum/2017 for AY 2013-14 is as regards to the order of CIT(A) allowing the claim of reimbursement of expenses to Blue Star Limited amounting to Rs.1,1,98,917/-. For this Revenue has raised the following ground: - "3. Whether on the facts and in the circumstances and in law, the Ld. CIT(A) was justified in allowing reimbursement of expenses to Blue Star Limited amounting to Rs.1,15,98,917/-, without considering the fa....