TaxTMI 
TaxTMI 
2022 (1) TMI 424
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....nd in law, the AO erred in holding and CIT(A) further erred in confirming that goodwill does not qualify as 'business or commercial right' as envisaged under section 32(1 )(ii) of the Act. 4. That on the facts and circumstances of the case and in law, the AO erred in levying interest under section 234B and section 234D of the Act. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal". 2.1. The assessee has also raised the following additional ground : "That on the facts and circumstances of the case and in law, the education cess ("EC'') and higher and secondary education cess ("SHEC") on Income Tax is an allowable expenditure for computing total income as per the provisions of the Income-tax Act, 1961 ("Act")." 3. Learned Counsel for the Assessee submitted that the additional ground is purely legal in nature and no fresh facts are required to be investigated. Referring to the decisions of Hon'ble Supreme Court in the cases of National Thermal Power Co. Ltd., vs., CIT reported in 229 ITR 383 (SC) and Jute Corporation of India vs., CIT 187 ITR 688 (SC), he submitted that the additional....
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....dia with logistics services for a period of 15 years. The tangible assets acquired are recognized as capital assets in the books of account of the company and depreciation has been charged on these assets as per rates prescribed under section 32 of the Act. Further, balance consideration of INR 147,293,773 has been allocated to intangible assets, being workforce, supplier contracts of IBM's freight and forwarding business and also the right to provide logistic services to IBM for a maximum period of 15 years, and has been capitalized as Goodwill in the books of accounts and is charged to depreciation at the rate of 25 percent, in accordance with provisions of (he Act. Accordingly, for the year under consideration, the company claimed an amount of INR 1,55,34,890 as depreciation on intangible assets." 5.3. However, the A.O. was not satisfied with the arguments advanced by the assessee. Distinguishing the various decisions cited before him and following the order of the DRP in the preceding assessment years, the A.O. disallowed the depreciation on goodwill of Rs. 1,55,34,890/-. 5.4. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under : "Examinati....
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....rt titled as "IBM Corporation, Fair Market Value of total Assets of Project Panda as of Feb. 23, 2009." In the said report, prepared by certain firm 'Duff & Phelps', the fair market value of total assets of IBM Logistic business in 58 countries have been estimated. However, the appellant has failed to explain the said 'Project Panda' and that how the said report can be used in its case since the three companies from whom assets have been acquired i.e. IBM (India) Pvt. Ltd., IBM Daksha Business Process Services (P) Ltd. and Network Solution Pvt. Ltd. have not even been mentioned in the said report and also there is no description of the assets valued in this report. It has not been mentioned in the report as to what constitutes the Indian Logistics of IBM Corporation. 6.7. I find that the AO in his assessment order has dealt with the issue in details. He has made various valid observations which inter-alia, include - 1. The definition of the goodwill in agreement is not as presented by the assessee as the assessee company has not become any sole logistic provider. 2. As regards value of third party contracts, the AO has noted that expiry date of these contra....
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....unal. He accordingly submitted that this being a covered matter in favour of the assessee, the ground raised by the assessee should be allowed. 8. The Ld. D.R. on the other hand relied on the orders of the A.O. and the Ld. CIT(A). 9. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. following the orders of his predecessor disallowed the claim of depreciation on goodwill. We find the Ld. CIT(A) upheld the action of the A.O, the reasons of which, have already been reproduced in the preceding paragraph. We find the issue stands decided in favour of the assessee by the consistent decisions of the Tribunal for the A.Ys. 2010-11, 2011-12 and 2012-13. We find the Tribunal in ITA.No.483/Del./2017 order dated 17.03.2021 for the A.Y. 2012-13 has allowed the claim of depreciation on goodwill by observing as under : "8. As regards Ground No. 42 in Assessment Year 2011-12, the Tribunal held in Para 17 to 25 are as under :- "17. The second grievance relates to disallowance of depreciation on goodw....
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....ired in the previous year relevant to the assessment year under consideration. According to the AO, the assessee has not acquired any business during the year and, hence, there is no question of making payment over and above for any commercial or business rights as defined under Explanation 3 to section 32(1). Further, the purchase price is not verifiable from any calculation or valuation report. According to the AO, there is decline in the business receipts even after paying so much on account of goodwill and, therefore, there is no justification for the payment of such amount. Further, it is also the case of the AO that as per the provisions of law, no depreciation is allowable on goodwill and the legislature provides that depreciation should be allowed on all other intangible assets other than goodwill. 41. We find, the Hon'ble Delhi High Court in the case of Areva T & D India Ltd. vs. DCIT, 345 ITR 421 has decided an identical issue in favour of the assessee. In that case, the following substantial question of law was admitted:- "Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that know-how, business contacts, business infor....
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....isallowance of depreciation on the amount described as goodwill. It was thus argued on behalf of the assessee Company that Section 32(1)(ii) would mean rights similar in nature as the specified assets, viz., intangible, valuable and capable of being transferred and that such assets were eligible for depreciation. On behalf of the respondent it was argued that applying the doctrine of noscitur sociis the expression "any other business or commercial rights of similar nature" used in Explanation 3(b) to Section 32(1) has to take colour from the preceding words "knowhow, patents, copyrights, trademarks, licenses, franchises". It was urged that the Supreme Court had clearly held in Techno Shares and Stocks Ltd.(supra) that "Our judgment should not be understood to mean that every business or commercial right would constitute a "licence" or a "franchise" in terms of section 32(1)(ii) of 1961 Act". 13. In the present case, applying the principle of ejusdem generis, which provides that where there are general words following particular and specific words, the meaning of the latter words shall be confined to things of the same kind, as specified for interpreting the expression "business ....
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....ssets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a "license" or "akin to a license" which is one of the items falling in Section 32(1)(ii) of the Act. 14. In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section. 15. In view of the above, it is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation under Section 32(1)(ii) of the Act. In the circumstances, the substantial question of law is decided in the affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside." 44. We further find the SLP filed by the Revenue against the aforesaid decision was dismissed by the Hon'ble Supreme Court, vide order dated 23rd September, 2013 vide SLP 21227/2012. 45. We further find, the Delhi Special Bench ....
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....that depreciation is allowable on goodwill. 47. We further find the allegation of the AO that the year-wise revenue from logistic services to IBM India is showing a declining trend is also incorrect. A perusal of the chart at para 32 of this order shows that there is, in fact, increase of revenue from IBM. 48. In view of the above discussion and relying on the decisions cited (supra), we hold that the assessee is entitled to depreciation on goodwill. The ground raised by the assessee is accordingly allowed." 25. Respectfully following the findings of the coordinate bench, we direct the Assessing Officer to allow claim of depreciation of good will. This ground is, accordingly, allowed." In the present appeal, the issue is identical to that of earlier years and no distinguishing facts pointed out by the Revenue. The DRP has not at all considered the aspect of depreciation on goodwill in correct context as there is a finding identical to that of earlier years, assessee entered into a world-wide multi-year outsourcing agreement with IBM India Pvt. Ltd., Network Solutions Pvt. Ltd. and IBM Daksh Business Process Services Pvt. Ltd. as well as Acquisition Agreement and this is ....