TaxTMI 
TaxTMI 
2014 (1) TMI 1921
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....he assessment was completed under section 143(3) read with section 147 of the Act after making certain additions and disallowances. The Assessing Officer has disallowed an amount of Rs. 3,11,35,290/- towards depreciation on trade marks and licences. In the assessment order, the Assessing Officer has noted from the depreciation table that the assessee had claimed depreciation on Trade Marks and Licences [valued at Rs. 12,45,41,161/- the beginning of the relevant financial year] @ 25% applicable for intangible assets. The Assessing Officer further noted that on this item, the claim of depreciation was disallowed by the Assessing Officer in the assessment year 2004-05, against which the assessee has not preferred any appeal, since the issue continues during the year under consideration i.e. the assessee has claimed depreciation on trade marks and licences in assessment year 2005-06 on opening WDV of Rs. 12,45,41,161/-, the claim of depreciation on trademarks is to be disallowed during this year also. The Assessing Officer asked the assessee to furnish the details for trademarks, licences and permissions. After considering the details furnished by the assessee regarding cost of intangi....
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....trictly and once the conditions laid down are fulfilled, the allowance of depreciation as claimed by the Appellant herein is to be allowed in full. 9. Your Appellant also submits that in the Appellant's own case for Asst Year 2008/09, this issue was considered by the Commissioner of Income tax Appeals in ITA No. 362/10-11 dt. 21hMarch, 2012 who allowed the claim of the Appellant in full. The Department's Appeal before the Hon'ble Tribunal was dismissed in ITA No 1295/Mds/2012 dt. 14th February 2013." 4. The ld. CIT(Appeals), after considering the submissions of the assessee, by following assessee's own case for the assessment year 2008-09 in ITA No.362/10-11/A-III dated 27.03.2012 passed by the ld. CIT(Appeals) and also following the decision of the Tribunal in I.T.A. No. 1295/Mds/2012 vide order dated 14.02.2013 in assessee's own case, deleted the addition made by the Assessing Officer and directed him to allow the same. The relevant portion of the order is extracted as under: 5.2 I have carefully considered the facts of the case and submissions of the Id. AR. I find that the issue is squarely covered in favour of the appellant by the decision of&#....
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....r the agreement entered into by the appellant and M/s. Empee Distilleries Ltd, the vendor. As per clause (ii) of section 32(1), trade marks, licence etc or any other business or commercial rights of similar nature being intangible assets acquired on or after 1.4.98 are eligible for depreciation. Once the conditions laid down for making a claim for depreciation are satisfied, the AO has to grant depreciation. The fact that an asset may appreciate and therefore is not eligible for depreciation allowance has not been prescribed anywhere in the Income-tax Act. A restriction which is not there in the Act cannot be inserted to deny the relief envisaged in the statute. When the Act allows depreciation on intangibles including trade mark and licence and when the words of the section are clear and unambiguous, the AO is obliged to allow such depreciation at the applicable rate. I also agree that decision in one year will not operate as res judicata in the subsequent year. An assessment year under the Act is a self- contained assessment period and a decision in one assessment year does not ordinarily operate as res judicata in respect of the matter decided in any subsequent year. Reliance is....
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....see's own case for the assessment year 2008-09 in I.T.A. No. 1295/Mds/2012 vide order dated 14.02.2013. 7. On the other hand, the ld. DR fairly accepted that issue is covered in favour of the assessee. 8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal is whether the depreciation claimed by the assessee is eligible or not. The very same issue in assessee's own case for the assessment year 2008-09 came before the Tribunal and the Tribunal has decided the issue in favour of the assessee. The relevant portion of the order is extracted as under: "20. Vide its ground No.4, grievance of the Revenue is that disallowance of Rs. .1.31 Crores claimed as depreciation on trademarks and licences, disallowed by the A.O. was allowed by the CIT(Appeals). Depreciation claim was on trademarks and licences acquired by the assessee from M/s Empee Distilleries Limited vide agreement dated 28.2.2002. The issue how far depreciation was allowable on these intangible assets, had come up before this Tribunal in assessee's appeal against a 263 revision attempted by CIT for assessment year 2007-08 ....
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....e its successors) of the One Par AND EMPEE DISTILLERIES LIMITED a copy registered under the Companies Act, 1956 and having its registered office at 693, Annasalai, Chennai 600 003 represented by its Managing Director Mr. M.P. Purushothaman hereinafter called "the Licensee" (which expression shall unless it be repugnant to the context or meaning thereof mean and include it successors) of the Other Part:" Clearly, the licensor is M/s Empee Breweries Ltd., which is assessee here and licencee is M/s Empee Distilleries Ltd. In other words, assessee had acquired trademarks and licences from M/s Empee Distilleries Ltd. by virtue of the first agreement and thereafter, gave the same company a licence to use a trademark called 'morco polo'. The latter agreement elsewhere clearly state that such licence was granted for a limited period of nine months. Two things that come out is that assessee had not given all the licences and trademarks it had acquired from M/s Empee Distilleries Ltd., but had only given right to us one trade mark called 'morco polo', that too for a limited period. 17. Therefore, in our opinion, ld. CIT fell in error when he came to a conclusion that assess....
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.... trademarks and licences cannot be considered to have been done by overlooking any provisions of the Act. If the value ofRs. 22 Crores was not acceptable to the Assessing Officer, then this was an aspect which ought have been considered in assessment year 2003-04. But for that year, depreciation was allowed after considering the agreements filed by the assessee, as already mentioned by us. In such circumstances, we cannot say that grant of depreciation on Written Down Value of the intangible assets was erroneous. We cannot say the assessment order suffered from any error much less an error which caused prejudicious to the Revenue. We are of the opinion that this is not the case where revisionary power under Section 263 could have been invoked. 19. Before parting with, it would be inappropriate if we do not deal with the case, strongly relied on by the learned D.R. First is that of Hon'ble Apex Court in the case of Rampyari Devi Saraogi(supra), where the CIT while invoking his revisionary power under Section 33B of Income-tax Act, 1922, had relied on certain facts, which were not indicated or communicated to the assessee. Hon'ble Apex Court held that this was not a ....
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.... "6.1 The Id. AR vehemently contested against the said addition and submitted as under: 1. Your Appellant submits that the Assessment was reopened on the basis of proceedings under Section 263 invoked by the Commissioner for Asst. Year 2004/05. 2. Your Appellant Company submits that it had made a payment of Service Charges of a total sum of RS.15,92,46, 138/-' to Intertia Industries Limited and United Breweries Ltd. 3. During the course of the original assessment, the entire sum was allowed as a business expenditure - the entire nature of expenditure was examined and the original assessment was. completed under Section 43(3) of the Income tax Act, 1961. 4. During the course of the reassessment proceedings, the Assessing Officer has held that the entire service charges paid is capital in nature and proceeded to allow depreciation at the rate of 25% on such expenditure. 5. Your Appellant submits that the assessing officer has arrived at the conclusion that the same is a capital item of expenditure by treating the entire expenditure as expenditure for technical knowhow. 6. Your Appellant submits that the Assessing Officer by s....
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....fore becomes a nullity." 12. The ld. CIT(Appeals), by following the order for the assessment year 2004-05 and also the decision of the ITAT Chennai in assessee's own case for the assessment year 2004-05 in I.T.A. No. 888/Mds/2009 vide order dated 11.07.2011 allowed the ground raised by the assessee. 13. Aggrieved, the Revenue is in appeal before the Tribunal. 14. At the time of hearing, the ld. Counsel for the assessee has submitted that the issue involved in this appeal is squarely covered by the decision of the Tribunal in I.T.A. No. 888/Mds/2009 dated 11.07.2011 and supported the order passed by the ld. CIT(Appeals). 15. On the other hand, the ld. DR fairly accepted the issue is covered in favour of the assessee. 16. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal is with regard to service charges paid to UBL and IIL is eligible or not. The Tribunal in assessee's own case has considered this issue and decided in favour of the assessee. The relevant portion of the order of the Tribunal is extracted as under: "11. The next issue is regarding service charges paid to....
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....r of the ld. CIT(Appeals) and dismiss the grounds raised in both the issues. 19. In the result, the appeal filed by the Revenue is dismissed. 1481/Mds/2013 [A.Y. 2009-2010] 20. The first effective ground raised in the appeal of the Revenue for the assessment year 2009-10 relates to disallowance of payment towards fees and technical advisory and management fees to the tune of Rs. .10 crores to M/s. United Breweries Ltd. (UBL). In the assessment order, the Assessing Officer has observed that during the relevant previous year, an amount of Rs. .10 crores was paid to UBL towards technical advisory and management fee. The assessee was asked to file agreement copy entered into with UBL and also ledger copy of this expense. From the details filed, the Assessing Officer has observed that the payments were made in round figures and there is no specific apportionment of breakup for any particular services rendered by UBL. The Assessing Officer has noted that in the ledger extract, all the payments were stated to be CMC charges paid - JV units and moreover, in the agreement with UBL, the details of services to be rendered were not mentioned. In view of the absence of any supporting d....
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....g to various items of purchases and service availed by the Appellant Company. Your Appellant further submits that a perusal of the letter aforementioned provide savings of a value of Rs. 1253.34 lakhs (Please see Annexure A). 5. Your Appellant further submits that the managerial expertise has been completely drawn from United Breweries Limited in various aspects of managing the enterprise. 6. Your appellant also submits that the payment made to UB Ltd is also on account of a strategic plan in running its business. 7. Your appellant Company submits that it is not the case of the revenue that no payment was made by the appellant company to UBL. Your Appellant has filed a confirmation from UBL confirming the payment of Rs. 10 crores by your Appellant herein to UB Ltd (copy enclosed). 8. Your Appellant Company further submits that in so far as the tax department is concerned, the payment of 10 crores is revenue neutral in nature. 9. Your Appellant Company also submits that it is not open to the tax authorities to sit in the arm chair of a businessman and determine the necessity of making business related payments. 10. Your Appellant....
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....e Tribunal and the Tribunal in I.T.A. No. 1295/Mds/2012 vide order dated 14.02.2013 decided the issue in favour of the assessee. Accordingly, the ld. CIT(Appeals), by following Tribunal's order dated 14.02.2013 in I.T.A. No. 1295/Mds/2012 decided the issue in favour of the assessee for the assessment year under consideration. 23. On being aggrieved, the Revenue is in appeal before the Tribunal. 24. At the time of hearing, the ld. Counsel for the assessee has submitted that the issue involved in this appeal is squarely covered by the decision of the Tribunal in assessee's own case for the assessment 2008-09 and strongly supported the order passed by the ld. CIT(Appeals) and submitted that the same may be followed. 25. The ld. DR fairly accepted that the issue is covered in favour of the assessee. 26. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal is with regard to technical advisory and management fees paid to UBL is for the purpose of business or not. The Tribunal in assessee's own case for the assessment year 2008-09 has considered the said issue and decided in favour of the ....
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....19,22,970/- on which it had paid tax at maximum marginal rate, as noted by the CIT(Appeals). If the sum of Rs. 4 Crores was not received by it, tax payable by the said company would have only gone down. As against this, assessee had returned loss of Rs. 1.08 Crores and therefore, there is much strength in the argument of learned A.R. that if the transaction had not gone through, revenue would only have been at a disadvantage. We cannot say that the reply given by the assessee to the queries made by the Assessing Officer which has been produced at para 11 above, were such that, it called for a disallowance of the amount. Fact of the matter is that assessee paid the sum as per agreement and receipt thereof was acknowledged by M/s UBL. Such payments were also acknowledged by the recipient as received for the technical, advisory and management fees rendered by them. Hon'ble Apex Court in the case of S.A. Builders Ltd. (supra) has held that Revenue could not by itself sit in the chair of a businessman and could not insist that every businessman should do his business in such a manner to earn maximum rate of profits. As for the reliance placed by the learned D.R. on the decision of H....