TaxTMI 
TaxTMI 
2022 (10) TMI 988
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....tively. 2. On 23rd July, 2010, ITA No. 905/2010 was admitted and the following substantial question of law was framed : "(1) Whether the ITAT was correct in law in deleting the additions made by the Assessing Officer amounting to Rs.50 lacs on account of depreciation on goodwill and Rs. 2,73,25,000/- on depreciation of patents and trademark?" 3. On 13th March, 2013, ITA No. 130/2013 was admitted and the following substantial question of law was framed : "(1) Whether the Income Tax Appellate Tribunal was correct in law in deleting the addition made by the Assessing Officer on account of depreciation of goodwill and on depreciation of patents and trademark?" 4. The facts giving rise to the present appeals are that the Assessee was engaged in the business of manufacturing and trading of air conditioners and water coolers. On 01st May, 2000, the Respondent, Assessee, entered into a Business Purchase Agreement (the 'agreement') with M/s Usha International Ltd. ('UIL') for the purchase of marketing and business rights for a period of twenty years, including the establishment, as well as the set up for marketing the products of air conditioners and water coolers, along with the ben....
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....of the Assessee, as recorded by the auditor in Note no. 6 of the audited accounts. The AO held that since trademarks are registered under the Trademarks Act, 1999, in the absence of such a registration, the Assessee is not entitled to claim depreciation on these IP rights. 8. The CIT(A), after perusing the terms of the agreement executed between the Assessee and SAL held that upon payment of consideration for the IP rights, the Assessee had become legally entitled to use the trademarks, brand name and the logos for marketing its products. The CIT(A) has also returned a finding that the facts brought on record evidence that the Assessee had in fact after acquistion of the said rights carried on business using the said brand name, logos and trademark. The CIT(A) relying upon the judgment of the Supreme Court in the case of Mysore Minerals vs. Commissioner of Income Tax, [1999] 239 ITR 775 and Dalmia Cement (Bharat) Ltd. vs. Commissioner of Income Tax, Delhi, [2001] 247 ITR 267 concluded that the Assessee had become the owner of the IP rights by virtue of the said agreement dated 8th August, 2000 and the absence of the registration of the trademarks and other IP rights in the name of....
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....ed the definition of assets so as to include intangible asset for the purpose of depreciation under section 32 (1). The definition of the intangible asset as given in section 32 (1) (ii) identifies various intangible assets as also business or commercial rights similar to the rights which have been treated as intangible assets in the said provision. What is evident from the said provision is that what is being permitted, as an intangible asset to be depreciated is to be rights. It is only such rights, which can be used to run the business. It is only such rights the use of which generate income that have been specified in the provisions of section 32(1)(i) as depreciable intangible assets. This being so, goodwill cannot be said to be a right which can be used as a tool to generate business. In these circumstances, we are of the view that the ld. CIT(A) was right in holding that the assessee was entitled to the depreciation in regard to the purchase of the exclusive business rights to the extent of Rs.1,73,00,000/- and directing the AO to grant depreciation on the same. In regard to the amount of Rs.27,00,000/- as paid by the assessee, as it has not been shown that this amount had b....
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....date specified in the agreement the assessee would be in possession of the duly executed instruments of transfer, assignment and Conveyances of the assets as specified in the agreement which are basically the intellectual property rights and the fixed assets. This being so, as also the principles as laid down by the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. referred to supra and reaffirmed the decision of Dalmia Cements, it would have to be held that the assessee was the owner of the property and the assessee having used the same in its business was entitled to depreciation on the same. In the circumstances, the finding of the ld. CIT(A) on this issue stands confirmed." (Emphasis supplied) 11. Learned Senior Counsel for the Respondent has relied upon the judgments of Apex Court in Mysore Minerals Ltd. (supra) and Dalmia Cements (supra), to contend that registration is not a condition precedent, in order to claim depreciation under Section 32 of the Act. The ITAT and CIT(A) also take note of the said judgments. The ratio in Mysore Minerals (supra) reads as follows:- "18. An overall view of the aforesaid authorities shows that the very concept the depreciation....
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....n the principles of consistency. 14. In these appeals as well the learned Senior Standing Counsel of the Revenue has not disputed the findings of the CIT(A) and the ITAT with respect to the acquisition of exclusive business rights by the Assessee from UIL and transfer of IP rights from SAL. The Revenue does not dispute that the said business is being carried out by the Assesee and the trademarks and logos are being used by the Assessee. The findings of the appellate authorities that the aforesaid rights constitutes IPR is not disputed by the Revenue and the only contention raised is as regards non-registration of the trademarks in the name of the Assessee, however, the said issue is no longer res integra as in light of the judgments relied upon by the appellate authorities. The Revenue has not brought to our attention any provision of law, which disentitles the Asessee from asserting ownership in a trademark in the absence of registration of the assignment under the Trademark Act, 1999. 15. We are of the considered view that there is no infirmity in the finding returned by the appellate authorities that the business rights acquired by the Assessee under its agreement with UIL for....