TaxTMI 
TaxTMI 
2019 (5) TMI 1982
X X X X Extracts X X X X
X X X X Extracts X X X X
....n order, for the sake of convenience. 2. In the appeals filed by the assessee, the decision of ld CIT(A) in confirming the disallowance of depreciation claimed on goodwill is being challenged. The Revenue is aggrieved by the decision ld CIT(A) in granting depreciation on non-compete fee. 3. The facts relating to the above said issues are stated in brief. A company by name Spencer & Company Ltd., had promoted a retail business under the name 'Food World'. The assessee company has purchased the retail business referred above as a going concern for a consideration of Rs. 18.50 crores. The net book value of tangible asset was determined at Rs. 2.18 crores and hence the difference amount of Rs. 16.32 crores was treated as goodwill by the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... crores as non-compete fee and the same was treated by the assessee as goodwill. The ld CIT(A) noticed that the Hon'ble Karnataka High Court has allowed depreciation on non competent fee in the case of CIT Vs. Ingersoll Rand International Ltd., (2014) 48 taxmann.com 349. Accordingly the ld CIT(A) directed the AO to allow depreciation on non-compete fee of 5.00 crores in all the years under consideration. Accordingly he confirmed disallowance of depreciation on the remaining amount of goodwill in all the years under consideration. 6. Aggrieved by the order passed by the ld CIT(A) in all the years under consideration both the parties have filed appeals before us. 7. We shall first take up appeal filed by the Revenue wherein the Revenue is c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her business or commercial rights of 'similar nature' has to be interpreted in such a way that it would have some similarities as other assets mentioned in Cl. (b) of Expln. 3. Here the doctrine of ejusdem generis would come into operation and therefore the noncompete fee vests a right in the assessee to carry on business without competition which in turn confers a commercial right to carry on business smoothly. When once the expenditure incurred for acquiring the said right is held to be capital in nature, consequently, the depreciation provided under See. 32(1)(ii) is attracted and the assessee would be entitled to the deduction as provided in the said provision i.e., precisely what the Tribunal has held. 9. Therefore we do not see any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble assets. Out of the above a sum of Rs. 5 crores has been identified by the ld CIT(A) as non-compete fee and the same leaves a balance of Rs. 11.32 crores, which is contended as relating to Goodwill. 13. Before the AO, the assessee has submitted that the entire amount of Rs. 16.32 crores represented goodwill and trade name rights. There is no dispute that the assessee has treated the entire amount of Rs. 16.32 crores as Good will in the books of account. We noticed that the assessee has taken an alternative stand before the AO that the major portion of amount represented payment made for trade name. We notice that the alternative stand was taken by the assessee, since the AO held that the Good will is not eligible for depreciation. The L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny stood increased. This finding has also been upheld by Income Tax Appellate Tribunal ['ITAT. for short]. We see no reason to interfere with the factual finding." 15. A perusal of the above said observations made by the Hon'ble Supreme Court would show that the difference between the cost of an asset and the amount paid for acquiring the same constituted goodwill. In commercial parlance also, the amount paid over and above the value of tangible and intangible rights is considered as goodwill. There is also no dispute with regard to the fact that the assessee has treated the difference amount as goodwill only in its books of account. Hence, in our view, merely because the assessee has taken a different stand before the AO to the effect....