TaxTMI 
TaxTMI 
2024 (9) TMI 1062
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....r dated 8.9.2016. The present appeal pertains to the order passed by the Tribunal in respect of the appeals filed by the assessee pertaining to AYs 2005-06 and 2006-07. 3. Heard the submissions of learned Senior Counsel Sri Percy Pardiwala appearing along with learned counsel Smt Tanmayee Rajkumar, for the appellant - assessee and learned counsel Sri E.I. Sanmathi, appearing for the respondent - Revenue. 4. This Court, vide order dated 14.11.2017 admitted the above appeal to consider the substantial questions of law formulated in the memorandum of appeal except substantial question of law No. 7. 5. Learned Senior counsel for the assessee and learned counsel for the Revenue jointly submit that substantial question of law Nos. 4, 5 and 6 in the memorandum of appeal would not arise for consideration due to the subsequent events. Hence, the said substantial questions of law are not considered in the present appeal. 6. In view of the aforementioned, the substantial questions of law considered in the present appeal are as under: "Whether, on the facts and circumstances of the case and on the grounds raised: i. the Tribunal was right in sustaining the 1st Res....
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....alore [Commissioner], which were dismissed and the appeals filed by the assessee before the Tribunal were also dismissed. Being aggrieved the present appeal is filed. 9. Learned Senior Counsel for the assessee contends that the deduction by the AO regarding the amount sought to be amortized in respect of the use of trademarks was rejected on the ground that the deduction is covered by Section 32 (1) as well as under Section 43 (6) of the IT Act. It is further contended that Section 32 (1) would require the assessee to "own" the trademark and Section 43 (6) would require the assessee to "acquire" the trademark and having regard to the fact that admittedly the assessee had only the right to use the trademark for a period of 36 months, neither Section 32 (1) nor Section 43 (6) of the Act would stand attracted. It is further contended that the authorities have erred in not considering the contention of the assessee regarding the "rule of consistency", inasmuch as the deduction as claimed by the assessee having been accepted for AYs 2003-04 and 2004-05, the same could not have been rejected for the subsequent years i.e., AYs 2005-06 and 2006-07. Hence, he seeks for answering the subs....
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....vered by sections 30 to 36. The deduction for acquisition of Trade Mark is covered by section 32. Explanation 3 to section 32 (1) says that 'block of assets' shall mean inter alia, intangible assets being trade mark. In other words, the deduction for the acquisition of trade mark should be under section 32. IT rules allow depreciation @ 25% on 'intangible assets'. Therefore deduction can be allowed on trademarks (which is intangible asset according to section 32) only under section 32, i.e., @ 25%. Further, section 43 (6) says that WDV of an asset purchased in an earlier year is the cost less depreciation actually allowed. In this case as deduction has already been claimed and allowed, the opening WDV will be the balance remaining to be written off, i.e., Rs. 25,23,333/- accordingly, depreciation was to be allowed on this amount @ 25%, or Rs. 6,30,834/- 3.2 In its letter dated 12.12.2008, the assessee reiterates its claim and states that as the trademark was granted for a limited period of three years and not perpetually, deduction cannot be allowed under section 32. For the reasons mentioned in the preceding paragraph, the assessee's arguments cannot b....
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....g within that block of assets at the beginning of the previous year and adjusted,- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year;" (emphasis supplied) 15. It is clear that in order for Section 32 (1) to be attracted, the assessee is required to 'own' the asset and for Section 43 (6) to be attracted the assessee ought to have 'acquired' the asset. Hence, reliance placed by the AO on the said sections to deny the deduction is ex facie untenable and liable to be rejected. 16. In the appeal filed before the Commissioner, vide order dated 29.3.2011 the Commissioner at para 13 after noticing the grounds urged and at para 13.1 after noticing the grounds on which the AO disallowed the claim of the assessee, has recorded the following findings: "13.1.1 Vide written submissions filed on 28-3-2011, the appellant merely stated that the AO ought to have accepted its claim and allowed the same as revenue expenditure as was done in AYs 2003-04 & 2004-05 based on the rule of consistency instead of treating the same as capital expenditure in AY 2005-06. Incidentally, a perusal of the earlier year'....
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....ommissioner of Income-tax (1972) 84 ITR 277 (SC) the Hon'ble Supreme Court while considering the tests required for distinguishing the capital and revenue expenditure, has held as follows: "Acquisition of the goodwill of the business is, without doubt, acquisition of a capital asset, and therefore, its purchase price would be capital expenditure. It would not make any difference whether it is paid in a lump sum at one time or in instalments distributed over a definite period. (See In re Ramjidas Jaini & Co. [1945] 13 ITR 130 (Lah.) and Kuppuswami v. commissioner of Income-tax [1945] 25 ITR 349 (Mad.). Where, however, the transaction is not one for acquisition of the goodwill but, for the right to use it, the expenditure would be a revenue expenditure." (emphasis supplied) 19. In the present case, it is clear from the factual matrix that the assessee has merely a right to use the trademark for a period of 36 months. Having regard to clear enunciation of law as held by the Hon'ble Supreme Court in the case Devidas Vithaldas & Co (1972) 84 ITR 277 (SC), the orders passed by the authorities are unsustainable. Further, as noticed above, reliance placed by the author....