TaxTMI 
TaxTMI 
2026 (8) TMI 1188
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....sessment, Assessing Officer found that the assessee has shown intangible assets of Rs. 1,00,91,68,125/- consisting of brand name know-how, licences and marketing distribution network. The Assessing Officer, however, was of the view that Section 32(1)(ii) of the Income Tax Act, 1961 (for short 'the Act') does not refer to marketing and distribution network right and brand name. Accordingly, on a show-cause notice issued by the Assessing Officer, after considering the reply of the assessee, the Assessing Officer concluded that the claim of depreciation on intangible assets consisting of marketing and distribution network by way of franchise and use of brand name is not allowable. Accordingly, the Assessing Officer rejected the claim of depreciation on the amount of Rs. 12,03,12,500/- which relates to two assets in the name of Brand name "Arvind" and "Marketing and distribution Network". 3.2. Being aggrieved, the assessee preferred an Appeal before the CIT (Appeals), who after considering the facts and circumstances of the case and the submissions made by the assessee, allowed the claim of the assessee by observing as under : "2.2. I have considered the assessment order an....
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....include trade marks, licences, franchisees and other business or commercial rights of similar nature acquired on or after 1st day of April, 1998. The Tribunal therefore, considering such facts, dismissed the Appeal of the Revenue holding as under : "6. We have heard both the parties and carefully gone through the records. Before us, the learned AR of the assessee reiterated the submissions as were made before the authorities below and strongly supported the impugned order of the learned CIT(A). The learned DR, on the other hand, supported the impugned order of the Assessing Officer. The moot question that is to be decided whether the depreciation claimed on the intangible assets amounting to Rs. 12,03,12,500 which relates to these two assets in the names of Brand name "Arvind" and "Marketing and distribution Network" is allowable u/s. 32(1)(ii) of the Income-tax Act, 1961. Going through the said section, it is very much clear that this section includes know-how, patents, copyrights, trade marks, licences, franchisees or any other business or commercial rights of similar nature, being intangible assets. The Revenue is not disputing that the assessee has acquired these two i....
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....ection in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be: Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for ....
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.... were used by them. Explanation 1.-Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.-For the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause* (c) of sub-section† (6) of section 43. Explanation 3.-For the purposes of this sub-section, the expression "assets" shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature [, not being goodwill of a business or profession]. Explanation 4....
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....ciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any one previous year; (iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee. Explanation.-For the purposes of this clause,- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, tak....
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.... know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 5. In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 6. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) 'CIT(A), for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to t....