Income Tax Appellate Tribunal - Mumbai
St. Angelos Computers Ltd, Mumbai vs Assessee on 22 July, 2015
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ 'ई', मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL "E", BENCH MUMBAI सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं सश्र ु ी सष ु भम चमर्रम, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & MS. SUSHMA CHOWLA, JM आमकय अऩीर सं./ITA No.6874/Mum/2011 ( नििाारण वषा / Assessment Year :2008-2009) St. Angelo's Computers Ltd., Vs. ITO-9(3)(2), Mumbai 6th Floor, Jyoti Plaza, Above Tata Motors, S.V.Road, Kandivali(W), Mumbai-67 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAECS 9697 J (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent) AND आमकय अऩीर सं./ITA Nos.133 to 138/Mum/2011 ( नििाारण वषा / Assessment Year :200 2-03 to 2007-08) St. Angelo's Computers Ltd., Vs. DCIT-9(3), Mumbai 6th Floor, Jyoti Plaza, Above Tata Motors, S.V.Road, Kandivali(W), Mumbai-67 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAECS 9697 J (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent) यनधमवरयती की ओर से /Assessee by : Shri S.E.Dastur, Sh.Niraj Sheth & Vipul B Joshi यमजस्र् की ओर से /Revenue by : Shri Neil Philip सुनर्मई की तमयीख / Date of Hearing : 09/06/2015 घोषणम की तमयीख/Date of Pronouncement 22/07/2015 आदे श / O R D E R PER BENCH :
These are the appeals filed by the assessee against the order of CIT(A) for the assessment years 2002-03 to 2008-09, in the matter of order passed u/s.143(3)/143(3) r.w.s.147 of the Act.2
ITA Nos.6874, 133-138/11
2. Common grievance of assessee in all the years pertains to disallowance of claim of depreciation on "goodwill" u/s.32(1)(ii) of the I.T.Act.
3. Rival contentions have been heard and record perused. Facts in brief are that the assessee company, during the A.Y.2002-03, had taken the entire business as a going concern of M/s. St. Angelo's Computers, which was carrying on the activity of imparting professional computer training since 1991 at Mumbai from 14 different centres. The business was acquired for a lumpsum consideration of Rs. 5,25,00,000/-. The assessee attributed Rs.4,85,00,000/- towards goodwill and business knowhow . The value of consideration was determined on the basis of valuation made by the M/s Uttam Abuwala & Co.. The valuation report indicates the contents of the computer diskette in electronic form relating to the operations and other information provided by the management signifying the value of the name/brand of St. Angelo's and other know-how in the field of computer education, trained instructors, books, course material developed for providing training in computer applications, working pattern, education methodology etc. which basically was developed over a period of time with the object of ensuring the best quality training in computer application. In the return of income assessee claimed depreciation on "good-will". The AO declined assessee's claim of depreciation on the "goodwill" on the plea that "good-will" is not an intangible asset for depreciation u/s.32(1)(ii). By the impugned order, the 3 ITA Nos.6874, 133-138/11 CIT(A) confirmed the disallowance of claim of depreciation on "Good-will"
against which assessee is in further appeal before us.
4. Shri S.E.Dastur, learned Senior Counsel placed on record order of the Hon'ble Supreme Court in the case of SMIFS Securities Ltd., 348 ITR 0302, wherein it was held that principle of ejusdem generis would strictly apply while interpreting the expression of "goodwill", which finds place in Explanation 3(b) to Section 362(1). Accordingly it was held that "Goodwill" is an asset under Explanation 3(b) to Section 32(1) of the Act, therefore, eligible for claim of depreciation. Ld. AR also placed reliance on the following decision wherein "Goodwill" was accepted as an asset eligible for claim of depreciation :-
i) Tyssenkrupp elevator (India) (P) Ltd., 167 TTJ 131(Del);
ii) Worldwide Media Pvt. Ltd., 30 ITR (Trib) 181;
iii) M/s PPG Asian Paints Pvt. Ltd., ITA No.2919/Mum/2013, dated 15-4-15
iv) M/s Toyo Engineering India Limited, ITA No.3279/Mum/2008, dated 13-10-2014;
v) Birla Global Asset Finance Co. Ltd., 221 Taxman 176(Bombay);
vi) KEC International Ltd., Order dated 7-2-2013(Bombay High Court)
5. On the other hand, ld. CIT DR relied on the orders of authorities below.
6. We have carefully gone through the decision of Hon'ble Supreme Court in the case of SMIFS Securities Ltd.(supra) and decision of Hon'ble Bombay High Court as well as decision of coordinate bench of the Tribunal cited at bar. The Hon'ble Supreme Court in the case of SMIFS Securities Ltd.(supra), held as under :-
"The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 ['Act', for short].4
ITA Nos.6874, 133-138/11 We quote hereinbelow Explanation 3 to Section 32(1) of the Act:
"Explanation 3.-- For the purposes of this sub-section, the expressions "assets' and "block of assets' shall mean-- [a] tangible assets, being buildings, machinery, plant or furniture; [b] intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature."
Explanation 3 states that the expression "asset' shall mean an intangible asset, being 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). In the circumstances, we are of the view that "Goodwill' is an asset under Explanation 3 b) to Section 32 (1) of the Act.:"
The coordinate bench of the Tribunal in the case of M/s PPG Asian Paints Pvt. Ltd (supra), held as under :-
"In view of the categorical finding of the Hon'ble Supreme Court that the goodwill also. falls under the expression 'any other business or commercial right of a similar nature' and thus would be an asset under Explanation 3(b) to. section 32( 1) of the Act, we accordingly hold that the assessee is entitled to. the claim of depreciation on goodwill. This issue is accordingly decided in favour of the assessee."
7. As the facts and circumstance of the case in all the years under consideration are same, following the same reasoning, we direct the AO to allow assessee's claim of depreciation on "Good-will" in all the years under consideration.
8. In the result, all appeals of the assessee are allowed in terms indicated hereinabove.
Order pronounced in the open court on this 22/07/2015.
Sd/- Sd/-
(सष
ु भम चमर्रम) (आय.सी.शभमव)
(SUSHMA CHOWLA) (R.C.SHARMA)
न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER
भुंफई Mumbai; ददनमंक Dated 22/07/2015
प्र.कु.मभ/pkm, यन.स/ PS
5
ITA Nos.6874, 133-138/11
आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :
1. अऩीरमथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमक् ु त(अऩीर) / The CIT(A), Mumbai.
4. आमकय आमक् ु त / CIT
5. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai
6. गमर्व पमईर / Guard file. आदे शािसार/ BY ORDER, सत्ममवऩत प्रयत //True Copy/ उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भंफ ु ई / ITAT, Mumbai