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ACIT -10(1) Mumbai. Vs. IL & FS Investment Managers Ltd. th Floor, Plot No. C-22, G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400 051
June, 06th 2014
                IN THE INCOME TAX APPELLATE TRIBUNAL,
                      MUMBAI BENCH "I", MUMBAI
     BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
               DR. S.T.M. PAVALAN, JUDICIAL MEMBER
              ITA Nos. 3146, 3147, 3148 & 5466/Mum/2010
            Assessment Years: 2003-04, 2004-05, 2005-06 & 2006-07

         IL & FS Investment                ACIT -10(1)
         Managers Ltd.                     Mumbai.
         The IL & FS Financial Center,
                                       Vs.
         9th Floor, Plot No. C-22, G
         Block, Bandra ­Kurla
         Complex, Bandra (E),
         Mumbai-400 051
                (Appellant)                          (Respondent)

              ITA Nos. 2693, 2694, 2695 & 5796/Mum/2010
            Assessment Years: 2003-04, 2004-05, 2005-06 & 2006-07
         ACIT -10(1)                       IL & FS Investment
         Mumbai.                           Managers Ltd.
                                           The IL & FS Financial Center,
                                       Vs. th
                                           9 Floor, Plot No. C-22, G
                                           Block, Bandra ­Kurla
                                           Complex, Bandra (E),
                                           Mumbai-400 051
               (Appellant)                            (Respondent)

                  Permanent Account No. :-AAACI 4829 C

                         Assessee by    :   Shri Dilip V. Lakhani
                          Revenue by    :   Shri Sanjeev Jain

                     Date of hearing  : 03.06.2014
                Date of Pronouncement : 03.06.2014
                                   ORDER
PER BENCH:-


      There are eight appeals, four appeals filed by the Assessee and four appeals
filed by the Revenue, the details of which are aforementioned in the short cause
title. Since common issues are involved in all these appeals, the same are heard
together and disposed of by this common order.
                                                              ITA Nos. 3146, 3147, 3148 & 5466/Mum/2010
                                           2                  ITA Nos. 2693, 2694, 2695 & 5796/Mum/2010
                                                                               IL & FS Investment Managers Ltd
                                                         Assessment Years: 2003-04, 2004-05, 2005-06 & 2006-07


2.     The common issue involved in the assessee's appeal pertains to the
allowability of depreciation on the value of goodwill amounting to Rs.82.30 lakhs.
The relevant facts are that the assessee vide transfer agreement dated 12th April,
2002 had purchased assets i.e., business from its associate concern. After the
purchase/transfer of the business asset, the assessee had claimed the depreciation
@ 25% of 11.13 crores, being the value for asset management rights/intangible
assets which included the claim of depreciation on the value of `goodwill' amounting
to Rs.82.30 crores on the basis of the valuation report from M/s. SSPA & Company
obtained by the assessee. In the assessment framed, the AO while not accepting the
valuation report filed by the assessee, rejected the claim of depreciation. On appeal,
Ld.CIT(A) while accepting the valuation report, has denied the depreciation on
`goodwill' for the reason that `goodwill' is not listed in the six items mentioned,
namely know-how, patent, copyrights, trademarks, licenses, franchises, in clause (ii)
of section 32(1). According to the Ld.CIT(A), the asset `goodwill' was not a business
or commercial rights similar in nature to six items mentioned in clause (ii) of section
32(1) of the Act. Therefore, the consideration paid by the assessee at Rs.82.30 lakhs
as valued by the valuer was not eligible for depreciation.




3.     Having heard both the sides and perused the material on record on the issue
of allowability of depreciation on goodwill, it is pertinent to mention that the Hon'ble
Supreme Court in the case of CIT Vs. Smifs Securities Ltd. [2012] 24 taxmann.com
222 (SC) has held that explanation 3 to section 32 states that the expression asset
shall mean intangible asset being know-how, copyrights, trade marks, licenses,
franchises or any other business are commercial rights of similar nature. The words
`any other business or commercial rights of similar nature' stated in explanation 3
includes that `goodwill' would fall under the expression `any other business of
commercial rights of a similar nature'. Further, the principle of `ejusdem generis'
would strictly apply while interpreting the said expression which find place in
explanation 3(b). Consequently, `goodwill' is an asset under the explanation 3(b) to
section 32(1) and eligible for the depreciation. In view of this settled legal position,
we are of the considered view that the Ld.CIT(A) is not justified in denying the
benefit of depreciation claimed by the assessee on the `goodwill'. Accordingly, we
                                                             ITA Nos. 3146, 3147, 3148 & 5466/Mum/2010
                                          3                  ITA Nos. 2693, 2694, 2695 & 5796/Mum/2010
                                                                              IL & FS Investment Managers Ltd
                                                        Assessment Years: 2003-04, 2004-05, 2005-06 & 2006-07


direct the AO to allow claim of depreciation on the goodwill in all the four
assessment years in which the said issue is involved.

4.    Grounds no. 4 & 5 in the assessee's appeal for the assessment year 2004-05
and 2005-06 relate to the disallowance u/s 14A read with Rule 8D which are not
pressed by the assessee and ground no. 6 in the said appeals are consequential in
nature. Thus grounds no. 4, 5 and 6 in the assessee's appeals for the assessment
year 2004-05 and 2005-06 are dismissed as the same do not require any
adjudication.

5.    The common issue involved in all the appeals filed by the revenue is
pertaining to the admission of fresh valuation report as additional evidence under
Rule 46A by the Ld.CIT(A). The Revenue has agitated the same on the ground that
the said evidence was not in existence at all till the date of assessment, but
constructed at a later date to support the claim of the assessee. Further, the
revenue has challenged the decision of the Ld.CIT(A) in accepting the valuation of
goodwill as per report of Ms. SSPA & Company. In this connection, it is pertinent to
mention that the assessee claimed the total depreciation on intangible asset as per
the business transfer agreement, the value of which is at 11.13 crores. This
valuation includes the valuation of goodwill also. Even if the valuation report valuing
the goodwill is not acceptable, then also the assessee is entitled to claim the
depreciation on the total value of intangible assets including the valuation otherwise
done on goodwill. The mere devaluation of the goodwill, as contended/proposed by
the Revenue, will not, in any way, reduce the claim of depreciation, as the assessee
is entitled @ 25% on the total value of the intangible assets valued at Rs.11.13
crores. No need to further emphasis that the assessee is entitled for the depreciation
on the good will on the same rate @ 25%. Therefore, contesting the validity of the
valuation report in the light of our decision allowing the claim of depreciation of
goodwill as aforementioned, the adjudication of these grounds raised by the revenue
in all the appeals becomes academic in nature and thus the same are dismissed.


6.    In Ground No. 3, the Revenue, in its appeal for the assessment year 2005-06
has agitated the decision of the Ld.CIT(A) in deleting the disallowance of employees
                                                                      ITA Nos. 3146, 3147, 3148 & 5466/Mum/2010
                                                4                     ITA Nos. 2693, 2694, 2695 & 5796/Mum/2010
                                                                                       IL & FS Investment Managers Ltd
                                                                 Assessment Years: 2003-04, 2004-05, 2005-06 & 2006-07


contribution to provident fund amounting to Rs.5,28,983/-. It is pertinent to mention
that it is an admitted fact that the assessee has made the payments after the due
date of payment but the said payment has been paid within the grace period. The
decisions of various Courts and Tribunals have held that the payment made within
the grace period is held to be made within the due date. In view of that matter, we
do not find any justifiable reason to interfere with the decision of the Ld.CIT(A) on
this count and the same is upheld. Resultantly, the ground raised by the revenue in
this regard is dismissed.




7.      In the result, the appeals filed by the Assessee are partly allowed and
that of the Revenue are dismissed.


      Order pronounced in the open court on this 3rd day of June, 2014.


            Sd/-                                                                Sd/-
      (D. KARUNAKARA RAO)                                              (Dr. S.T.M. PAVALAN)
      ACCOUNTANT MEMBER                                                  JUDICIAL MEMBER

Mumbai, Dated: 03.06.2014.
*Srivastava

Copy to: The Appellant
         The Respondent
         The CIT, Concerned, Mumbai
         The CIT(A) Concerned, Mumbai
         The DR "I" Bench

                                        //True Copy//

                                                            By Order

                                              Dy/Asstt. Registrar, ITAT, Mumbai.

 
 
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