DCIT, Circle 11(1), New Delhi Vs. Intertek India Pvt. Ltd., E-20, Block B-1, Mohan Coop Indl. Area, New Delhi.
June, 20th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ` C', NEW DELHI)
BEFORE SHRI R. P. TOLANI , JUDICIAL MEMBER AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No. 5540/Del/2013
Assessment year : 2008-09
DCIT, Circle 11(1), Vs. Intertek India Pvt. Ltd.,
New Delhi E-20, Block B-1,
Mohan Coop Indl. Area,
GIR / PAN:AAACI6890F
Appellant by : Shri Satpal Singh, Sr. DR
Respondent by : Shri Pradeep Denodia, FCA
PER T.S. KAPOOR, AM:
This appeal is filed by the Revenue against the order of Ld. CIT(A)-
XV, New Delhi dated 08.07.2013 for the assessment year 2008-09. The sole
grievance raised in this appeal is regarding action of Ld. CIT(A) by which
he has allowed depreciation on goodwill amounting to Rs.4,48,25,483/- by
holding that goodwill is an asset covered under Explanation (3)(b) of Section
32 of the Income-tax Act, 1961.
2. At the outset, Ld. A.R. submitted that this issue is covered in favour
of the assessee by the decision of Hon'ble Supreme Court in the case of CIT
Vs Smifs Securities Ltd. (2012) Civil Appeal No.5961 of 2012, findings are
based in this case and therefore, it was argued that Ld. CIT(A) had rightly
decided the issue in its favour which should be upheld.
3. Ld. D.R. fairly conceded to the submissions of the Ld. A.R. but relied
upon the assessment order.
2 ITA No5540./Del/2013
4. We have heard rival parties and have gone through the material placed
on record. We find that the assessee is engaged in the business of providing
testing services to its clients. By business transfer agreement dated
15.12.2005, the assessee had purchased quality register division of KPMG
and the consideration made by appellant over and above book value of net
current asset as appearing in books as on 15.12.2005 was recorded as
goodwill and depreciation thereon was claimed by treating the same as
intangible asset. The Assessing Officer did not accept the contention of the
appellant that goodwill was eligible for depreciation by observing that the
same was not included in the definition of intangible asset u/s 32 of the Act.
However, Ld. CIT(A) on the basis of submissions filed by the Ld. A.R. and
relying upon the judgement of Hon'ble Supreme Court in the case of CIT Vs
Smifs Securities Ltd. (supra), has held that goodwill is an asset which is
covered under Explanation (3)(b) of Section 32(1) of the Act which would
fall under the expression `any other business or commercial rights of similar
nature'. The relevant finding of Ld. CIT(A) are contained in para 6 to 6.3,
which are reproduced below:
"6. I have carefully considered the facts of the case in the light of
the submission made by the appellant and applicable law in this
regard. Accordingly, my decision on various grounds is as under:
6.2 On careful consideration of the facts, I find that even though
the appellant had treated the surplus of consideration paid over the
value of net current asset KLPM in terms o BTA dated 15.12.2005,
which was treated as goodwill in its books, however, the same was an
aggregation of various intangible asset comprising pending customers
contracts intangible property rights, assemble work forces and
customers relationship etc. Being intangible asset in nature each of
such item was separately eligible for depreciation in view of the
provisions of explanation 3(b) to Section 32(1).
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6.3 Moreover, the Hon'ble Supreme Court in the case of CIT Vs
Smifs Securities Ltd. (supra), while held that goodwill is an asset,
which is covered under Explanation 3(b) to Section 32(1) of the Act,
which would fall under the expression "any other business or
commercial rights of similar nature". Keeping in view the above
decision of the Apex Court, which is binding, it is held that the claim
of depreciation on the goodwill of the appellant was justified as per
law. In view of the same, Grounds No.1 to 4 of the appeals are
decided in favour of the appellant."
5. We find that Hon'ble Supreme Court in the above noted case has
clearly held that the goodwill would fall in `any other business or
commercial right of similar nature'. Respectfully following the same, we do
not find any infirmity in the order of Ld. CIT(A) and therefore, the appeal
filed by the Revenue is dismissed.
6. In view of the above, appeal filed by the Revenue is dismissed.
7. Order pronounced in the open court on 18th June, 2014.
(R. P. TOLANI ) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
(ITAT, New Delhi).
4 ITA No5540./Del/2013
Date of hearing
Date of Dictation
Date of Typing
Date of order signed by
both the Members &
Date of order uploaded on net
& sent to the Bench concerned.