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Income Tax Appellate Tribunal, DELHI BENCHES “C” : NEW DELHI
Before: SHRI R.K. PANDA & MS. SUCHITRA KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “C” : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.4771/Del./2018 Assessment Year 2013-14 Geodis Overseas Private The DCIT, Limited, Building No.5, Circle – 10 (1), Tower-B, 10th Floor, DLF Cyber City, Phase-III, vs., C.R. Building, Gurgaon – 122 002. New Delhi. Haryana. PAN AAACC6168L (Appellant) (Respondent) For Assessee : Shri Vishal Kalra, Advocate For Revenue : Shri Kumar Padmapani Bora, Sr. DR Date of Hearing : 18.11.2021 Date of Pronouncement : 10.01.2022 ORDER PER R.K. PANDA, A.M.
This appeal filed by the Assessee is directed against the order dated 20.04.2018 of the Ld. CIT(A)-4, New Delhi, relating to the A.Y. 2013-2014.
The grounds raised by the Assessee are as under:
2 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. 1. That the impugned order of assessment framed by the Commissioner of Income Tax (Appeals) (‘CIT(A)’) under Section 250(6) of the Income-tax Act, 1961 (‘Act’), is bad in law and arbitrarily upholds the additions/disallowance made by the Assessing Officer on the basis of conjectures and surmises. 2. That the CIT(A) erred on facts and in law in confirming the addition made by the AO in relation to disallowance of depreciation on goodwill amounting to INR 1,55,34,890 claimed under section 32(1)(ii) of the Act. 3. That on the facts and circumstances of the case and in law, the AO erred in holding and CIT(A) further erred in confirming that goodwill does not qualify as ‘business or commercial right’ as envisaged under section 32(1 )(ii) of the Act. 4. That on the facts and circumstances of the case and in law, the AO erred in levying interest under section 234B and section 234D of the Act.
3 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal”.
2.1. The assessee has also raised the following additional ground :
“That on the facts and circumstances of the case and in law, the education cess (“EC’’) and higher and secondary education cess (“SHEC”) on Income Tax is an allowable expenditure for computing total income as per the provisions of the Income-tax Act, 1961 (“Act”).”
Learned Counsel for the Assessee submitted that the additional ground is purely legal in nature and no fresh facts are required to be investigated. Referring to the decisions of Hon’ble Supreme Court in the cases of National Thermal Power Co. Ltd., vs., CIT reported in 229 ITR 383 (SC) and Jute Corporation of India vs., CIT 187 ITR 688 (SC), he submitted that the additional ground raised by the assessee should be admitted for adjudication.
4 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. 4. After hearing both the sides and considering the fact that the additional ground raised by the assessee being purely legal in nature and no fresh facts are required to be investigated, following the decisions of Hon’ble Supreme Court in the cases of National Thermal Power Co. Ltd., vs., CIT (supra) and Jute Corporation of India vs., CIT (supra), the additional ground raised by the assessee is admitted for adjudication.
So far as the grounds of appeal number.1 to 3 are concerned, the same relate to allowability of depreciation on goodwill.
5.1. Facts of the case, in brief, are that the assessee is a company engaged in the business of transportation of time sensitive packages, documents and cargo to domestic and international destinations. It filed its return of income on 29.11.2013 declaring total income of Rs.15,87,13,620/-. During the course of assessment proceedings, the A.O. noted that assessee company has claimed depreciation on goodwill of Rs.6,21,39,561/- @ 25% which comes to
5 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. Rs.1,55,34,890/-. Since goodwill is not covered within the meaning of intangible assets which means only know-how, patent, copyrights, trademarks, license, franchisee on any other business or commercial rights of similar nature, therefore, the A.O. asked the assessee company to show cause as to why the same should not be disallowed.
5.2. In response to the same, the assessee company filed the following reply :
“Geodis group entered into' Master Asset Purchase Agreement' dated December 1, 2008 with International Business Machine”(ÏBM”) to acquire its logistics division world-wide. Pursuant to such agreement, the company had entered into an acquisition agreement dated March 31, 2009 (enclosed as Annexure I), with IBM India Private Limited, Network Solutions Private Limited and IBM Dciksh Business Process Services India Private Limited (collectively referred to as ‘IBM Indict) to acquire its logistics division in India.
6 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. As a part of the Acquisition Agreement, the company acquired the following from IBM India for consideration of USD 2,783,540 convertible into INK 147,800,975(valuation report enclosed as Annexure 2) –
Tangible assets in the form of laptops/desktops; and Intangible assets being, supplier contracts, workforce under logistic division and the right to provide to IBM India with logistics services for a period of 15 years.
The tangible assets acquired are recognized as capital assets in the books of account of the company and depreciation has been charged on these assets as per rates prescribed under section 32 of the Act. Further, balance consideration of INR 147,293,773 has been allocated to intangible assets, being workforce, supplier contracts of IBM's freight and forwarding business and also
7 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. the right to provide logistic services to IBM for a maximum period of 15 years, and has been capitalized as Goodwill in the books of accounts and is charged to depreciation at the rate of 25 percent, in accordance with provisions of (he Act. Accordingly, for the year under consideration, the company claimed an amount of INR 1,55,34,890 as depreciation on intangible assets.”
5.3. However, the A.O. was not satisfied with the arguments advanced by the assessee. Distinguishing the various decisions cited before him and following the order of the DRP in the preceding assessment years, the A.O. disallowed the depreciation on goodwill of Rs.1,55,34,890/-.
5.4. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under :
“Examination of the issue and decision :-
I have carefully considered assessment order, written submission made by the appellant and materials placed on record by the appellant.
8 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. 6.1. Though the appellant has argued that the amount of Rs.14,72,93,773/- paid towards acquisition of intangible assets being workforce, suppliers contracts of IBM's freights and forwarding business and its right to provide logistic services to IBM for a period of 15 years, the appellant has failed to explain the specific nature of each of the contract taken over/transferred from IBM (India) Pvt. Ltd., Network Solutions (P) Ltd., IBM Daksh Business Process Services Pvt. Ltd., list of which has been given in schedule 2.01(B) of the "local Acquisition Agreement - India dated 31/03/2009.
6.2. It is important to note that the term 'Goodwill' is not present specifically in the definition of 'Intangible asset' given in explanation 3to section 32. As per the said explanation intangible asset includes 'know-how, patents, copyright, trade mark, licences, franchises or any other business or commercial rights of similar
9 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. nature. 6.3. The appellant has failed to explain under which limb of the definition does its case fall and which rights constitute goodwill in this case and at which value. Depending on the circumstances of a case, as held by Hon'ble Apex Court in CIT vs. Smifs Securities Ltd. [2012] 348 ITR 302 (SC), goodwill is an asset but there must exist a direct correlation between the right acquired and corresponding value of such rights. 6.4. Since the appellant is claiming depreciation on such intangible asset, the onus is on the appellant to establish that value of such asset has rightly been claimed on a cogent and reasonable basis. Since the appellant has failed to give any item wise break-up of the value of such rights claimed to have been acquired and basis of valuation, there is a possibility that the appellant has paid such amount which is not covered under the definition of 'intangible asset'.
10 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. 6.5. In any case, the very concept of 'claim of depreciation on any asset' is based on 'value' of such asset. Unless the value of such asset is not clearly determined, any claim of depreciation on unverifiable value cannot be held to have been claimed rightly.
6.6. The appellant has submitted/relied upon some valuation report titled as "IBM Corporation, Fair Market Value of total Assets of Project Panda as of Feb. 23, 2009." In the said report, prepared by certain firm 'Duff & Phelps', the fair market value of total assets of IBM Logistic business in 58 countries have been estimated. However, the appellant has failed to explain the said 'Project Panda' and that how the said report can be used in its case since the three companies from whom assets have been acquired i.e. IBM (India) Pvt. Ltd., IBM Daksha Business Process Services (P) Ltd. and Network Solution Pvt. Ltd. have not even been mentioned in the said report
11 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. and also there is no description of the assets valued in this report. It has not been mentioned in the report as to what constitutes the Indian Logistics of IBM Corporation.
6.7. I find that the AO in his assessment order has dealt with the issue in details. He has made various valid observations which inter-alia, include – 1. The definition of the goodwill in agreement is not as presented by the assessee as the assessee company has not become any sole logistic provider. 2. As regards value of third party contracts, the AO has noted that expiry date of these contracts listed with the agreement has already expired in Dec. 2009. 3. Neither the brand name of IBM has been acquired nor the IBM has transferred any commercial knowledge or technical know- how so that the assessee company can claim
12 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. the same as business or commercial right of similar nature. 4. As discussed in preceding paragraphs, the AO referring to the 'Goodwill' as defined in the agreement has further pointed out that the purchase price of goodwill is not verifiable from any calculation or valuation report. 6.8. Even during the appellate proceeding, the appellant has failed to counter the above observations of the AO. 6.9. Further, the judicial pronouncement relied upon by the appellant in the written submission has already been dealt in and distinguished by the Assessing Officer in the assessment order one by one. The appellant in its written submission has not explained as to why the distinguishing factors explained by the AO in the assessment order are not correct.
13 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. 6.10. In view of the above discussion, I am of the considered view that addition of Rs.1,53,34,890/- made by the AO by disallowing depreciation on goodwill is justified and deserve to be upheld. 6.11. Accordingly, addition of Rs.1,53,34,890/- is confirmed. The ground of appeal No.1 (including 1.1 to 1.5 is dismissed.”
Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
Learned Counsel for the Assessee referring to the decision of the Tribunal in assessee’s own case for the A.Ys. 2010-11, 2011-12 and 2012-13, copies of which are placed at page numbers.75 to 145 of the PB submitted that the issue has already been decided by the Tribunal in favour of the assessee. He submitted that in A.Y. 2010-11 the Tribunal in ITA.No.2305/Del./2015 order dated 18.05.2020 has decided the issue in favour of the assessee at paras-40 to 48 of the order and depreciation on goodwill was allowed.
14 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. Referring to the order of the Tribunal in ITA.No.2242/ Del./2016 order dated 28.10.2020 for the A.Y. 2011-12, he submitted that the Tribunal again following the order for the A.Y. 2010-11 has allowed the depreciation on goodwill. Referring to the order of the Tribunal in ITA.No.483/ Del./2017 for the A.Y. 2012-13 order dated 17.03.2021, he submitted that the Tribunal again has allowed the depreciation on goodwill by following the decision of the Tribunal. He accordingly submitted that this being a covered matter in favour of the assessee, the ground raised by the assessee should be allowed.
The Ld. D.R. on the other hand relied on the orders of the A.O. and the Ld. CIT(A).
We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. following the orders of his predecessor disallowed the claim of depreciation on goodwill. We find the Ld. CIT(A) upheld the action of the A.O, the reasons of which,
15 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. have already been reproduced in the preceding paragraph. We find the issue stands decided in favour of the assessee by the consistent decisions of the Tribunal for the A.Ys. 2010-11, 2011-12 and 2012-13. We find the Tribunal in ITA.No.483/Del./2017 order dated 17.03.2021 for the A.Y. 2012-13 has allowed the claim of depreciation on goodwill by observing as under :
“8. As regards Ground No. 42 in Assessment Year 2011-12, the Tribunal held in Para 17 to 25 are as under :- “17. The second grievance relates to disallowance of depreciation on goodwill.
Facts on record show that the appellant entered into a world-wide multi-year outsourcing agreement with IBM India Private Limited, Network Solutions Private Limited and IBM Daksh Business Process Services Private Limited to acquire the freight forwarding business/ internal global logistics operations of IBM in India for a consideration of Rs. 14,78 crores.
The appellant acquired tangible assets, employees, supplier contracts of IBM. Consideration of Rs. 14.72 crores paid by the appellant represents the value of transferred workforce and supplier contracts including the right to provide logistics services to IBM India for a maximum period of 15 years. The appellant has characterised these as goodwill and claimed depreciation on the same at the rate of 25% under section 32(i)(ii) of the Act.
However, the claim of the assessee was dismissed by the Assessing Officer who was of the firm belief that the
16 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. depreciation on goodwill was not allowable as a deduction in light of the provisions of Explanation 3 to section 32(1) of the Act.
Before us, the ld. counsel for the assessee brought to our notice the decision of the co-ordinate bench in assessee’s own case in ITA No. 2305/DEL/2015 for A.Y 2010-11 and pointed out that Tribunal has decided this issue in favour of the appellant.
Per contra, the ld. DR supported the findings of the DRP.
We find force in the contention of the ld. counsel for the assessee. We are of the considered opinion that this is not the initial year of claim of depreciation and in this year, the assessee has claimed depreciation on the written down value. We find that in the immediately preceding A.Y i.e. 2010-11, this dispute has been settled by the co-ordinate bench in assessee’s own case [supra].
The relevant findings read as under :
“40. We have considered the rival arguments made by both the sides, perused the orders of the AO/TPO/DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, disallowed depreciation on goodwill on the ground that the assessee has not become the sole logistic service provider to IBM India, the value of workforce does not facilitate the smooth carrying on of the business of the assessee and the supplier contracts forming part of the acquisition agreement have expired in the previous year relevant to the assessment year under consideration. According to the AO, the assessee has not acquired any business during the year and, hence, there is no question of making payment over and above for any commercial or business rights as defined under Explanation 3 to section 32(1). Further, the purchase price is not
17 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. verifiable from any calculation or valuation report. According to the AO, there is decline in the business receipts even after paying so much on account of goodwill and, therefore, there is no justification for the payment of such amount. Further, it is also the case of the AO that as per the provisions of law, no depreciation is allowable on goodwill and the legislature provides that depreciation should be allowed on all other intangible assets other than goodwill.
We find, the Hon’ble Delhi High Court in the case of Areva T & D India Ltd. vs. DCIT, 345 ITR 421 has decided an identical issue in favour of the assessee. In that case, the following substantial question of law was admitted:-
"Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that know-how, business contacts, business information, etc. acquired as part of the slump sale described as „goodwill‟ were not entitled for depreciation under Section 32(1)(ii) of the Income Tax Act?"
We find, the Hon’ble Delhi High Court in the said decision has held that specified intangible assets, viz., business claims, business information, business records, contracts, employees and know- how acquired by assessee under slump sale agreement are in nature of 'business or commercial rights of similar nature' specified in section 32(1)(ii) and are accordingly eligible for depreciation under that section.
The relevant observation of the Hon’ble High Court from para 12 to 15 are as under:-
“12. In the present case, it is seen that the assessee vide slump sale agreement dated 30th June, 2004, acquired, as a going concern,
18 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. the transmission and distribution business of the transferor Company w.e.f. 1 st April, 2004. As a result thereof, the running business of transmission and distribution was acquired by the transferee lock, stock and barrel minus the trademark of the transferor which was retained by the transferor, for lump sum consideration of Rs.44.7 Crores. It is further seen that the book value of the net tangible assets (assets minus liabilities) acquired was recorded in the balance sheet of the transferor as on the date of transfer as Rs.28.11 Crores. The said assets and liabilities were recorded in the books of transferee at the same value as appeared in the books of the transferor. The balance payment of Rs.16,58,76,000/- over and above the book value of net tangible assets, was allocated by the transferee towards acquisition of bundle of business and commercial rights, clearly defined in the slump sale agreement, compendiously termed as "goodwill" in the books of accounts, which comprised, inter alia, the following:- (i) Business claims, (ii) Business information, (iii) Business records, (iv) Contracts, (v) Skilled employees, (vi) knowhow. It is also observed that the AO accepted the allocation of the slump consideration of Rs.44.7 Crores paid by the transferee, between tangible assets and intangible assets (described as goodwill) acquired as part of the running business. The AO, however, held that depreciation in terms of Section 32(1)(ii) of the Act was not, in law, available on goodwill. The CIT(A) and the ITAT approved the reasoning of the AO thereby holding disallowance of depreciation on the amount described as goodwill. It was thus argued on behalf of the assessee Company that Section 32(1)(ii) would mean rights similar in nature as the specified assets, viz.,
19 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. intangible, valuable and capable of being transferred and that such assets were eligible for depreciation. On behalf of the respondent it was argued that applying the doctrine of noscitur sociis the expression "any other business or commercial rights of similar nature" used in Explanation 3(b) to Section 32(1) has to take colour from the preceding words "knowhow, patents, copyrights, trademarks, licenses, franchises". It was urged that the Supreme Court had clearly held in Techno Shares and Stocks Ltd.(supra) that "Our judgment should not be understood to mean that every business or commercial right would constitute a "licence" or a "franchise" in terms of section 32(1)(ii) of 1961 Act".
In the present case, applying the principle of ejusdem generis, which provides that where there are general words following particular and specific words, the meaning of the latter words shall be confined to things of the same kind, as specified for interpreting the expression "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act, it is seen that such rights need not answer the description of "knowhow, patents, trademarks, licenses or franchises" but must be of similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred in Section 32(1)(ii) of the Act preceding the term "business or commercial rights of similar nature", it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words "business or commercial rights of similar nature" have been additionally used, clearly demonstrates that the Legislature did not
20 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of "business or commercial rights" cannot be restricted to only the aforesaid six categories of assets, viz., knowhow, patents, trademarks, copyrights, licenses or franchises. The nature of "business or commercial rights" can be of the same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets that form part of the tool of trade of an assessee facilitating smooth carrying on of the business. In the circumstances, it is observed that in case of the assessee, intangible assets, viz., business claims; business information; business records; contracts; employees; and knowhow, are all assets, which are invaluable and result in carrying on the transmission and distribution business by the assessee, which was hitherto being carried out by the transferor, without any interruption. The aforesaid intangible assets are, therefore, comparable to a license to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd.(supra) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the
21 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. market and has an economic and money value is a "license" or "akin to a license" which is one of the items falling in Section 32(1)(ii) of the Act.
In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section.
In view of the above, it is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation under Section 32(1)(ii) of the Act. In the circumstances, the substantial question of law is decided in the affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside.”
We further find the SLP filed by the Revenue against the aforesaid decision was dismissed by the Hon’ble Supreme Court, vide order dated 23rd September, 2013 vide SLP 21227/2012.
We further find, the Delhi Special Bench in the case of CLC & Sons Private Ltd. (supra), while allowing depreciation on goodwill has held as under:-
“7. It is overt from the command of clause (ii) of section 32(1) of the Act that depreciation is permissible in respect of intangible assets listed herein, acquired on or after 01.04.1998. This clause contains certain specified and unspecified species of intangible assets. Whereas the specified intangible assets
22 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. enshrined in the provision include know-how, patent and copyrights ITA No.1976/Del/2006 etc., the unspecified intangible assets have been described with the expression 'or any other business or commercial rights of similar nature.' It is nobody's case that goodwill is a specified intangible asset. The assessee has sought to cover `goodwill' within the expression deployed to define unspecified intangible assets. Au contraire, the A.O. has canvassed a view that the expression used in the provision for defining unspecified intangible assets cannot embrace something which is inextricably linked with the business of the assessee. He bolstered his point of view by noting that the specified assets in the provision are such which are detachable from the business of the assessee and transferrable individually and separately. In this light, he held that the expression 'or any other business or commercial rights of similar nature' would include only such assets which are transferrable distinctly. Goodwill of a business, being, an intangible asset which cannot be transferred separately de hors the transfer of business, was, ergo, held to be not includible in the expression used in the provision to explain the unspecified intangible assets. In our considered opinion, this issue is no more res integra in view of the judgment of the Hon'ble Summit court in CIT vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC) in which it ITA No.1976/Del/2006 has been held: "that goodwill will fall under the expression 'or any other business or commercial rights of similar nature'" and, hence, qualifies for depreciation u/s 32(1) of the Act. We, therefore, answer the legal issue raised in the question before the Special bench
23 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. in affirmative by holding, in principle, that depreciation is available on genuine goodwill.”
The various other decisions relied on by the ld. Counsel for the assessee also support his case to the proposition that depreciation is allowable on goodwill.
We further find the allegation of the AO that the year-wise revenue from logistic services to IBM India is showing a declining trend is also incorrect. A perusal of the chart at para 32 of this order shows that there is, in fact, increase of revenue from IBM.
In view of the above discussion and relying on the decisions cited (supra), we hold that the assessee is entitled to depreciation on goodwill. The ground raised by the assessee is accordingly allowed.”
Respectfully following the findings of the co- ordinate bench, we direct the Assessing Officer to allow claim of depreciation of good will. This ground is, accordingly, allowed.”
In the present appeal, the issue is identical to that of earlier years and no distinguishing facts pointed out by the Revenue. The DRP has not at all considered the aspect of depreciation on goodwill in correct context as there is a finding identical to that of earlier years, assessee entered into a world-wide multi-year outsourcing agreement with IBM India Pvt. Ltd., Network Solutions Pvt. Ltd. and IBM Daksh Business Process Services Pvt. Ltd. as well as Acquisition Agreement and this is not an initial year of claim of depreciation on goodwill. Hence, in light of the decision of the earlier years by the Tribunal the appeal of the assessee is allowed.”
24 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. 9.1. Respectfully following the decision of the Tribunal in assessee’s own case for the immediately three preceding assessment years and in absence of any contrary material brought to our notice, we set aside the order of the Ld. CIT(A) and direct the A.O. to allow depreciation on goodwill. Accordingly, grounds raised by the assessee are allowed.
9.2. Grounds of appeal number.4 being mandatory and consequential in nature is dismissed.
So far as the additional ground is concerned, the same relates to allowability of education cess and higher secondary education cess as an expenditure.
After hearing both the sides, we find the Hon’ble Bombay High Court in the case of Sesa Goa Limited vs., JCIT [2020] 107 CCH 375 (Bom.) has held that since the term “Cess” is not included in clause (ii) of section 40(a)of the I.T. Act, 1961, there is no prohibition in claiming the same as a deduction in computing income chargeable under head of profits and gains of business or profession. Similar view has been taken by the Hon’ble Rajasthan High Court in
25 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. the case PCIT vs., Chambal Fertilizers and Chemicals Ltd. ITA.No.52 of 2018 wherein it has been held that education cess is not a disallowable expenditure under section 40(a)(ii) of the I.T. Act, 1961. We find the Coordinate Bench of the Delhi Tribunal in case of Sicpa India Private Ltd vs., Addl. CIT ITA Nos.704/Kol/2015 and 1586/Kol/2016 held that education cess on income-tax, dividend distribution tax and fringe benefit tax is not a disallowable expenditure under section 40(a)(ii) of the I.T. Act, 1961 having been expressly excluded from section 40(a)(ii) of the I.T. Act, 1961. Similar view has been taken by the Delhi Bench of the Tribunal in the case of Crystal Crop Protection (P) Limited vs., DCIT ITA No.1539/Del/2016 and Midland Credit Management India vs., ACIT ITA.No.3892/Del/2017. In view of the above, we are of the considered opinion that education cess and secondary education cess paid on income tax is an allowable expenditure. Accordingly, the additional ground raised by the assessee is allowed.
In the result, appeal of the Assessee is allowed.
26 ITA.No.4771/Del./2018 Geodis Overseas Private Limited, Gurgaon. Order pronounced in the open court on 10.01.2022.
Sd/- Sd/- [Ms. SUCHITRA KAMBLE] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated 10th January, 2022 VBP/- Copy to 1. The assessee 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT ‘C’ Bench, Delhi 6. Guard File. // By Order //
Assistant Registrar : ITAT Delhi Benches : Delhi.