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Income Tax Appellate Tribunal, MUMBAI “A” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.
ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-20, Mumbai, dated 09.07.2014 for A.Y. 2008-09 on following ground:
NATURAL JUSTICE A.Y. 08-09 [St. Angelo’s Computers Ltd. vs. ITO] Page 2
1.1 The Learned Commissioner of Income - tax (Appeals) - 20, Mumbai, ["Ld. CIT(A)”] erred in passing the appellate order in breach of the principles of natural justice as much as:
(i) Not proper, effective and fair opportunity has been granted to the Appellant;
(ii) There was no application of mind to the facts and circumstances of the case of the Appellant as well as the submissions made before him.
1.2 It is submitted that, in the facts and the circumstances of the case, and in law, the order is held to be bad in law. WITHOUT PREJUDICE TO THE ABOVE
2.1 The Ld. CIT (A) erred in confirming the action of the A.O. in levying penalty u/s. 271(1)(c) of the Income-tax Act ["the Act"]. 2.2 The Ld. CIT (A) failed to appreciate that the order passed by the A.O. and / or the penalty levied was bad and illegal as the necessary conditions for initiating the penalty proceedings and the completion thereof were not fulfilled. WITHOUT PREJUDICE TO THE ABOVE
3.1 The Ld. CIT (A) erred in confirming the action of the A.O. in levying penalty u/s. 271(1)(c) of the Act, to the extent of Rs.7,33,501/-, on the allegation of filing inaccurate particulars of income particulars of income by the Appellant.
3.2 It is submitted that in the facts and circumstances of the case, and in law, on merit also, no such penalty was leviable.”
In this case, Assessing Officer levied penalty on the ground that assessee has wrongly claimed depreciation of A.Y. 08-09 [St. Angelo’s Computers Ltd. vs. ITO] Page 3 Rs.21,57,990/-. Ld. Authorized Representative before us quantified that quantum addition has been deleted by ITAT Mumbai ‘E’ Bench in ITA No.6874/Mum/2011 & Others vide para no.6 by observing as under: “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].
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.:"
A.Y. 08-09 [St. Angelo’s Computers Ltd. vs. ITO] Page 4 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."
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.” Nothing contrary was brought to our knowledge on behalf of Revenue. So, we find that quantum addition is made on account of disallowance of claim of depreciation on “goodwill” u/s.32(1)(ii) of the Act, which is the basis of penalty, does not survive. In view of the Tribunal’s decision in quantum, penalty u/s.271(1)(c) of the Act does not survive. Same is directed to be deleted.
As a result, appeal filed by assessee is allowed.
Pronounced in the open Court on this the 12th day of August, 2016.