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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Amit Shukla, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-41, Mumbai, {(in short ‘CIT(A)’}, dated 24.03.2011 passed against assessment order u/s 143(3) r.w.s. 263 of the Act, dated 6.12.10 for the A.Y.2005-06 on the following grounds:
2 Franklin Templeton “The under mentioned Grounds of Appeal are without prejudice to one another:
1. Jurisdiction 1.1. In the case of the Appellant, the Commissioner of Income-tax (Appeals)-41, Mumbai ("the CIT (A)") erred in law and on facts in not appreciating that the order under section 143(3) read with section 263 of the Income-tax Act, 1961 ("the Act") ("the impugned Order"), passed by the Assessing officer ('the AU') on 6 December 2010, was passed without examining the issues in detail and not making a fresh assessment, although the AO was directed to do so by the Commissioner of Income-tax, Central III. Mumbai ("the CIT"). 1.2. The CIT(A) erred in not appreciating that as the Order passed under section 143(3) of the Act ("Original Assessment Order") was passed after duly examining the relevant issues, the Original Assessment Order was not erroneous and prejudicial to the interest of the Revenue. The Appellant, therefore, prays that the impugned order passed by the AU be quashed and the Original Assessment Order he re-instated. Without prejudice to the above,
2. Launch Expenses 2.1. The CIT(A) erred in holding that the initial issue expenses of Rs.13,52,00,000, borne by the Appellant, an Asset Management Company ("AMC"), should be amortized over a period of five years. 2.2. The CIT(A) erred in holding that an amendment in the SEBI Regulations was applicable to the assessee where it is held that the Asset Management Company has to obtain reimbursement of the initial issue expenses to the extent of 6% of the total fund raised and balance expenses though borne by the Asset Management company should be amortized over a period of five years. 2.3. The CIT(A) erred in not appreciating that the provisions for amortisation of initial issue expenses under the SEBI Regulations' are in the context of accounting treatment to be followed by mutual funds 3 Franklin Templeton and these do not govern the manner of accounting treatment to be followed by AMC's, such as the Appellant. 2.4. The CIT(A) erred in distinguishing and not following the orders of the Hon'ble Tribunal in Appellant's own case for earlier years on this issue, in which initial issue expenses incurred by the Appellant have been consistently held to be fully allowable revenue expenditure. The Appellant, therefore, prays that the aforesaid initial issue expenses incurred by the Appellant are revenue in nature and be fully allowed in the assessment year in question.
3. Prior period expenses 3.1. The CIT(A) erred in confirming the disallowance of the alleged prior period expenses of Rs.23,32,000 in the subject year. 3.2. The CIT(A) erred in not appreciating the fact that the expenses in question crystallised in the hands of the Appellant only in the subject year and that these expenses should be deductible in computing the income of the subject year. The Appellant prays that in respect of the expenses in question, deduction be allowed in the subject year. 3.3. Without prejudice to the above, the CIT(A) erred in not directing the AO to exclude the reversal of the said expenses from the income of AY 2009-10, previously included in the income of that year. The Appellant prays that the AO be directed to not treat the expenses in question as income in the year in which these are reversed.
4. Allowability of expenses of the amalgamating entity 4.1. The CIT(A) erred in not allowing the administrative and other expenses of Rs.2,95,194 and tax depreciation allowance of Rs.73,17,204 of Franklin Templeton AMC Limited ("FTAMC"), the amalgamating entity, in computing the total income of FTAMIL, the amalgamated company, with which FTAMC had merged effective 26 July 2002. 4.2. Without prejudice, having himself held that the business of the Appellant had not ceased to exist during the year, the CIT(A) erred in not directing deduction of 4 Franklin Templeton expenses and depreciation allowance of FTAMC in computing the income of the merged entity i.e. FTAMIL. The Appellant prays that the AO be directed to allow deduction for the aforesaid expenses and tax depreciation allowance in computing the total income of the Appellant for the subject year.
5. Levy of interest under section 220(2) of the Act 5.1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the levy of interest of Rs.84,27,813 Under section 220(2) of the Act, for the period from January 2008 to December 2010. 5.2. The CIT(A) erred in not appreciating that the demand in question entirely arose on account of the impugned order, received by the Appellant on 21 December 2010 and that prior to the same (considering the relief's obtained in appeal), there was no default of payment of tax on part of the Appellant. 5.3. The CIT(A) erred in not appreciating that liability to interest under section 220(2) of the Act in respect of the said demand would trigger only after the expiry of 30 days of the receipt of the impugned order, that is, from 19 January 2011. The Appellant prays that the AO be directed not to levy of interest under section 220(2) of the Act, in respect of the period prior to 19 January 2011.
6. Levy of interest under section 234D of the Act 6.1. The CIT(A) erred in not adjudicating on the ground relating to the levy of interest of Rs. 85,38,2 13 under section 234D of the Act. 6.2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in not appreciating that the levy of interest under section 234D of the Act cannot be increased, as a consequence of effect given to the order under section 263 of the Act. 6.3. The CIT(A) has erred in law in not appreciating that section 234D(2) of the Act clearly mandates that levy of interest under section 234D( 1) of the Act be reduced upon giving effect to, inter alia, an order under section 263 of the Act. 6.4. Further, The CIT(A) erred in not appreciating that an 5 Franklin Templeton assessment made to give effect to the order under section 263 of the Act is not a "regular assessment". 6.5. The CIT(A) erred in not directing the AO to restrict levy of the said interest to Rs.7,00,516 as was determined at the time of giving effect to the order of the CIT(A) dated 23 June 2008 passed under section 250 of the Act. The Appellant prays that the AO be directed to restrict the levy of interest under section 234D of the Act to Rs.7,00,516, as against Rs. 85,38,2 13 determined by him.
7. Consequential relief The Appellant prays that the AO be directed to grant all consequential reliefs.”
During the course of hearing, arguments were made by Shri F.V. Irani, Authorised Representative (AR) on behalf of the Assessee and by Shri G.M. Doss, Departmental Representative (CIT-DR) on behalf of the Revenue. The arguments made by both the sides have been duly considered while disposing of this appeal.
Ground No.1 relates to jurisdictional validity of the impugned orders. During the course of hearing, Ld. Counsel of the assessee stated that this ground is not pressed. Therefore, it is dismissed as not pressed. 4. Ground No.2: This ground deals with disallowance of Launch (initial issue) Expenses of Rs.13.52 crores. The AO disallowed the expenses incurred by the assessee company for launch/ initial issue of ‘Franklin India Flexicap Fund’ and one other scheme since these gave benefits of enduring nature to the assessee company and thus, these expenses were capital
6 Franklin Templeton in nature and therefore, not allowable as expenditure of the year under consideration. 4.1. The brief background of this case is that in the original assessment order passed by the AO u/s 143(3) dated 31st December 2007, no disallowance was made under this head. Subsequently, the CIT passed an order u/s 263 dt 31.03.2010 wherein he directed the AO to make proper verification of the Launch Expenses. Thus, in pursuance to the order passed u/s 263, the AO passed an order u/s 143(3) r.w. section 263 dated 06.12.2010 wherein he disallowed the expenses on the ground as stated above. It was held by the AO that assessee should have amortised the initial expenses over a period of five year by referring to certain provisions of SEBI regulations. 4.2. Being aggrieved, the assessee filed appeal before the Ld. CIT(A) wherein the disallowance was upheld on the ground that in view of SEBI regulations initial issue expenses to the extent of 6% of the total fund raised were reimbursable. It was further held by the Ld. CIT(A) that these were not allowable as revenue expenses being capital in nature. 4.3. Being aggrieved, the assessee filed an appeal before the Tribunal. 4.4. During the course of hearing before us, it was stated at the outset by the Ld. Counsel that the order passed u/s 263 was contested by the assessee before the Tribunal wherein the same was quashed by the Tribunal vide its order dated 27.01.2012 in ITA No.3858/M/2010. In view of the same, it was submitted that since the order passed u/s 263, itself has been quashed therefore, the impugned disallowance becomes
7 Franklin Templeton illegal and beyond jurisdiction per se and therefore same should be deleted by way of nature of legal consequence. Per contra, Ld. DR did not dispute the factual situation narrated by the Ld. Counsel. 4.5. We have gone through the facts of this case as well as aforesaid order passed by the Tribunal wherein revision order u/s 263 was contested by the assessee. It is noted by us that Ld. Counsel has rightly submitted of the facts that order passed u/s 263 has been quashed by the Tribunal. We find it appropriate to reproduce the relevant portion of the order of the Tribunal dated 27.01.2012 (ITA No.3858/Mum/2010) as under: “24. We have considered the rival submissions. We are of the view that in the absence of any specific reference to a particular regulation of SEBI which lays down that initial expenses have to be amortized over a period of time, we cannot say with certainty as to how the order of the AO in allowing the deduction of Rs.13.52 Crores was erroneous. We will proceed to examine the contention of the parties on the basis of the decision of the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation (supra). The question before the Hon’ble Court was as to whether discount on issue of debentures was capital or revenue expenditure and as to whether such discount can be claimed in one year in a lump sum or has to be spread over for the period of the debentures. The Hon’ble Supreme Court that the expenditure in question was revenue expenditure. On the question of claiming the same in one year, the Hon’ble Court held as follows: “The Tribunal, however, held that since the entire liability to pay the discount had been incurred in the accounting year in question, the assessee was entitled to deduct the entire amount of Rs. 3,00,000 in that accounting year. This conclusion does not appear to be justified looking to the nature of the liability. It is true that the liability has been incurred in the accounting year. But the liability is a 8 Franklin Templeton continuing liability which stretches over a period of 12 years. It is, therefore, a liability spread over a period of 12 years. Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corporation Ltd. v. CIT [1983] 144 ITR 474, the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question. Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability should, therefore, be spread over the period of the debentures.” (Underlining by us for emphasis) 25. As to whether the ratio laid down in the aforesaid decision is to the effect that in all cases revenue expenses have to be spread over for the period for which the benefits of such expenditure are likely to be derived or the said decision has to be confined to the facts of the case before the Hon’ble Supreme Court is again debatable. As to whether the said decision will be relevant in the context of an AMC which manage funds on behalf of mutual fund companies and derives income from managing a fund in the form of fee for managing the fund, is again debatable. On such debatable issues where two views are possible jurisdiction u/s.263 is not to be exercised. We accordingly hold that exercise of jurisdiction u/s.263 could not have been made. In the result the order u/s. 263 of the Act, in so far as it relates to the initial issue expenses, are hereby quashed.”
9 Franklin Templeton 4.6. It is thus noted from the above that the impugned order passed u/s 263 has been quashed by the Tribunal and therefore, there are no basis to continue with the impugned disallowance made by the AO on account of launch/initial issue expenses in consequent to the order passed by the CIT u/s 263. Therefore, under these circumstances the impugned disallowance being devoid of force of law is directed to be deleted. Thus, Ground No.2 is allowed.
Ground No.3: This ground relates to prior period expenses, this ground was not pressed by the Ld. Counsel during the course of hearing and therefore, it is dismissed as not pressed.
Ground No.4: This ground deals with the action of lower authorities in not allowing the administrative and other expenses of Rs.2,95,194/- and depreciation allowance of Rs.73,17,204/- pertaining to a erstwhile company namely Franklin Templeton AMC Limited (in short ‘FTAMC’) which stood merged/amalgamated with the assessee company (i.e. amalgamated company), while computing the income of the assessee company. 6.1. The brief background of the issue is that another company namely ‘Franklin Templeton AMC Limited’ had amalgamated with the assessee company by the order of the High Court. The Scheme of amalgamation/merger was approved by the Hon’ble Bombay High Court on 07.10.2005 and by Hon’ble Madras High Court on 07.02.2006. 6.2. During the course of assessment proceedings of erstwhile company, the original assessment order was passed u/s 143(3) dt 24.12.2007. In the said assessment order, the AO of 10 Franklin Templeton the erstwhile company disallowed the aforesaid expenses on the ground that the said assessee company had not carried out any regular business other than the sale/redemption of mutual fund from which it had earned Rs.72,97,297/- as profit and offered to tax under the head ‘income from business’. The AO of the said company finally determined the income of the erstwhile company under the head ‘income from capital gains’ and ‘income from other sources’ at total income of Rs.81,37,246/-, and did not allow the benefit of any business expenses. 6.3. Being aggrieved, the erstwhile company (in short referred to as FTAMC) filed an appeal before the concerned CIT(A). In the appeal, the said company made exhaustive submissions to show that business of the said company was still in existence and AO of FTAMC had wrongly held on facts that no business activity was carried out during the year under consideration. The CIT(A) of FTAMC passed an appeal order in the hands of erstwhile company on 18.08.2010 wherein it was held by him that it cannot be held that there was no business nor it can be said that business activity had ceased during the year under consideration. The relevant para containing the observations of aforesaid CIT(A) is pertinent to be noted and therefore reproduced hereunder for the sake of ready reference: “ I have considered the assessment order of the Assessing Officer, submission of the Appellant and circumstances and facts of the case that as per scheme of amalgamation between FTAMC and FTAMIL, all the properties, assets, liabilities, rights etc. were transferred from FTAMC to FTAMIL from the appointed date, which is 26 July 2002. However, as the dissolution of FTAMC, in the scheme of amalgamation, was finally approved by the Madras High 11 Franklin Templeton Court in March 2008. In the assessment order the Assessing officer had held that in the year under consideration the assessee company has sold 54798 units and purchases 4,00,086 units of Templeton Asset India Management (I) P. Ltd. which means the sale and purchase of the units was within the company’s group. Since sale and purchase of units was there during the year under consideration, therefore, it cannot be held that there was not business or the business activity was ceased during the year under consideration. To this extent the ground of appeal is allowed. However, whether these transactions were treated as stock in trade or investment in purchase and sale of units is separately discussed in ground no.3. Therefore, second ground that business was carried out during the year consideration is allowed for statistical purposes.” 6.4. It has been brought to our notice that the aforesaid order attained finality as no appeal has been reportedly filed by either party against the said order before the Tribunal. This fact was confirmed by Ld. Counsel by making statement at bar on the instructions of the assessee. Subsequently, the AO of the assessee company, while giving effect to the aforesaid order of the aforesaid CIT(A) (of FTAMC), in the impugned assessment order dated 06.12.2010 passed in pursuance to order u/s 263, disallowed the aforesaid expenses while computing total income of the assessee company after including taxable income of the erstwhile company (FTAMC) which had since been amalgamated/merged into the assessee company. 6.5. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein impugned order has been passed by the Ld. CIT(A) which has been appealed before us,. In the impugned order, Ld. CIT (A) considered the appeal order passed earlier 12 Franklin Templeton by the CIT(A) of erstwhile company (FTAMC) and read the same in the manner as if disallowance has been confirmed by the CIT(A) (of FTAMC) in the order dated 18.08.2010 passed in the case of erstwhile company. 6.6. Before us, Ld. Counsel vehemently submitted that the facts have been totally misunderstood by the impugned order by Ld CIT(A). In fact, it was held in the case of erstwhile company by the then CIT(A) that the said company was actually carrying on business activities. Our attention was also drawn upon the subsequent orders passed by the AO wherein depreciation has been allowed in A.Y. 2007-08 as well as in subsequent years. 6.7. Per contra, Ld. DR relied upon the orders of the lower authorities. 6.8. We have gone through the orders passed by the lower authorities in the case of the assessee company as well as in the case of erstwhile company (FTAMC), which has been amalgamated into the assessee company. It is noted by us that the CIT(A) of erstwhile company (FTAMC) had clearly held that the said company was very much engaged in its business activities and thus it could not be said that business of the said company had ceased to exist. These findings of the then CIT(A) have been misunderstood by the present CIT(A) who has passed the impugned order in the hands of assessee company. It is further noted by us that scheme of the amalgamation/merger clearly states that the assessee company has taken over running business of the erstwhile company (FTAMC). There is no dispute that the assessee 13 Franklin Templeton company is engaged in the business activities in a full-fledged manner. This fact is confirmed in the impugned assessment order passed in the hands of the assessee company wherein income of the assessee company has been assessed under the head ‘income from business’. It is further noted that in the hands of erstwhile company itself, the AO of the said company in subsequent year i.e. A.Y. 2007-08 assessed its income under the head ‘income from business’ and also allowed the benefit of depreciation. Thus, no contradictory action could have been taken in the hands of the assessee company while computing taxable income of the erstwhile company to be included in the taxable income of the assessee company, in consequence to the amalgamation/merger of FTAMC into the assessee company. We find that, entire facts and circumstances of this case suggest that lower authorities have themselves acknowledged factum of continuation of business. Under these circumstances, there was no rational to disallow routine administrative expenses under the erroneous presumption of non-continuation of business activities. Thus, we find the disallowance of expenses and depreciation to be incorrect on facts as well as on law. Therefore, same is directed to be deleted. As a result Ground no.4 is treated to be allowed.
7. Ground Nos. 5, 6 & 7 are consequential and therefore these are dismissed.
Additional Ground:
14 Franklin Templeton 8. During the course of hearing, Ld. Counsel drew our attention upon the additional ground vide his petition dated 19th December 2012. In the said additional ground, the assessee has claimed that it should be granted depreciation allowance u/s 32(1)(ii) of the Act, on the amount of goodwill acquired by the assessee on acquisition and merger of FTAMC ( i.e. erstwhile company) with the assessee company. Our attention has been drawn on schedule XIV i.e. Notes to the Financial Statements, appended with the Balance Sheet of the assessee company as on 31.03.2005, wherein, inter alia, following note has been given: “The company has made an investment of Rs.267,63,35,393 in Franklin Templeton AMC Limited a wholly owned subsidiary. The book value of Franklin Templeton AMC limited as at July 26, 2002 amount to Rs.22,36,67,034/-. The difference between the cost of investment and book value amounting to Rs.245,26,68,359 represents the value attributable to the management contracts and other intangible assets.” 8.1. It was further submitted that as on 31st March 2008, the amount debited under the head management contracts and other intangible assets was reversed and was transferred to Goodwill account and thus Goodwill showed debit balance to the tune of Rs.24,76,03,223/-. Our attention has been drawn upon Note-2(E) of Schedule XIV (Notes to the accounts appended with the Balance sheet as on 31.03.2008 wherein following particulars have been given with regard to Goodwill acquired as a result of amalgamation with the erstwhile company i.e. the difference between the cost of investment in FTAMCL of the company and the net book value of all assets 15 Franklin Templeton and liabilities of FTAMCL as at July 26, 2002 transferred to the company have been adjusted against the balance in profit and loss account and share premium account of FTAMCL as at this date in accordance with the resolution passed by the Board of Directors of the Company at the meeting on August 12, 2006. The balance has been disclosed as Goodwill on amalgamation in the books of account of the company. Particulars Amount in Rupees Cost of Investment(A) 267,63,35,393 Gross value of Assets (as at July 26, 2002) 30,66,28,484 Gross Value of Liabilities (as at July 26, 10,63,25,322 2002) Net: Assets taken over (B) 20,03,03,162 Goodwill (A-B) 247,60,32,231 8.2. It was further submitted that in the subsequent years depreciation has been claimed by the assessee on the written down value of the goodwill brought forward from the earlier years. The amount of WDV was computed in such a manner as if depreciation has been claimed and granted by the assessee since beginning and accordingly amount of depreciation was reduced every year on notional basis and whatever amount of WDV was left in the relevant year, the depreciation was claimed upon the same. It was submitted that depreciation has been granted by the AO in all the subsequent years and therefore, there were no basis to deny the benefit of depreciation in the year under consideration. 8.3. Per contra, Ld. CIT-DR fairly submitted that though this additional ground is a purely legal ground and therefore, it 16 Franklin Templeton could be admitted. But, the assessee himself did no treat this amount in the initial year as Goodwill but described the same as management contracts on which depreciation is not allowable. 8.4. We have gone through the facts of the case and legal position in this regard. It is noted that Ld. CIT- DR was not able to negate the factual submission of the Ld. Counsel wherein it was stated that the AO has granted the benefit of depreciation on reduced WDV of Goodwill in subsequent years, thereby accepting the claim of the assessee in principle, as per law. It is further noted that the judgment of Hon’ble Supreme Court in the case of CIT vs Smifs Securities Ltd 348 ITR 302 (SC) clearly laid down the principle that depreciation is admissible on the amount of Goodwill. It is also well settled that the amount of difference between the amount of net value the assets taken over and amount of consideration paid on the amalgamation/acquisition/merger of a company by another company represents the amount of Goodwill. The law in this regard is well settled now. Our view finds support from the judgment of Hon’ble Delhi High Court in the case of Triune Energy Services Private Limited vs DCIT 65 taxmann.com 288 (Delhi), wherein identical issue was involved, in similar facts and circumstances. Hon’ble Delhi High Court relied upon the judgment of Apex Court in the case of Smifs Securities Ltd., supra and held as under: “Goodwill is an intangible asset providing a competitive advantage to an entity. This includes a strong brand, reputation, a cohesive human resource, dealer network, customer base, etc. The expression goodwill subsumes within it a variety of intangible benefits that are acquired 17 Franklin Templeton when a person acquires a business of another as a going concern. From an accounting perspective, it is well established that 'goodwill' is an intangible asset, which is required to be accounted for when a purchaser acquires a business as a going concern by paying more than the fair market value of the net tangible asset, that is, assets less liabilities. The difference in the purchase consideration and the net value of assets and liabilities is attributable to the commercial benefit that is acquired by the purchaser. Such goodwill is also commonly understood as the value of the whole undertaking less the sum total of its parts. The ‘Financial Reporting Standard 10’ issued by Accounting Standard Board which is applicable in United Kingdom and by the Institute of Chartered Accountants of Ireland in respect of its application in the Republic of Ireland, explains that the accounting requirements for goodwill reflect the view that goodwill arising on an acquisition is neither an asset like other assets nor an immediate loss in value. Rather, it forms the bridge between the cost of an investment shown as an asset in the acquirer's own financial statements and the values attributed to the acquired assets and liabilities in the consolidated financial statements. In view of Accounting Standard 10 as issued by the ICAI the assessee's contention was right that the consideration paid by the assessee in excess of value of tangible assets was rightly classified as goodwill. In the facts of the present case, the Tribunal has rejected the view that the slump sale agreement was a colourable device. Once having held so, the agreement between the parties must be accepted in its totality. The agreement itself does not provide for splitting up of the intangibles into separate components. Indisputably, the transaction in question is a slump sale which does not contemplate separate values to be ascribed to various assets (tangible and intangible) that constitute the business undertaking, which is sold and purchased. The agreement itself indicates that slump sale included sale of goodwill and the balance sheet specifically recorded goodwill at Rs. 40.58 crore. Goodwill includes a host of intangible assets, which a person acquires, on acquiring a business as a going concern and valuing the same at the excess consideration paid over and above the value of net tangible assets is an 18 Franklin Templeton acceptable accounting practice. Thus, a further exercise to value the goodwill is not warranted.” 8.5. Similar view has been taken recently by the Coordinate bench in the case of Grindwell Norton Ltd Dt 27 July, 2016 (ITAT-Mumbai). In the case before us also the facts are identical, as discussed in detail in earlier part of our order, and therefore in our opinion, the assessee company is eligible as per law for claim of depreciation on the amount of Goodwill. 8.6. With respect to other objection of Ld CIT-DR for not debiting the amount of Goodwill by the assessee company in its books on real time basis, it is noted by us that it is also well settled position of law that entry in the books of accounts is not determinative of real character of transactions under the income tax law. Reference in this regard can be made upon the recent judgment of Hon’ble Supreme Court in the case of Taparia Tools Ltd vs JCIT 372 ITR 605 (SC). Thus, we find that the assessee is prima facie entitled for the claim of depreciation on the amount of Goodwill acquired by the assessee on account of acquisition of erstwhile company (FTAMC). However, we find it appropriate that requisite facts in this regard should be verified by the AO. Therefore, we send this ground back to the file of the AO. The AO shall verify the factual assertion made by the assessee that depreciation has been allowed on this amount of Goodwill in subsequent years, as has been claimed before us. If it is found to be correct, then depreciation should be granted from the beginning. The assessee shall file requisite documents in support of its claim.
19 Franklin Templeton The AO take into account all the documentary evidences and other submission as may be made available by the assessee on objective basis before deciding this issue afresh, but keeping in view the legal position as discussed above. The assessee is free to raise all legal and factual issues in this regard. The AO shall give adequate opportunity of hearing before deciding this issue afresh. This ground may be treated as allowed for statistical purposes.
In the result, the appeal filed by the Assessee is partly allowed.
Order pronounced in the open court on 3rd August, 2016.