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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI JASON P. BOAZ
Per Bench
These are appeals by the assessee against the common order dated 28.03.2008 of the CIT(Appeals)-III, Bangalore relating to assessment years 2001-02 to 2003-04.
There is a delay of about 1836 days in filing these appeals by the assessee before the Tribunal. The reasons for the delay in filing the
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appeals have been set out in the application for condonation of delay filed by the assessee. It has been stated in the said application that the
common order of CIT(Appeals) was passed on 28.3.2008 and received by the assessee on 3.4.2008. It appears that the then GM(Finance) of the
assessee, who is also a Chartered Accountant, advised the assessee that
there was no purpose in filing further appeal. The assessee had approached the present counsel (who filed these appeals) for some other
professional advice and in the course of discussion, the common order of the CIT(A) was seen by the present counsel. Thereupon, the present
counsel asked the assessee as to whether any appeal has bee preferred against the impugned order of CIT(A). It was informed by the assessee to
the present counsel that in view of the advice of GM(Finance), no appeal
was filed against the order of CIT(A). The present counsel, however, advised the assessee that it had a good case to go in appeal. Immediately
on receipt of such advice, the assessee had filed the present appeals before the Tribunal.
The averments stated in the application for condonation of delay
have been verified as true by Amit Chatterjee, M.D. of the assessee. The assessee has also filed before us an inter-office memo dated 21.4.08
wherein the relevant notings for not preferring appeals to the Tribunal have been mentioned. The same was filed before us by the ld. counsel for the
assessee.
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The ld. counsel for the assessee further submitted before us that in the matter of condonation of delay in filing appeals, the Tribunal should adopt a liberal approach. It was submitted by him if the explanation furnished by the assessee does not smack of malafides or it is not put forth as part dilatory strategy, the court must show utmost consideration to the suitor. Our attention was drawn to the decision of the Hon’ble Supreme Court in this regard in Ramnath Sao @ Ramnath Sahu & Ors. v.
Govardhan Sao & Ors, AIR 2002 SC 1201. Reliance was also placed
on the decision of the ITAT Bangalore Bench in the case of Raghavendra
Constructions v. ITO, ITA No.425/Bang/2012, order dated
14.12.2012, wherein the Tribunal condoned the delay of about 678 days
in filing the appeal. In doing so, the Tribunal followed the decision of the Hon’ble High Court of Karnataka rendered in the case of CIT v. ISRO
Satellite Centre, ITA No.532/2008 dated 28.10.2011, wherein the
Hon’ble High Court condoned the delay of five years in filing the appeal. In the aforesaid case, the Hon’ble Court found that the very liability of the assessee was non-existent and therefore expressed the view that in such circumstances, the delay in filing the appeal should be condoned.
The ld. counsel for the assessee also drew our attention to the fact that the issue involved in the appeal was with regard to allowing depreciation on goodwill. The ld. counsel for the assessee brought to our notice that the assessee purchased the business on weighing division of
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Phillips India Ltd. on 1.7.1998 for a consideration of Rs.3.7 crores. A sum of Rs.64,93,760 was attributable to the value of goodwill in the consideration so paid. The assessee claimed that goodwill was an item of asset on which depreciation u/s. 32(1) of the Act had to be allowed. The revenue authorities rejected the claim of the assessee on the ground that goodwill was neither an item of asset within the definition of term “block of assets” u/s. 2(11) as well as under section 32 of the Act.
The ld. counsel for the assessee drew our attention to the decision of the Hon’ble Supreme Court rendered in the case of CIT v. Smifs
Securities Ltd., 348 ITR 302 (SC) wherein it was held that goodwill is an
asset on which depreciation is allowable u/s. 32 of the Act. The aforesaid development of law, consequent to the decision of Hon’ble Supreme Court rendered on 22.8.2012, according to the ld. counsel for the assessee, would only mean that the assessee was entitled to benefit of depreciation beyond doubt. According to him, as per the decision of Hon’ble High Court of Karnataka rendered in ISRO Satellite Centre (supra), the delay in filing
the appeals ought to be condoned, as the claim of assessee for depreciation could not be denied on the ground on which the revenue authorities had denied the claim of assessee. It was therefore submitted by the ld. counsel for the assessee that the delay in filing the appeal should be condoned and further it should be held that assessee is entitled to benefit of depreciation on goodwill.
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The ld. DR, however, submitted that the CIT(Appeals) had observed in para 3.4 of the impugned order that in A.Y. 2002-03 and 2003-04, the
assessee accepted the disallowance of depreciation on goodwill. According to him, the delay in filing the appeal was inordinate and therefore
should not be condoned.
On merits, the ld. DR submitted that allowance of depreciation is dependent upon fulfillment of conditions that the assessee is owner of the
asset on which depreciation is claimed and that the assessee has been used for the purpose of business of the assessee. According to him, in the
present case, the AO as well as the CIT(Appeals) proceeded on the basis
that goodwill was not an item of asset, on which depreciation can be allowed u/s. 32 of the Act and therefore, had no occasion to go into the
question whether the assessee owned the goodwill and had used the goodwill for the purpose of business. According to him, in the event of
claim of the assessee being accepted, the issue with regard to ownership
and use of goodwill for the purpose of business should be directed to be examined by the AO.
We have given a very careful consideration to the rival submissions. As far as the delay in filing the appeals is concerned, it is seen that the
impugned order of CIT(Appeals) was passed on 28.3.2008 and was served
on 3.4.2008. On 21.4.2008, there is an inter-office memo in which the advice of GM(Finance) not to file the appeal against the impugned order of
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CIT(Appeals) has been recorded. The law with regard to allowing depreciation on goodwill crystallised with the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. (supra) rendered on 22.8.2012.
The appeal before the Tribunal had been filed by the assessee on 18.6.2013. It is therefore probable that the claim of assessee that appeal was not filed due to an earlier advice and later on filed because of the professional advice given by the present counsel is correct. By the decision rendered by the Hon’ble Supreme Court in Smifs Securities Ltd.
(supra), allowance of depreciation on goodwill is no longer a matter of debate. In such circumstances, we are of the view that the assessee should not be denied benefit which it is entitled to in law purely on technicalities. We are also satisfied that the delay in filing the appeals has occasioned on account of reasonable cause. In this regard, we find that in Raghavendra Constructions (supra), this Tribunal on identical issue held
that subsequent professional advice and delay on account of earlier improper professional advice was sufficient cause to condone the delay in filing he appeal. Following were the relevant observations of the Tribunal:-
“13. We have considered the rival submissions. At the outset, we observe that the Hon’ble Supreme Court, in the case of Mst. Katiji (supra), has explained the principles that need to be kept in mind while considering an application for condonation of delay. The Hon’ble Apex Court has emphasized that substantial justice should prevail over technical considerations. The Court has also explained that a litigant does not stand to benefit by lodging the appeal late. The Court has also explained that every day’s delay must be explained does not mean that a pedantic approach should be taken. The doctrine must be applied in a rational common
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sense and pragmatic manner. In the case of Shakuntala Hegde, L/R of R.K. Hegde v. ACIT, ITA No.2785/Bang/2004 for the A.Y. 1993-94, the Hon’ble Tribunal condoned the delay of about 1331 days in filing the appeal wherein the plea of delay in filing appeal due to advice given by a new counsel was accepted as sufficient. The Hon’ble Karnataka High Court in the case of CIT v. ISRO Satellite Centre, ITA No. 532/2008 dated 28.10.2011 has condoned the delay of five years in filing appeal before them which was explained due to delay in getting legal advice from its legal advisors and getting approval from Department of Science and PMO. In the aforesaid decision, the Hon’ble Court found that the very liability of the assessee was non-existent and therefore condoned the delay in filing appeal. 14. Keeping in mind the aforesaid principles, we shall consider the claim of the assessee in the present case. Admittedly the advice was given by the counsel who appeared on behalf of the Assessee before the Hon’ble High Court. The decision of the Hon’ble High Court was rendered on 28.2.2012. The appeal has been filed by the Assessee before the Tribunal on 26.3.2012. Hence, we find that there has been no willful neglect on the part of the Assessee. In such matters the advice of the professional would be the point of time at which the Assessee would begin to explore the option of exhausting all legal remedies. We are also of the view that by condonation of delay there is no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected. We therefore accept the reason given for condonation of delay in filing the appeal. The delay in filing the appeal is accordingly condoned.”
As far as merits of the appeals are concerned, the fact that the assessee acquired the business of weighing division of Phillips India Ltd. and that a sum of Rs.64,93,706 was paid as goodwill of the business is not in dispute. The assessee is in the business of sales and servicing of electronic weighing solutions. It is therefore clear that the assessee owned goodwill and had used the goodwill for the purpose of its business. In such
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circumstances, we are of the view that the assessee would be entitled to depreciation on goodwill.
With regard to claim of ld. DR that the assessee had no objection for disallowing of depreciation in A.Ys. 2002-03 & 2003-04, we find that in the proceedings for A.Y. 2002-03, the AO has only observed that depreciation is added to the income in the earlier year and therefore is being added in AY 02-03 also, for which the AR had no objection. The order of AO for A.Y. 2002-03 was passed on 31.12.04. Even before this order was passed, the assessee had filed an appeal against the order of assessment for A.Y. 2001-02 denying depreciation on 4.3.2004 itself. It is therefore not correct on the part of the ld. DR to contend that the assessee had accepted the disallowance of depreciation. In our view, tax liability cannot be imposed on the basis of admission and it should be strictly in accordance with law.
For the reasons stated above, we allow the appeals of the assessee.
Pronounced in the open court on this 27th day of March, 2015.
Sd/- Sd/-
( JASON P. BOAZ ) ( N.V. VASUDEVAN ) Accountant Member Judicial Member
Bangalore, Dated, the 27th March, 2015.
/D S/
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Copy to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar/ Senior Private Secretary ITAT, Bangalore.