The Tax Publishers2012 TaxPub(DT) 2033 (Del-HC) : (2012) 345 ITR 0421 : (2012) 250 CTR 0151 : (2012) 208 TAXMAN 0252 : (2012) 070 DTR 0233

INCOME TAX ACT, 1961

--Depreciation--Allowability Intangible assets--The assessee company is presently engaged in transmission and distribution business of power. The business involves, inter alia, designing, manufacturing, supplying, installation, testing, commissioning and servicing transmission and distribution system of power on turnkey basis. (ii) The assessee company earlier was a subsidiary of an Indian company, viz., ALSTOM 'transferor'). Subsequently, the appellant-company became the subsidiary of Areva T&D Holdings SA France transferee') w.e.f. 1-4-2004 pursuant to transfer under a slump sale agreement dt. 30-6- 2004. (iii) Under the transfer/slump sale agreement, the business was transferred by the transferor lock, stock arid barrel to the assessee company. However, the transferor retained its trademark'. (iv) The business of the transferor was acquired by the assessee company for a total sale consideration of Rs. 44.7 crores. On bifurcation, it is revealed that the tangible assets were transferred for a net value of Rs. 28.11 crores. (v) The excess amount of Rs. 16,58,76,000 was claimed as payment made by the assessee company for acquisition of various business and commercial rights categorized under the separate head, namely, 'goodwill' in the books of account of the assessee. These business and commercial rights comprised of the following : Business claims; business information; business records; contracts; skilled employees; know-how. (vi) The assessee company while filing its return for the relevant assessment year 2005-06 claimed depreciation under section 32(1)(ii) with respect to the aforesaid amount of Rs. 16,58,76,000 as being a price paid for acquisit On the same on of abovementioned intangible assets. (vii) The assessing officer while completing the assessment under section 143(3) disallowed the depreciation. On the same After the order of assessment was framed the assessee company invoked the jurisdiction of Commissioner (Appeals) challenging the validity of the assessment order with regard to depreciation. (ix) The assessee company filed its appeal contending, inter alia, that the sum of Rs. 16,58,76,000 was in actuality an amount paid by the assessee company for acquiring intangible assets including valuable know-how, employees, work orders, business information, business contracts etc., as specified in the slump sale agreement dt. 30th June, 2004 which were compendiously termed as 'goodwill' and therefore entitled to depreciation under section 32(1)(ii) of the Act. (x) The Commissioner (Appeals) repelled the contention of the assessee company vide order dt. 4-4-2008 thereby reaffirming the stand of the assessing officer on the ground that goodwill has not been specifically included under section 32(1)(ii). The Tribunal in impugned order held that the statutory expression of the provision granting depreciation on intangible assets does not include all the intangible assets and that the residual clause, viz., 'any other business or commercial rights of similar nature' must be of similar nature to the intangible assets eligible for depreciation enumerated in the said provision prior to the aforesaid expression. Held: Know-how, business contracts, business information, etc., acquired as part of the slump sale described as 'goodwill' were entitled for depreciation under section 32(1)(ii). treetint it as business of commercial rights of similar nature.

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