THE DCIT, CIRCLR-6, Ahmedabad v. M/s Talent Gujarat, Ahmedabad

ITA 1052/AHD/2009 | 2005-2006
Pronouncement Date: 16-12-2011 | Result: Dismissed

Appeal Details

RSA Number 105220514 RSA 2009
Assessee PAN AAAFT9575F
Bench Ahmedabad
Appeal Number ITA 1052/AHD/2009
Duration Of Justice 2 year(s) 8 month(s) 9 day(s)
Appellant THE DCIT, CIRCLR-6, Ahmedabad
Respondent M/s Talent Gujarat, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-12-2011
Date Of Final Hearing 12-12-2011
Next Hearing Date 12-12-2011
Assessment Year 2005-2006
Appeal Filed On 06-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH . .. . . .. . !'# !'# !'# !'# $ $ $ $ %&' ( ) %&' ( ) %&' ( ) %&' ( ) &* + &* + &* + &* + & # & # & # & # BEFORE S/SHRI G.C. GUPTA VICE-PRESIDENT AND BIJENDRA PAUL JAIN ACCOUNTANT MEMBER) ITA NO.1013 AND 1014/AHD/2009 [ASSTT.YEAR : 2004-2005 AND 2006-2007] DCIT CIR.6 AHMEDABAD. /VS. M/S.TALENT INDIA 1601 KARNAVATI ESTATE GIDC PHASE-III VATVA AHMEDABAD. PAN : AAAFT 9575 F ITA NO.1052 AND 1053/AHD/2009 [ASSTT.YEAR : 2005-2006 AND 2006-2007] DCIT CIR.6 AHMEDABAD. /VS. M/S.TALENT GUJARAT 45/1602 KARNAVATI ESTATE GIDC PHASE-III VATVA AHMEDABAD. PAN : AAAFT 9576 G ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 &/ REVENUE BY : SHRI U.B MISHRA 45 1 2 &/ ASSESSEE BY : SHRI SUNIL TALATI 6 1 57*/ DATE OF HEARING : 12 TH DECEMBER 2011 89: 1 57*/ DATE OF PRONOUNCEMENT : ____DECEMBER 2011 &; / O R D E R PER G.C. GUPTA VICE-PRESIDENT: THESE FOUR APPEALS BY THE REVENUE FOR THE ASSTT.YEAR 2004-2005 2005-2006 AND 2006- ITA NO.1013 AND 1014/AHD/2009 AND OTHERS -2- 2007 ARE DIRECTED AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME- TAX (APPEALS) AHMEDABAD. THEY ARE BEING DISPOSED O F WITH THIS CONSOLIDATED ORDER. 2. IDENTICAL GROUND IN ALL APPEALS IN THESE FOUR AP PEALS BY THE REVENUE READS AS UNDER: 1. THE LD.CI(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE FOLLOWING ADDITIONS ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON GOODWILL: ASSTT.YEAR AMOUNT (RS.) 2004-2005 (TALENT INDIA) 4 11 328/- 2006-2007 (TALENT INDIA) 2 31 372/- 2006-2007 (TALENT GUJARAT) 1 77 979/- 2005-2006 (TALENT GUJARAT) 2 37 305/- 3. THE LEARNED DR RELIED ON THE ORDERS OF THE AO. HE REFERRED TO THE RELEVANT PARAS OF THE ASSESSMENT ORDERS IN SUPP ORT OF THE CASE OF THE REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDERS OF THE CIT(A). HE SUBMITTED THAT THE ASSESS EE-FIRM HAS PAID CERTAIN AMOUNTS TOWARDS COMMERCIAL RIGHTS TO THE RE TIRING PARTNERS AND THEREAFTER TWO NEW PARTNERS HAVE JOINED THE PAR TNERSHIP FIRM. HE SUBMITTED THAT THE ASSESSEE-FIRM HAD EXCLUSIVE RIGH T FOR MARKETING OF THE PRODUCTS OF ITS SISTER CONCERN AND ASSESSEE-FIR M HAD ESTABLISHED TRADE MARK OF ITS OWN. HE RELIED ON THE DECISION O F THE ITAT MUMBAI BENCHES IN THE CASE OF SKYLINE CARTERS PVT. LTD. VS. ITO 20 SOT 266 (MUM) IN SUPPORT OF THE ARGUMENTS. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ONLY CO MMON ISSUE IN ITA NO.1013 AND 1014/AHD/2009 AND OTHERS -3- THESE FOUR APPEALS FOR ADJUDICATION BEFORE US IS RE GARDING DISALLOWANCE OF DEPRECIATION ON GOODWILL. WE FIND THAT THE DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE ON TH E INTANGIBLE ASSET VIZ. GOODWILL. IT IS ADMITTED FACT THAT THE ASSE SSEE FIRM HAD PAID CERTAIN AMOUNT TOWARDS COMMERCIAL RIGHTS TO THE RET IRING PARTNERS AND THEREAFTER TWO NEW PARTNERS HAVE JOINED THE PAR TNERSHIP FIRM. THE OUTGOING PARTNERS WERE PAID CERTAIN AMOUNTS SIN CE THEY HAD ESTABLISHED PARTNERSHIP FIRM. THE OLD FIRM HAD MAR KETED MANUFACTURING GOODS OF M/S.TALENT GUJARAT WHICH WAS ITS SISTER CONCERN. THE ASSESSEE-FIRM HAD EXCLUSIVE RIGHTS FO R MARKETING THE PRODUCTS OF M/S.TALENT GUJARAT AND THE ASSESSEE HAD ESTABLISHED TRADEMARK OF ITS OWN. IN THESE FACTS THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE ABOVE SAID INTANGIBLE ASSET ACQ UIRED FROM THE OUTGOING PARTNERS UNDER SECTION 32(1)(II) OF THE IT ACT. THESE FACTS HAVE NOT BEEN DOUBTED BY THE REVENUE. THE CITA) RE CORDED A FINDING THAT THE PAYMENTS HAD BEEN MADE NOT ONLY FO R THE SAKE OF GOODWILL BUT FOR RIGHTS OF COMMERCIAL NATURE I.E. MARKETING RIGHTS FOR THE PURPOSE OF ACQUIRING ABOVE INTANGIBLE ASSET S AND TOOLS OF BUSINESS. THE CIT(A) HAS FURTHER OBSERVED THAT TH E RETIREMENT DEED ALSO CLEARLY SUBSTANTIATED THE ABOVE FACTUAL POSITI ON AND THE RIGHTS WHICH WERE ACQUIRED FROM ERSTWHILE PARTNERS ARE INT ANGIBLE ASSETS BEING TOOLS OF TRADE WHICH ARE ESSENTIALS FOR THE A SSESSEE TO CARRY ON AND CONTINUE THE BUSINESS OF PHARMACEUTICAL PRODUCT S. THE CIT(A) HAS CONCLUDED THAT IT WOULD NOT BE CORRECT TO HOLD THAT IT WAS MERELY A PAYMENT FOR GOODWILL SIMPLICITER AND THAT THE A SSESSEE HAS PAID THE AMOUNT FOR ACQUIRING THE INTANGIBLE ASSETS IN T HE FORM OF ITA NO.1013 AND 1014/AHD/2009 AND OTHERS -4- EXCLUSIVE MARKETING AND BUSINESS RIGHTS FOR WHICH T HE COST WAS INCURRED AND INCURRING OF SUCH COST WAS NOT DOUBTED BY THE AO. IN THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN HOLDING THAT THE MARKET RIGHTS OF THE PRODUCTS OF THE M/S.TALENT GUJARAT WERE ACQU IRED BY THE PARTNERS OF THE FIRM AND THEREFORE THE OUTGOING PAR TNERS WERE TO BE PAID SOME CONSIDERATION AS THEY WERE FOREGOING THEI R RIGHTS TO THE INCOMING PARTNERS AND DENIAL OF THE DEPRECIATION ON GOODWILL WAS NOT JUSTIFIED. IN THIS VIEW OF THE MATTER WE CONFI RM ORDER OF THE CIT(A) AND THE COMMON GROUND RAISED IN THESE FOUR A PPEALS OF THE REVENUE IS DISMISSED. 5. IN THE RESULT THE ALL THE APPEALS OF THE REVENU E ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&' ( ) %&' ( ) %&' ( ) %&' ( ) /B.P. JAIN &* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !'# !'# !'# !'# /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD