(Per : Honourable Mr.Justice Akil Kureshi)
1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 23.12.2016 raising following questions for our consideration:
| [A] |
Whether the Appellate Tribunal erred in law and on facts in deleting the disallowance of Rs. 87,959/- made on account of foreign expenses? |
[B] |
Whether the Appellate Tribunal erred in law and on facts in deleting the addition of Rs. 1,09,600/- made by treating the expenses incurred on Registration of trade mark as capital expenses? |
[C] |
Whether the Appellate Tribunal erred in law and on facts in deleting the addition of Rs. 2,23,307/- u/s. 40(a)(ia) of non-deduction of TDS u/s. 194C of the I.T. Act, 1961? |
[D] |
Whether the Appellate Tribunal erred in law and on facts in deleting the disallowance of Rs. 1,05,468/- made on account of depreciation on non-compete fees? |
[E] |
Whether the Appellate Tribunal erred in law and on facts in allowing depreciation of Rs. 7,19,01,743/- on so called goodwill which was only a book entry created on the event of amalgamation and that there was no goodwill as is understood in commercial sense? |
[F] |
Whether the Appellate Tribunal erred in law and on facts in adjudicating the issue of depreciation on goodwill which was not claimed in the Return of Income as filed by the assessee company? |
[G] |
Whether the Hon'ble ITAT, while adjudicating on the issue of depreciation on goodwill, erred in law and on fact by not appreciating that its powers on adjudicating on fresh/additional grounds were limited to issues of law which did not require investigation of facts? |
[H] |
Whether the Hon'ble ITAT, while adjudicating on the issue of impugned fresh claim of depreciation on goodwill, erred in law and on fact by not remitting the matter to the lower authorities for making proper inquiry into the fact of generation of goodwill amount of such goodwill, if any? |
2. Insofar as questions no. (A) to (D) are concerned, learned counsel for the Revenue fairly brought to our notice that similar questions concerning the same assessee were raised by the Revenue for the earlier assessment year 2009-10 in Tax Appeal No. 139 of 2017 and the tax appeal came to be dismissed by the Court by judgement dated 14.03.2017. Without recording separate reasons, therefore, these questions are not considered.
3. The remaining questions no. (E) to (I) relate to the assessee's claim of depreciation. In the return filed for the assessment year 2010-11, the assessee had not raised such a claim. However, during the course of assessment proceedings, the assessee presented revised computation which included the assessee's claim of depreciation of Rs. 7.19 crores on the goodwill expanded at the time of amalgamation of the companies. The assessee pointed out that such claim would be allowable by virtue of the judgement of the Supreme Court in case of Commissioner of Income-Tax, Kolkata vs. Smifs Securities Ltd. reported in 348 ITR 302. The Assessing Officer disallowed the claim on two grounds. Firstly, that the claim was not made in the original return nor did the assessee file the revised return. The second ground was that the claim was fictitious and the goodwill has been accounted as a balancing factor in the hands of the assessee without acquisition of an intangible asset as contemplated under Section 32 of the Act.
4. The assessee carried the matter in appeal. The CIT(Appeals) as well as the Tribunal both ruled in favour of the assessee. With respect to raising an additional claim without revising the return the Tribunal relied on the decision of the Bombay High Court in case of Commissioner of Income Tax vs. Pruthvi Brokers & Shareholders (P.) Ltd. reported in [2012] 349 ITR 336. With respect to the claim of depreciation on acquisition of goodwill, the Tribunal relied on the decision of the Supreme Court in case of Smifs Securities Ltd. (supra).
5. Having heard learned learned counsel for the parties and having perused the orders on record, we see no reason to interfere. The issue of tenability of a claim though not raised in the original return is examined by the Courts in various decisions. This Court in case of Commissioner of Income- Tax vs. Mitesh Impex reported in [2014] 46 taxmann.com 30 (Gujarat) referred to and relied on several judgements of the Supreme Court and High Courts including the judgement of Bombay High Court in case of Pruthvi Brokers & Shareholders (P.) Ltd. (supra) and observed as under:
"38. It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. vs. Commissioner of Income-tax (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-tax (supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd. vs. Commissioner of Income-tax (supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income.
39. This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer.
40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under section 80IB and 80HHC of the Act."
6. With respect to the claim of depreciation, the decision of Supreme Court in case of Smifs Securities Ltd. (supra) would squarely apply. There is no material referred to by the Assessing Officer to hold that the claim of depreciation was fictitious. If we read his entire expression in this respect, he seems to be suggesting that being an intangible asset acquisition thereof would not qualify for depreciation. If that be so, the view of the Assessing Officer was opposed to the decision of the Supreme Court in case of Smifs Securities Ltd. (supra). On the other hand, if the observations of the Assessing Officer can be seen as his findings that the claim itself was baseless, there was no discussion or reference to any material to enable him to come to such a conclusion.
7. In the result, tax appeal is dismissed.