The order of the Bench was delivered by
1. These are the appeals filed by the assessee against the order of the Commissioner of Income-tax (Appeals) for the assessment years 2002-03 to 2008-09, in the matter of the order passed under section 143(3) read with section 147 of the Income-tax Act, 1961.
2. The common grievance of the assessee in all the years pertains to disallowance of claim of depreciation on "goodwill" under section 32(1)(ii) of the Income-tax Act.
3. The rival contentions have been heard and record perused. Facts in brief are that the assessee-company, during the assessment year 2002-03, had taken the entire business as a going concern of M/s. St. Angelo's Computers, which was carrying on the activity of imparting professional computer training since 1991 at Mumbai from 14 different centres. The business was acquired for a lump sum consideration of Rs. 5,25,00,000. The assessee attributed Rs. 4,85,00,000 towards goodwill and business knowhow. The value of consideration was determined on the basis of valuation made by M/s. Uttam Abuwala and Co. The valuation report indicates the contents of the computer diskette in electronic form relating to the operations and other informations provided by the management signifying the value of the name/brand of St. Angelo's and other know-how in the field of computer education, trained instructors, books, course material developed for providing training in computer applications, working pattern, education methodology, etc., which basically was developed over a period of time with the object of ensuring the best quality training in computer application. In the return of income the assessee claimed depreciation on "good-will". The Assessing Officer declined the assessee's claim of depreciation on the "goodwill" on the plea that "good-will" is not an intangible asset for depreciation under section 32(1)(ii). By the impugned order, the Commissioner of Income-tax (Appeals) confirmed the disallowance of claim of depreciation on "good-will" against which the assessee is in further appeal before us.
4. Shri S. E. Dastur, learned senior counsel placed on record the order of the hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC), wherein it was held that the principle of ejusdem generis would strictly apply while interpreting the expression of "goodwill", which finds place in Explanation 3(b) to section 32(1). Accordingly it was held that "goodwill" is an asset under Explanation 3(b) to section 32(1) of the Act, therefore, eligible for claim of depreciation. The learned authorised representative also placed reliance on the following decision wherein "goodwill" was accepted as an asset eligible for claim of depreciation :
(i) ThyssenKrupp Elevator (India) P. Ltd. v. Asst. CIT [2015] 167 TTJ (Delhi-Trib) 131;
(ii) Deputy CIT v. Worldwide Media P. Ltd. [2014] 30 ITR (Trib) 181 (Mumbai) ;
(iii) PPG Asian Paints P. Ltd. v. Asst. CIT (LTU) I. T. A. No. 2919/ Mum/2013, dated April 15, 2015 [2015] 43 ITR (Trib) 307 (Mum) ;
(iv) Toyo Engineering India Ltd., I. T. A. No. 3279/Mum/2008, dated October 13, 2014 ;
(v) CIT v. Birla Global Asset Finance Co. Ltd. [2014] 221 Taxman 176 (Bom) (Mag.) ; and
(vi) KEC International Ltd., order dated February 7, 2013 (Bombay High Court).
5. On the other hand, the learned Commissioner of Income-tax-Departmental representative relied on the orders of the authorities below.
6. We have carefully gone through the decision of the hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC) and the decision of the hon'ble Bombay High Court as well as decision of co-ordinate Bench of the Tribunal cited at bar. The hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra), held as under (page 304) :
"8. The Assessing Officer held that goodwill was not an asset fall ing under Explanation 3 to section 32(1) of the Income-tax Act, 1961 ("the Act", for short).
9. We quote hereinbelow Explanation 3 to section 32(1) of the Act :
'Explanation 3.-For the purposes of this sub-section, the expres sions "assets" and "block of assets" shall mean-
(a) tangible assets, being buildings, machinery, plant or furniture ;
(b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature.'
10. Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of sim ilar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or com mercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b).
11. In the circumstances, we are of the view that 'goodwill' is an asset under Explanation 3(b) to section 32(1) of the Act."
7. The co-ordinate Bench of the Tribunal in the case of PPG Asian Paints P. Ltd. v. Asst. CIT (LTU) [2015] 43 ITR (Trib) 307 (Mum), held as under (page 308) :
"In view of the categorical finding of the hon'ble Supreme Court that the goodwill also falls under the expression 'any other business or commercial right of a similar nature' and thus would be an asset under Explanation 3(b) to section 32(1) of the Act, we accordingly hold that the assessee is entitled to the claim of depreciation on goodwill. This issue is accordingly decided in favour of the assessee."
8. As the facts and circumstance of the case in all the years under consideration are same, following the same reasoning, we direct the Assessing Officer to allow the assessee's claim of depreciation on "good-will" in all the years under consideration.
9. In the result, all the appeals of the assessee are allowed in terms indicated hereinabove.
The order pronounced in the open court on this July 22, 2015.