Commissioner Of Income Tax,Kolkata-Iv, Kolkata v. M/S. Stewart Mackertich Wealthmanagement Ltd

ITAT/103/2010IA No.GA/1/2010 (Old No.GA/1467/2010) IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE COMMISSIONER OF INCOME TAX,KOLKATA-IV, KOLKATA -Versus- M/S. STEWART MACKERTICH WEALTHMANAGEMENT LTD. Appearance:Mr. Prithu Dudheria, Adv....for the appellant. Mr. J. P. Khaitan, Sr. Adv.Mr. Pratik Ghose, Adv.Mr. Avishek Roy Chowdhury, Adv....for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 6[th] June, 2022. The Court : This appeal filed by the revenue underSection 260A of the Income Tax Act, 1961 (the ‘Act’ for brevity)is directed against the order dated 30[th] November, 2009 passed bythe Income Tax Appellate Tribunal, “C” Bench, Kolkata in ITANo.1709/Kol/2009 for the assessment year 2000-01. The revenue has raised for the following substantial questions of law for consideration: i)Whether the Learned Income Tax Appellate Tribunal,“C” Bench, Kolkata erred in law in the facts andcircumstances of the case in holding that revenuehas failed to explain that delay in filing thedepartmental appeals was due to sufficient cause ?“C” Bench, Kolkata erred in law in the facts andcircumstances of the case in holding that revenuehas failed to explain that delay in filing thedepartmental appeals was due to sufficient cause ?ii)Whether the Learned Income Tax Appellate Tribunal,“C” Bench, Kolkata erred in law in the facts andcircumstances of the case in dismissing the appealtreating the same as unadmitted being time barredinasmuch as the learned Tribunal did not appreciatethe materials on record, evidence and the legalproposition involved in the case and quashed theorders passed by the learned CIT on mere surmise andconjecture ?“C” Bench, Kolkata erred in law in the facts andcircumstances of the case in dismissing the appealtreating the same as unadmitted being time barredinasmuch as the learned Tribunal did not appreciatethe materials on record, evidence and the legalproposition involved in the case and quashed theorders passed by the learned CIT on mere surmise andconjecture ?We have heard Mr. Prithu Dudheria, learned standingcounsel appearing for the appellant and Mr. J. P. Khaitan, learnedsenior counsel assisted by Mr. Pratik Ghosh and Mr. Avishek RoyChowdhury, learned Advocates for the respondent/assessee.The appeal filed by the revenue before the tribunal wassenior counsel assisted by Mr. Pratik Ghosh and Mr. Avishek RoyChowdhury, learned Advocates for the respondent/assessee.The appeal filed by the revenue before the tribunal wastime barred. The tribunal considered the cause shown and foundthat there was no explanation for the delay in filing the appealthough the delay was only 79 days. More importantly, the tribunaltook note of the fact that the earlier assessment in theassessee’s own case namely, for the assessment year 2003-04,identical issue was considered by the tribunal and by an orderdated 18[th] May, 2007, the appeal filed by the revenue wasdismissed. The revenue carried the matter by way of appeal beforethis Court in ITA No.642 of 2007 which was dismissed by thethat there was no explanation for the delay in filing the appealthough the delay was only 79 days. More importantly, the tribunaltook note of the fact that the earlier assessment in theassessee’s own case namely, for the assessment year 2003-04,identical issue was considered by the tribunal and by an orderdated 18[th] May, 2007, the appeal filed by the revenue wasdismissed. The revenue carried the matter by way of appeal beforethis Court in ITA No.642 of 2007 which was dismissed by the judgment dated February 19, 2008. The revenue filed appeal beforethe Hon’ble Supreme Court which was dismissed as reported in[2012] 348 ITR 302 (SC) in the case of Commissioner of Income Taxvs. SMIFS Securities Ltd. Before the Hon’ble Supreme Court, twoof the questions raised by the revenue are whether (a) StockExchange Membership Cards are assets allowable for depreciationunder Section 32 of the Act; (b) Whether goodwill is an assetwithin the meaning of Section 32 of the Act and whetherdepreciation on goodwill is allowable under the said Section ?Both these questions were answered in favour of the assessee andagainst the revenue. In so far as question (a) is concerned, therevenue conceded that the issue is covered by the decision of theHon’ble Supreme Court in Techno Shares and Stocks Ltd. vs. CITreported in [2010] 327 ITR 323 (SC). So far as question no.(b) isconcerned, the Hon’ble Supreme Court held as follows: 6. In the present case, the assessee had claimeddeduction of Rs.54,85,430/- as depreciation on goodwill.In the course of hearing, the explanation regardingorigin of such goodwill was given as under:"In accordance with Scheme of Amalgamation ofYSN Shares & Securities (P) Ltd with SmifsSecurities Ltd (duly sanctioned by Hon'ble HighCourts of Bombay and Calcutta) with retrospectiveeffect from 1st April, 1998, assets and liabilitiesof YSN Shares & Securities (P) Ltd were transferredto and vest in the company. In the process goodwillhas arisen in the books of the company." 7. It was further explained that excess considerationpaid by the assessee over the value of net assets acquiredof YSN Shares and Securities Private Limited [AmalgamatingCompany] should be considered as goodwill arising onamalgamation. It was claimed that the extra considerationwas paid towards the reputation which the AmalgamatingCompany was enjoying in order to retain its existingclientele. 8.The Assessing Officer held that goodwill was not anasset falling under Explanation 3 to Section 32 (1) of theIncome Tax Act, 1961 [‘Act’, for short].9.We quote hereinbelow Explanation 3 to Section 32(1) ofthe Act: "Explanation 3. For the purposes of this sub-section, theexpressions "assets' and "block of assets' shall mean- [a] tangible assets, being buildings, machinery,plant or furniture; [b] intangible assets, being know�how, patents,copyrights, trademarks, licences, franchises or anyother business or commercial rights of similarnature." 10. Explanation 3 states that the expression "asset'shall mean an intangible asset, being know�how,patents, copyrights, trademarks, licences, franchisesor any other business or commercial rights of similarnature. A reading the words "any other business orcommercial rights of similar nature' in clause (b) ofExplanation 3 indicates that goodwill would fall under theexpression "any other business or commercial right of a similar nature'. The principle of ejusdem generis wouldstrictly apply while interpreting the said expressionwhich 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 Section32(1) of the Act. 10. Explanation 3 states that the expression "asset'shall mean an intangible asset, being know�how,patents, copyrights, trademarks, licences, franchisesor any other business or commercial rights of similarnature. A reading the words "any other business orcommercial rights of similar nature' in clause (b) ofExplanation 3 indicates that goodwill would fall under theexpression "any other business or commercial right of a similar nature'. The principle of ejusdem generis wouldstrictly apply while interpreting the said expressionwhich 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 Section32(1) of the Act. 12. One more aspect needs to be highlighted. In thepresent case, the Assessing Officer, as a matter offact, came to the conclusion that no amount was actuallypaid on account of goodwill. This is a factual finding.The Commissioner of Income Tax (Appeals) ["CIT(A)', forshort] has come to the conclusion that the authorisedrepresentatives had filed copies of the Orders of theHigh Court ordering amalgamation of the above twoCompanies; that the assets and liabilities of M/s. YSNShares and Securities Private Limited were transferred tothe assessee for a consideration; that the differencebetween the cost of an asset and the amount paidconstituted goodwill and that the assessee�Company in theprocess of amalgamation had acquired a capital right inthe form of goodwill because of which the market worth ofthe assessee�Company stood increased. This finding hasalso been upheld by Income Tax Appellate Tribunal['ITAT', for short]. We see no reason to interfere withthe factual finding. 13. One more aspect which needs to be mentioned isthat, against the decision of ITAT, the Revenue hadpreferred an appeal to the High Court in which it had raised only the question as to whether goodwill is anasset under Section 32 of the Act. In the circumstances,before the High Court, the Revenue did not file an appealon the finding of fact referred to hereinabove.” From the order impugned in this appeal we find that therevenue did not dispute the fact that identical issue wasconsidered in the assessee’s own case for the assessment year2003-04 and the appeal filed by the department was dismissed bythe tribunal as well as by this Court. We also note that thedecision of this Court has been affirmed by the Hon’ble SupremeCourt. Thus, we find that there is no ground to interfere withthe order passed by the tribunal both on the limitation as well ason merits.Accordingly, the appeal is dismissed and the substantialquestions of law are answered against the revenue. Consequently, the connected application for stay (IANo.GA/1/2010) stands closed. (HIRANMAY BHATTACHARYYA, J.)