Mr. Mihir Naniwadekar And Ms v. Oral Judgment (Per F. M. Reis, J

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 28 OF 2012 Chowgule & Company Private Limitedchowgule House, MormugaoHarbour, Goa 403803,Represented through itsManaging Director Vijay chowgule,… Appellant V e r s u s Addl. Commissioner of Income-taxCircle-2, Blessings Pioneer Complex,3[rd] floor, Margao Range,Margao, Goa, 403601.…Respondent Mr. Mihir Naniwadekar and Ms. V. Palyekar, Advocates for the Appellants. Ms. Asha Desai, Advocate for the Respondents. Coram :-F. M. REIS, K. L. WADANE, JJ. ORAL JUDGMENT (Per F. M. Reis, J.) thDate : 12 January, 2016 Heard Mr. Mihir Naniwadekar, learned Counsel appearing for theAppellants and Ms. Asha Desai, learned Counsel appearing for the Respondents. 2. The above Appeal came to be admitted by an Order dated 26.03.2012on the following substantial questions of law : (1) Whether on the fact and in the circumstances ofthe case, the Appellate Tribunal is right in disallowingAppellant's claim for depreciation on intangible assetby way of 'Goodwill' representing business and/orcommercial rights acquired in the course ofamalgamation of a company duly approved by theHigh Court ? (2) Whether on the facts and in the circumstances ofthe case the Appellate Tribunal is right in dismissingthe appeal based on incorrect appreciation of factsand law, which could be called perverse ? 3. The learned Counsel appearing for the Appellants, in support of thefirst substantial question of law, has pointed out that the question as to whetherdepreciation can be allowed on Goodwill in cases of amalgamation of Companies isno longer resintegra in view of the Judgment of the Apex Court reported in [2012]24 taxmann.com 222 (SC) in the case of Commissioner of Income-tax, Kolkatavs. Smifs Securities Ltd. The learned Counsel has further pointed out that theTribunal whilst passing the impugned Order has come to the conclusion that therecan be no depreciation on account of Goodwill in cases of amalgamation ofCompanies in terms of Section 32 of the Income-tax Act, 1961. Learned Counselhas thereafter taken us through the said Judgment to pointed out that this finding ofthe learned Tribunal is erroneous and, as such, on this ground alone, the firstsubstantial question of law is to be answered in favour of the Appellant. LearnedCounsel further pointed out that the Tribunal whilst passing the impugned Orderhas also gone to the extent of holding that in the present case, there was noamount paid on account of Goodwill as, according to him, such finding has beenarrived at by misappreciating the evidence on record. Learned Counsel furtherpointed out that in the subsequent Assessment year 2006-07 of the Appellant, insimilar circumstances, the learned Tribunal has come to the conclusion that suchamounts were paid and in fact depreciation has been allowed in the subsequentAssessement year. Learned Counsel further pointed out that the said Orderpassed by the learned Tribunal for the subsequent Assessment year has been accepted and given effect to by the Revenue Authorities and, as such, it is not opento the Respondents to take a contrary stand as far as the present Appeal isconcerned. Learned Counsel has also brought to our notice a Judgment of theDivision Bench of this Court dated 30.10.2012 passed in Income Tax Appeal (L)No. 1330 of 2012, wherein relying upon the Judgment of the Apex Court in thecase of Commissioner of Income Tax vs. Smifs Securities Limited (supra), thisCourt has remanded the matter to the learned Tribunal to decide the Appeal filed bythe Assessee afresh. Learned Counsel, as such, pointed out that the matter maybe remanded to the learned Tribunal to decide afresh in the light of the Judgmentsreferred to herein above. accepted and given effect to by the Revenue Authorities and, as such, it is not opento the Respondents to take a contrary stand as far as the present Appeal isconcerned. Learned Counsel has also brought to our notice a Judgment of theDivision Bench of this Court dated 30.10.2012 passed in Income Tax Appeal (L)No. 1330 of 2012, wherein relying upon the Judgment of the Apex Court in thecase of Commissioner of Income Tax vs. Smifs Securities Limited (supra), thisCourt has remanded the matter to the learned Tribunal to decide the Appeal filed bythe Assessee afresh. Learned Counsel, as such, pointed out that the matter maybe remanded to the learned Tribunal to decide afresh in the light of the Judgmentsreferred to herein above. 4. On the other hand, Ms. Asha Desai, learned Counsel appearing forthe Respondents, has submitted that though the question of law has beenanswered by the Apex Court, nevertheless, in the facts of the present case, suchprinciples are not applicable. Learned Counsel further pointed out that the learnedTribunal whilst passing the impugned order has come to the conclusion that therewas no amount paid towards Goodwill and, as such, the question of seekingdepreciation on account of Goodwill in cases of amalgamation of Companies underSection 32 of the Income-Tax Act, 1961, would not arise. Learned Counsel hastaken us through the findings of the Tribunal to point out that there was nomisappreciation of evidence. Learned Counsel further pointed out that the relianceplaced by the Appellants in the Order passed by the learned Tribunal for thesubsequent year 2006-07, is not at all acceptable as, according to the learnedCounsel, the facts which were available in the present case were not considered bythe learned Tribunal whilst passing such Order. Learned Counsel as such pointed out that the Appeal be rejected. 5. We have given our thoughtful considerations to the rival contentionsand we have also gone through the records. On perusal of the Judgment of theApex Court in the case of Commissioner of Income-tax, Kolkata vs. SmifsSecurities Ltd. (supra), it has been observed at Paras 4 and 5 thus : “4.Explanation 3 states that the expression 'asset' shallmean an intangible asset, being know-how, patents,copyrights, trademarks, licences, franchises or any otherbusiness or commercial rights of similar nature,. A readingthe words 'any other business or commercial rights ofsimilar nature' in clause (b) of Explanation 3 indicates thatgoodwill would fall under the expression 'any otherbusiness or commercial right of a similar nature'. Theprinciple of ejusdem generis would strictly apply whileinterpreting the said expression which finds place inExplanation 3(b). 5.In the circumstances, we are of the view that'Goodwill'[ is an asset under Explanation 3(b) to Section32(1) of the Act.” 6. Taking note of the observations of the Apex Court, we find that the firstsubstantial question of law framed by this Court has to be answered in favour of theAppellant herein. The Apex Court has clearly come to the conclusion thatdepreciation on Goodwill paid upon amalgamation is a permissible deduction interms of Section 32 of the Income-tax Act, 1961. Hence, the first substantialquestion of law is answered accordingly. 7. As far as the second substantial question of law is concerned, takingnote of the rival contentions and the Judgments relied upon by the learned Counselappearing for the Appellants, we find that it would be appropriate in the interest ofjustice to quash and set aside the impugned Order passed by the learned Tribunaland remand the matter to the learned Tribunal to decide the Appeal preferred bythe Appellants afresh in the light of the observations made herein above and theJudgments relied upon by the learned Counsel appearing for the Appellants. Thesecond substantial question of law is answered accordingly. 8. In view of the above, I pass the following : O R D E R 7. As far as the second substantial question of law is concerned, takingnote of the rival contentions and the Judgments relied upon by the learned Counselappearing for the Appellants, we find that it would be appropriate in the interest ofjustice to quash and set aside the impugned Order passed by the learned Tribunaland remand the matter to the learned Tribunal to decide the Appeal preferred bythe Appellants afresh in the light of the observations made herein above and theJudgments relied upon by the learned Counsel appearing for the Appellants. Thesecond substantial question of law is answered accordingly. 8. In view of the above, I pass the following : O R D E R (i)The Appeal is partly allowed. (ii)The impugned Order passed by the learned Tribunal dated 24.01.2011 is quashed and set aside.dated 24.01.2011 is quashed and set aside. (iii)The Tax Appeal is restored to the file of the learned Tribunal.Tribunal. (iv)The learned Tribunal is directed to decide the Appeal afresh in the light of the observations made herein above in accordance with law.afresh in the light of the observations made herein above in accordance with law. (v)All contentions of the parties are left open. K. L. WADANE, J. F. M. REIS, J. arp/*