Maya Entertainment Ltd Vs DCIT (ITAT Pune)
We note that the assessee is a company engaged in the business of aviation training and hospitality industry. It imparts training programs ranging from personality development and grooming to high-end professional courses like training for cabin crew, ground staff and cargo handlers for the aviation sector. The assessee entered into an agreement with Avalon Aviation Academy and acquired various assets and liabilities for a lump sum consideration of Rs.75,00,000/- in F.Y. 2005-06. The excess of the consideration over the fair value of these assets on the date of acquisition of Rs.60,85,577/- which was treated by the assessee as goodwill. The assessee claimed the same as depreciation/amortization on the ground that it is a right in the nature of know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature being intangible assets. The AO denied depreciation by holding that the goodwill is not included any specific items and rejected the claim of the assessee and added Rs.10,73,646/- to the income of the assessee. The CIT(A) discussed the issue in Para No. 8 and following its own order for A.Y. 2011-12 confirmed the order of AO. We find a similar issue in assessee’s own case for A.Y. 2011-12 came up before this Tribunal and the Tribunal by following the earlier order in assessee’s own case allowed depreciation.
Following the order of this Tribunal in assessee’s own case for A.Y. 2011-12, thus, we hold that the assessee is entitled to claim depreciation on goodwill.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee against the order dated 31-03-2016 passed by the Commissioner of Income Tax (Appeals)-1, Pune [‘CIT(A)’] for assessment year 2010-11.
2. We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set ex-parte. Therefore, we proceed to dispose of the appeal by hearing the ld. DR and perusing the material available on record.
3. The only issue is to be decided is as to whether the CIT(A) is justified in confirming the disallowance made by the AO on account of depreciation of goodwill of Rs.10,73,646/- in the facts and circumstances of the case.
4. Heard ld. DR and perused the material available on record. We note that the assessee is a company engaged in the business of aviation training and hospitality industry. It imparts training programs ranging from personality development and grooming to high-end professional courses like training for cabin crew, ground staff and cargo handlers for the aviation sector. The assessee entered into an agreement with Avalon Aviation Academy and acquired various assets and liabilities for a lump sum consideration of Rs.75,00,000/- in F.Y. 2005-06. The excess of the consideration over the fair value of these assets on the date of acquisition of Rs.60,85,577/- which was treated by the assessee as goodwill. The assessee claimed the same as depreciation/amortization on the ground that it is a right in the nature of know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature being intangible assets. The AO denied depreciation by holding that the goodwill is not included any specific items and rejected the claim of the assessee and added Rs.10,73,646/- to the income of the assessee. The CIT(A) discussed the issue in Para No. 8 and following its own order for A.Y. 2011-12 confirmed the order of AO. We find a similar issue in assessee’s own case for A.Y. 2011-12 came up before this Tribunal and the Tribunal by following the earlier order in assessee’s own case allowed depreciation. The relevant portion of the said order at Para No. 5 is reproduced here-in-below for ready reference :
“5. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to depreciation on goodwill. We find that identical issue arose in assessee’s own case in A.Y. 2007-08 before the Co-ordinate Bench of the Tribunal. The Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee by holding as under :
“9. We have heard the rival contentions and perused the record. The limited issue arising in the present appeal is in relation to the claim of depreciation on goodwill. The assessee had taken over the sole proprietary concern under the name and style of Avalon Aviation Academy as a going concern as per the agreement dated 09th September, 2006. The said going concern was taken over along with all the assets, liabilities, rights, privileges, pending contracts, permissions, etc. as a slump sale, in an as-is-where-is is condition for the good and valuable consideration. As per the term of the agreement the total consideration was fixed at Rs.75,00,000/-. It was agreed between the parties that the sale of the ‘acquired business undertaking’ by the seller to the purchaser pursuant thereto was as and by way of a slump sale and the purchase consideration was a composite purchase consideration for the whole of the acquired business undertaking and no purchase consideration shall be assigned to specific items to the ‘acquired business undertaking’, as per article 2.2 of the agreement. While clarifying and interpreting the term ‘acquired business undertaking’, as per article 1.1.1, it was agreed upon that the seller’s business run under the name and style of Avalon Aviation Academy which is, inter alia, engaged in Aviation and hospitality training; the goodwill relating to the seller’s business; all the rights, assets, current assets and obligation, all intellectual property rights, brands, logos, properties of every kind and description, etc., including the rights in the list of properties set out in Annexure 1; the liabilities of the seller, as on the transfer date as listed in the balance sheet as on 31st March, 2006; the and obligation of the seller under the pending contracts, if any and the employee, shall be taken over. Meaning thereby that by paying the agreed consideration the assessee was not only taking over the business as a going concern but was also taking over all the rights, liabilities, assets, pending contracts benefits and obligation of the current contracts, as bundle of rights. This was in addition to rights of obligation of the seller on the transfer date, the employees of the said concern and also goodwill relating to the seller business. The understanding between the parties was clear and no specific price was attributed to the assets and liabilities since it was a case of sump sum consideration being paid for takeover of the assets. The copy of the agreement is placed at pages 27 to 40 of the paper book. Under such facts and circumstances the assessee while filing the return of income had worked out the excess consideration over the value of the assets and liabilities at Rs.60,85,577/-, as under :
