Case Law Details
KPIT Cummins Global Business Solutions Ltd. Vs ACIT (ITAT Pune)
The issue which arises in the present appeal is whether the payment so made by the assessee is in the category of intangible assets which is eligible for claim of depreciation under section 32(1)(ii) of the Act. The Assessing Officer had denied the said claim of assessee on the ground that the said payment did not fall in the category of know-how, patents, copyrights, trademark, license, franchise, etc. The Assessing Officer however, vide para 3.9.1 though admits that at best the payment could be called as goodwill, which had been acquired by the assessee from Cummins through the said agreement. The terms of agreement and what the assessee has acquired have been elaborately explained by the assessee before the Assessing Officer. It may be pointed out that at the time when the Assessing Officer passed the order, goodwill was not considered as eligible for claim of depreciation under the term ‘intangible asset’. The Assessing Officer denying the claim of depreciation observed that at best what was paid was goodwill. After passing of the order of Assessing Officer and DRP, the Hon’ble Supreme Court in CIT Vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC) has held that goodwill was an intangible asset under section 32(1)(ii) of the Act covered with expression ‘any other business or commercial rights of similar nature’. The Hon’ble Supreme Court also held the assessee entitled to claim the depreciation on such goodwill.
The learned Authorized Representative for the assessee has pointed out that in assessment year 2008-09, the decision of the Hon’ble Supreme Court was not available. However, the same was available in assessment year 2009-10 and it was relied upon by the assessee before the Assessing Officer and the DRP, but the plea of assessee was rejected. However, in assessment year 2010-11, similar plea was raised before the Assessing Officer and thereafter, before the DRP. Vide order dated 17.11.2014, the DRP held the assessee eligible to claim depreciation on the said consideration paid being intangible asset, covered by the ratio laid down by the Hon’ble Supreme Court in CIT Vs. Smifs Securities Ltd. (supra). The relevant findings of DRP in paras 7.6 to 7.8 are clear from the copy of DRP order, placed on record by the assessee. Since the Assessing Officer in the year under consideration had also held the payment made by the assessee was at best being payment for goodwill and where similar claim has been allowed in the hands of assessee in assessment year 2010-11, we hold the assessee to be entitled to claim depreciation on the right to render BPO services being goodwill in the hands of assessee. Thus, we reverse the order of Assessing Officer n disallowing depreciation of ₹ 2.26 crores.
FULL TEXT OF THE ITAT JUDGMENT
Out of this bunch of three appeals, appeal filed by the assessee is against order of ACIT, Circle 11(1), Pune, dated 22.11.2012 relating to assessment year 2008-09 passed under section 143(3) r.w.s. 144C of Income Tax Act 1961 (in short the Act’) and the cross appeals filed by the Revenue and assessee are against order of DCIT, Circle 11(1), Pune, dated 09.01.2014 relating to assessment year 2009-10 passed under section 143(3) r.w.s. 144C(13) of the Act.
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