Case Law Details
Padmini Products Pvt. Ltd. Vs DCIT (Karnataka High Court)
The business of manufacture and sale of incense sticks is built on an intangible experience of aroma which can rarely be secured in the form of trade name / trade mark. It is pertinent to mention here that Assessing Officer himself has found that the erstwhile partnership firm was the registered owner of various trade marks. It is also pertinent to mention here that valuation of the shares was made by the assessee as per the accounting standards 10 & 26. It is also noteworthy that none of the authorities have either questioned the valuation of the intangible assets or have doubted the genuineness of the transactions. Thus, the intangible asset of the assessee has a real money value. The aforesaid trademark viz., the intangible assets were transferred to the assessee for a valuable consideration. Section 32(1) of the Act provides for depreciation in respect of trademarks owned wholly or partly by the assessee. In the instant case, the assessee succeeded to the business of the partnership firm, which had trademarks registered in its name. Therefore, the assessee under Section 32(1) of the Act was entitled for depreciation. It is also pertinent to note that under Section 47 of the Act, any transfer of capital asset or a intangible asset by a firm to a company as are result of succession of the firm by a company is a recognized mode of transfer. Admittedly, the assessee and the erstwhile partnership firm are different entities and there was transfer of intangible assets by the partnership firm to the assessee for a valuable consideration that is by way of allotment of shares. Thus, the aforesaid transaction is squarely covered under Section 47(xiii) of the Act and therefore, the assessee under Section 32(1) of the Act was entitled for depreciation with reference to actual cost incurred by it with reference to intangible assets.
FULL TEXT OF THE HIGH COURT ORDER/JUDGEMENT
This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment years 2005-06 to 2008-09. The appeal was admitted by a bench of this Court vide order dated 26.09.2014 on the following substantial question of law:
(i) Whether on the facts and in the circumstances of the case, the Honourable ITAT was right in law in upholding the action of Learned Respondent in re-opening the assessment for the assessment years 2005- 06, 2006-07 & 2008-09 under Section 147 of the IT Act in the absence of any tangible material but merely on the basis of additions made in subsequent assessment year 2007-
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