Calcutta High Court
Kolkata-Iv vs M/S. Stewart Mackertich Wealth on 6 June, 2022
OD-2
ITAT/103/2010
IA No.GA/1/2010 (Old No.GA/1467/2010)
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
ORIGINAL SIDE
COMMISSIONER OF INCOME TAX,
KOLKATA-IV, KOLKATA
-Versus-
M/S. STEWART MACKERTICH WEALTH
MANAGEMENT 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 : 6th June, 2022.
The Court : This appeal filed by the revenue under
Section 260A of the Income Tax Act, 1961 (the 'Act' for brevity)
is directed against the order dated 30th November, 2009 passed by
the Income Tax Appellate Tribunal, "C" Bench, Kolkata in ITA
No.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 and
circumstances of the case in holding that revenue
has failed to explain that delay in filing the
departmental appeals was due to sufficient cause ?
ii) Whether the Learned Income Tax Appellate Tribunal,
"C" Bench, Kolkata erred in law in the facts and
circumstances of the case in dismissing the appeal
treating the same as unadmitted being time barred
inasmuch as the learned Tribunal did not appreciate
the materials on record, evidence and the legal
proposition involved in the case and quashed the
orders passed by the learned CIT on mere surmise and
conjecture ?
We have heard Mr. Prithu Dudheria, learned standing
counsel appearing for the appellant and Mr. J. P. Khaitan, learned
senior counsel assisted by Mr. Pratik Ghosh and Mr. Avishek Roy
Chowdhury, learned Advocates for the respondent/assessee.
The appeal filed by the revenue before the tribunal was
time barred. The tribunal considered the cause shown and found
that there was no explanation for the delay in filing the appeal
though the delay was only 79 days. More importantly, the tribunal
took note of the fact that the earlier assessment in the
assessee's own case namely, for the assessment year 2003-04,
identical issue was considered by the tribunal and by an order
dated 18th May, 2007, the appeal filed by the revenue was
dismissed. The revenue carried the matter by way of appeal before
this Court in ITA No.642 of 2007 which was dismissed by the
judgment dated February 19, 2008. The revenue filed appeal before
the Hon'ble Supreme Court which was dismissed as reported in
[2012] 348 ITR 302 (SC) in the case of Commissioner of Income Tax
vs. SMIFS Securities Ltd. Before the Hon'ble Supreme Court, two
of the questions raised by the revenue are whether (a) Stock
Exchange Membership Cards are assets allowable for depreciation
under Section 32 of the Act; (b) Whether goodwill is an asset
within the meaning of Section 32 of the Act and whether
depreciation on goodwill is allowable under the said Section ?
Both these questions were answered in favour of the assessee and
against the revenue. In so far as question (a) is concerned, the
revenue conceded that the issue is covered by the decision of the
Hon'ble Supreme Court in Techno Shares and Stocks Ltd. vs. CIT
reported in [2010] 327 ITR 323 (SC). So far as question no.(b) is
concerned, the Hon'ble Supreme Court held as follows:
6. In the present case, the assessee had claimed
deduction of Rs.54,85,430/- as depreciation on goodwill.
In the course of hearing, the explanation regarding
origin of such goodwill was given as under:
"In accordance with Scheme of Amalgamation of
YSN Shares & Securities (P) Ltd with Smifs
Securities Ltd (duly sanctioned by Hon'ble High
Courts of Bombay and Calcutta) with retrospective
effect from 1st April, 1998, assets and liabilities
of YSN Shares & Securities (P) Ltd were transferred
to and vest in the company. In the process goodwill
has arisen in the books of the company."
7. It was further explained that excess consideration
paid by the assessee over the value of net assets acquired
of YSN Shares and Securities Private Limited [Amalgamating
Company] should be considered as goodwill arising on
amalgamation. It was claimed that the extra consideration
was paid towards the reputation which the Amalgamating
Company was enjoying in order to retain its existing
clientele.
8. The Assessing Officer held that goodwill was not an
asset falling under Explanation 3 to Section 32 (1) of the
Income Tax Act, 1961 ['Act', for short].
9. We quote hereinbelow Explanation 3 to Section 32(1) of
the Act:
"Explanation 3. For the purposes of this sub-section, the
expressions "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 any
other business or commercial rights of similar
nature."
10. Explanation 3 states that the expression "asset'
shall mean an intangible asset, being know how,
patents, copyrights, trademarks, licences, franchises
or any other business or commercial rights of similar
nature. A reading the words "any other business or
commercial rights of similar nature' in clause (b) of
Explanation 3 indicates that goodwill would fall under the
expression "any other business or commercial right of a
similar nature'. The principle of ejusdem generis would
strictly apply while interpreting the said expression
which 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 Section
32(1) of the Act.
12. One more aspect needs to be highlighted. In the
present case, the Assessing Officer, as a matter of
fact, came to the conclusion that no amount was actually
paid on account of goodwill. This is a factual finding.
The Commissioner of Income Tax (Appeals) ["CIT(A)', for
short] has come to the conclusion that the authorised
representatives had filed copies of the Orders of the
High Court ordering amalgamation of the above two
Companies; that the assets and liabilities of M/s. YSN
Shares and Securities Private Limited were transferred to
the assessee for a consideration; that the difference
between the cost of an asset and the amount paid
constituted goodwill and that the assessee Company in the
process of amalgamation had acquired a capital right in
the form of goodwill because of which the market worth of
the assessee Company stood increased. This finding has
also been upheld by Income Tax Appellate Tribunal
['ITAT', for short]. We see no reason to interfere with
the factual finding.
13. One more aspect which needs to be mentioned is
that, against the decision of ITAT, the Revenue had
preferred an appeal to the High Court in which it had
raised only the question as to whether goodwill is an
asset under Section 32 of the Act. In the circumstances,
before the High Court, the Revenue did not file an appeal
on the finding of fact referred to hereinabove."
From the order impugned in this appeal we find that the
revenue did not dispute the fact that identical issue was
considered in the assessee's own case for the assessment year
2003-04 and the appeal filed by the department was dismissed by
the tribunal as well as by this Court. We also note that the
decision of this Court has been affirmed by the Hon'ble Supreme
Court. Thus, we find that there is no ground to interfere with
the order passed by the tribunal both on the limitation as well as
on merits.
Accordingly, the appeal is dismissed and the substantial
questions of law are answered against the revenue.
Consequently, the connected application for stay (IA
No.GA/1/2010) stands closed.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
S.Das /As
