(2011) 128 ITD 275 (Mum.) Piem Hotel Ltd. v. Dy. CIT A.Y. 2004-05. Dated: 13-8-2010

Facts:
The assessee acquired licence/approval for operating hotel business and included the amount paid in respect of the same under the head goodwill forming part of block of assets under the head intangible assets. While completing original assessment u/s.143(3), the AO had raised queries about claim of depreciation on goodwill and asked the assessee to provide details of the same with detailed working. The assessee provided all the necessary details along with the working of depreciation on intangible assets to the AO. On being satisfied, the AO allowed the claim of depreciation on intangible assets, but failed to discuss it in the assessment order. However, the CIT issued notice u/s.263 on the ground that the AO has not obtained bifurcation and details of assets on which depreciation was claimed. The CIT held that the AO has failed to apply his mind in determining whether these licences/approvals bring into existence any new asset/or not.

Held:
Licence/approval can be said to be intangible assets as defined in Clause (b) to explanation 3 to section 32(1)(ii). In the order of the AO, claim of depreciation on goodwill was not discussed even though the AO had examined the detailed explanation presented before him. The same claim was allowed in earlier year also.

Held that the AO’s decision of not rejecting the claim, after having an opportunity to peruse the detailed submission, cannot by itself imply that there was no application of mind.

It is well-settled law that when two views are possible and the AO has taken one view, then his order cannot be subjected to revisions, merely because other view is also possible.

Therefore view taken by the AO was a possible view in allowing depreciation and cannot be held to be erroneous and prejudicial to the interest of the revenue.

Therefore, order passed by the CIT u/s.263 was to be quashed.