DCIT, CIR-7(1), KOLKATA, Kolkata V. M/r Britannia Dairy Pvt. Ltd., Kolkata

ITA 1113/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1414 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Depreciation; Cost of acquisition
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1113/KOL/20 16 ASSESSMENT YEAR : 2011-1 2 D.C.I.T., CIRCLE-7 (1) -VS.- M/S BRITANNI A DAIRY PVT. LTD. KOLKATA KOLKATA [PAN : AABCB 8795 R] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SAURA BH KUMAR, ADDL.CIT, SR.DR FOR THE RESPONDENT : SHRI AKKAL DUDHEWALA, AR DATE OF HEARING : 28.02.2018. DATE OF PRONOUNCEMENT : 01.03.2018 ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUEAGAINST THE ORDER D ATED 02.03.2016 OF C.I.T.(A)-15, KOLKATA RELATING TO A.Y.2011-12. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ S AS FOLLOWS :- THE FOLLOWING GROUNDS OF APPEAL ARE SUGGESTED:- 1. 'THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS FOR ALL OWING DEPRECIATION ON INTANGIBLE ASSETS VIZ, KNOWHOW, MARKETING INFRASTRUCTURE AND N ON-COMPETE RIGHTS IN CONTRAVENTION OF SECTION 32 OF THE I T.ACT, 1961.' 2. 'THAT THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALTER, MODIFY OR TAKE NEW GROUNDS OF APPEAL'. 3. THE ASSESSEE IS A COMPANY. DURING THE RELEVANT YEAR THE ASSESSEE CARRIED ON BUSINESS OF MARKETING, DISTRIBUTION AND SALE OF VAL UE ADDED DAIRY PRODUCTS .. PURSUANT TO BUSINESS TRANSFER AGREEMENT DATED 22.03.2002 THE AS SESSEEHAD PURCHASED DAIRY BUSINESS OF BRITANNIA INDUSTRIES LIMITED (BIL). UND ER THE SAID BUSINESS TRANSFER AGREEMENT (BTA) THE APPELLANT HAD PURCHASED INTANGI BLE RIGHTS RELATING TO DAIRY PRODUCTS FOR CONSIDERATION SPECIFIED THEREIN. THE I NTANGIBLE RIGHTS PURCHASED INTER ALIA 2 ITA NO.1113/JKOL/2016 M/S BRITANNIA DAIRY PVT. LTD. A.YR.2011-12 2 INCLUDED KNOW HOW, MARKETING INFRASTRUCTURE AND GOO DWILL. THE CONSIDERATION FOR EACH OF THE INTANGIBLE RIGHT WAS CLEARLY DEFINED IN THE BUSINESS TRANSFER AGREEMENT AND THE SAME WAS PAID TO BIL. BESIDES, BIL ALSO ENTERED INT O A NON COMPETE AGREEMENT ON 22.03.2002 IN TERMS OF WHICH BIL AGREED NOT TO CARR Y ON COMPETING DAIRY BUSINESS. FOR ACCEPTING THE NON COMPETE COVENANT SEPARATE AND DIS TINCT CONSIDERATION WAS PAID. IN RESPECT OF THE INTANGIBLE RIGHTS, PRIVILEGES AND AS SETS ACQUIRED IN TERMS OF THE BTA DATED 22.03.2002 THE APPELLANT CLAIMED DEPRECIATION U/S 3 2(1)(II) OF THE ACT. IN THE INCOME TAX ASSESSMENTS FOR A.Y. 2003-04 TO 2010-11 THE ASS ESSEES CLAIM FOR DEPRECIATION ON THE ACTUAL COST/WDV OF THE INTANGIBLE ASSETS WAS DI SALLOWED BY THE AO. 3. ON APPEAL BY THE ASSSSEE THE CIT(A) DIRECTED THE AO TO ALLOW DEPRECIATION OF INTANGIBLE ASSETS AS CLAIMED BY THE ASSESSEE AND IN DOING SO FOLLOWED THE ORDER OF CIT(A) IN ASSESSEES OWN CASE FOR A.Y.2003-04 WHERE IN DEPRECIATION CLAIMED BY THE ASSESSEE WAS ALLOWED BY CIT(A). 4. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING OF THE APPEAL IT WAS BROU GHT TO OUR NOTICE THAT THE ISSUE OF DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ACQUIRED BY THE ASSESSEE WAS THE SUBJECT MATTER OF DISPUTE FROM A.Y.2003-04 TO 2009-10 BETWE EN THE ASSESSEE AND THE DEPARTMENT. THE HONBLE ITAT IN ITA NOS.2678 TO 268 2/MUM/2012 AND 6592/MUM/2012 FOR A.Y.2003-04 TO 2009-10 CONSIDERED THE ISSUE BY ITS ORDER DATED 19.02.2018 AND ULTIMATELY CAME TO THE CONCLUSION TH AT THERE WAS A GENUINE BUSINESS TRANSFER AGREEMENT AND THAT THE RESIDUAL VALUE AFTE R ALLOCATION OF VALUES TO THE VARIOUS ASSETS WAS TREATED AS GOOD WILL AND THAT THE VALUAT ION DONE BY THE VALUERS WAS PROPER. THE TRIBUNAL FURTHER PLACED RELIANCE ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SNIFS SECURITIES LTD. 348 ITR 30 2 (SC) CAME TO THE CONCLUSION THAT THE TRANSFER OF INTANGIBLE SUCH A GOOD WILL IS ALLO WABLE U/S 32(1)(II) OF THE INCOME TAX 3 ITA NO.1113/JKOL/2016 M/S BRITANNIA DAIRY PVT. LTD. A.YR.2011-12 3 ACT, 1961 (ACT). THE TRIBUNAL ALSO CAME TO THE CONC LUSION THAT THE ACQUISITION OF KNOWHOW , PAYMENT FOR ACQUISITION OF MARKETING INFR ASTRUCTURE, PAYMENT OF CONSIDERATION OF NON COMPOSITE FEE AND PAYMENT OF A CQUISITION OF GOOD WILL WOULD ALL BE PAYMENT FOR ACQUIRING INTANGIBLE ASSETS AND THE ASSESSEE WOULD BE ELIGIBLE FOR DEPRECIATION ON ACQUISITION COST OF SUCH INTANGIBLE ASSETS. IN VIEW OF THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE WE FIND NO MERITS IN THI S APPEAL RAISED BY THE REVENUE. 6. IN THE RESULT THE APPEAL BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE COURT ON 01.03.2018. SD/- SD/- [WASEEM AHMED] [ N.V.VAS UDEVAN ] ACCOUNTANT MEMBER JUDICIAL M EMBER DATED : 01.03.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. M/S BRITANNIA DAIRY PVT. LTD., 5/1A, HUNGERFORD STREET, KOLKATA-700017. 2. D.C.I.T., CIRCLE-7(1), KOLKATA. 3. CIT(A)-15, KOLKATA 4. C.I.T.-3, KOLKA TA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES 4 ITA NO.1113/JKOL/2016 M/S BRITANNIA DAIRY PVT. LTD. A.YR.2011-12 4