DCIT Corporate Circle 1(1), CHENNAI V. Airplaza Retail Holdings Pvt Ltd., CHENNAI

ITA 1269/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6764 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS M SUBASHRIJCITD R
• Assessee Lawyers: SARAT CHNADRAN
• Keywords: Depreciation
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , , ( BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.1268 & 1269/CHNY/2018 /ASSESSMENT YEAR: 2013-14 & 2014-15 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI 600 034 VS. M/S. AIRPLAZA RETAIL HOLDINGS PVT. LTD., 4, MOOKAMBIKA COMPLEX 5 TH FLOOR, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 004. PAN: AAICA7614B ( * /APPELLANT) ( +,* /RESPONDENT) * - / APPELLANT BY : MRS.M.SUBASHRI,JCIT,D.R +,* - /RESPONDENT BY : MR.SARAT CHNADRAN,ADVOCATE - /DATE OF HEARING : 09.07.2019 - /DATE OF PRONOUNCEMENT : 09.07.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINS T THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)-1, CHENNAI, IN ITA NOS.97 & 685/C.I.T(A)-1/2016-17, DA TED 31.01.2018 FOR THE ASSESSMENT YEARS 2013-14 & 2014-15. ITA NOS.1268 & 1269/CHNY/2018 :- 2 -: 2. MRS.M.SUBASHRI REPRESENTED ON BEHALF OF THE REVE NUE AND MR.SARAT CHNADRAN REPRESENTED ON BEHALF OF THE ASSESSEE. 3. THE REVENUE RAISED COMMON GROUNDS IN BOTH THESE APPEALS FOR ASSESSMENT YEARS 2013-14 & 2014-15. IN GROUND NOS.2 .1 TO 2.4, THE REVENUE HAS CHALLENGED THE ORDER OF THE LD.CIT(A) I N DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPE CT OF DEPRECIATION CLAIMED ON GOODWILL . 4. IT WAS SUBMITTED BY LD.DR THAT LD.CIT(A) HAD FOL LOWED THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2011-12. LD.DR SUBMITTED THAT THE O RDER OF THE LD. CIT(A) IS LIABLE TO BE REVERSED AS THE ORDER OF THE TRIBUNAL DATED 01.05.2017 IN ASSESSEES OWN CASE HAS BEEN CHALLENG ED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT U/S.260A OF THE A CT. 5. IN REPLY, LD.AR PLACED BEFORE US A COPY OF THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011- 12 IN ITA NO.2227/MDS/2016 DATED 01.05.2017, WHEREI N THE TRIBUNAL HS HELD AS UNDER:- 5. ON APPEAL, THE LD.CIT(A) RELYING ON THE DECISIO N OF THE HONBLE APEX COURT IN THE CASE CIT V. SMIFS SECURITIES LTD. , REPORTED IN 24 TAXMANN.COM 222 HELD THE ISSUE IN FAVOUR OF THE ASS ESSEE BY OBSERVING AS UNDER: 19. IN THE PRESENT CASE UNDER CONSIDERATION, THIS IS PRECISELY WHAT THE APPELLANT HAS DONE WHEN IT VALUED THE FIXE D ASSETS FROM RS.315377571/- TO RS.131543344/- BY REFERRING TO TH E VALUATION OF ASSETS BY M/S.AXIS RISK CONSULTING BEING THE VAL UER TO CLAIM DEPRECIATION FOR WHICH ASSETS THE APPELLANT HAS PAI D A CONSIDERATION OF RS.31.53 CR. ITA NOS.1268 & 1269/CHNY/2018 :- 3 -: 20. THE QUESTION THAT IMMEDIATELY FOLLOWS FOR CONSI DERATION IS THAT WHEN THE CONSIDERATION PAID FOR ACQUISITION OF FIXE D ASSETS IS HIGHER THAN TILE VALUE OF THE ASSETS ON THE DATE OF ACQUISITION AS TO HOW TILE EXCESS CONSIDERATION PAID OUGHT TO BE TREA TED FOR COMPUTATION / INCOME TAX PURPOSES. 21. THE SUPREME COURT WHILE CONSIDERING THE ABOVE Q UESTION IN THE CASE OF CIT VS. SMIFS SECURITIES LTD' (2012 24 TAXMANN.COM 222) HELD THAT THE EXCESS CONSIDERATION PAID BY THE TRANSFEREE OVER THE VALUE OF THE NET ASSETS ACQUIRED FROM THE TRANSFEROR SHOULD HE CONSIDERED AS 'GOODWILL' AND THE EXTRA CO NSIDERATION PAID IN THIS REGARD TOWARDS THE REPUTATION WHICH TH E TRANSFERER WAS ENJOYING IN ORDER TO RETAIN ITS EXISTING CLIENT ELE. THE SUPREME COURT IN HE SAID DECISION FURTHER HELD THAT 'GOODWI LL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF IT ACT W HICH IS ELIGIBLE FOR DEPRECIATION UNDER THE RATES STIPULATED UNDER T HE IT RULES. THE PLEA OF THE APPELLANT THAT THE DECISION OF THE APEX COURT IN THE CASE OF AN AMALGAMATION OF COMPANIES EQUALLY AP PLIES WITH EQUAL FORCE FOR 'SLUMP SALES' AS IN ITS CASE ALSO. 22. FURTHER, FOLLOWING THE ABOVE DECISION, TILE CLA IM THAT THE EXTRA CONSIDERATION OF RS.18,38,34,227/- PAID BY THE APPE LLANT CONSTITUTES GOODWILL AND BECOMES ELIGIBLE FOR DEPRE CIATION UNDER THE IT ACT WHICH THE APPELLANT HAS CLAIMED FOR THE ASST YEAR: 2011- 12 HAS TO BE UPHELD. SUBSTANTIVELY THIS WOULD BE THE APPROPRIATE VIEW WITH REGARD TO VALUATION OF GOODWI LL FOLLOWING THE 'PURCHASE COST METHOD' AS DISTINCT FROM THE 'POOLIN G OF INTEREST METHOD'. 23. TAKING THE SUM TOTALITY OF THE FADS INTO ACCOUN T AND THE DISCUSSION IN THE FOREGOING, I AM OF THE CONSIDERED VIEW THAT THE PLEA ADVANCED BY THE APPELLANT WITH REGARD THE CLAI M OF DEPRECIATION IN RESPECT OF GOODWILL WHICH WAS DENIE D BY THE AO AT RS.2,29,79,278/- HAS TO BE UPHELD. THE AO IS DIR ECT TO MODIFY THE ORDER ACCORDINGLY. THIS GROUND OF APPEAL IS ALL OWED 6. BEFORE US THE LD. D.R ARGUED RELYING ON THE ORDE RS OF THE LD.AO WHILE AS THE LD. AR PLEADED IN SUPPORT OF THE ORDERS OF THE LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE MATERIALS ON RECORD. ON PERUSING THE DECISION OF T HE HONBLE APEX COURT RELIED BY THE LD.CIT(A) SUPRA, WE FIND THE FA CTS TO BE ITA NOS.1268 & 1269/CHNY/2018 :- 4 -: SOMEWHAT IDENTICAL TO THE CASE OF THE ASSESSEE BECA USE THE EXCESS CONSIDERATION PAID OVER AND ABOVE THE NET WORTH OF THE BUSINESS TAKEN OVER BY THE ASSESSEE CAN BE ONLY TREATED AS G OODWILL OR AS ANY OTHER ASSET IN THE NATURE OF INTANGIBLE ASSET WHICH IS ELIGIBLE FOR DEPRECIATION AS PER SECTION 32(1)(II) OF THE ACT. THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF TH E LD.CIT(A) ON THIS ISSUE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS IT IS NOTICED THAT THE ISSU ES IN GROUNDS NOS.2.1 TO 2.4 IN REVENUES BOTH APPEALS ARE SQUARELY COVERED BY THE DECISION OF THIS CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2011-12 REFERRED TO SUPRA, RESPECTFULLY FOLLOW ING THE DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE FOR ASSESSMENT YEAR 2011-12, THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE IS CONFIRMED. CONSEQUENTLY, GROUNDS NOS.2.1 TO 2.4 RAISED IN REVE NUES APPEALS FOR ASSESSMENT YEARS 2013-14 & 2014-15 STAND DISMISSED. 7. IN RESPECT OF GROUNDS NOS.3.1 TO 3.3, THE REVEN UE HAS CHALLENGED THE ORDER OF THE LD.CIT(A) IN DELETING THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER U/S.36(1)(VA) OF THE ACT IN RESPE CT OF NON-PAYMENT OF EMPLOYEES PART OF CONTRIBUTION TO EPF AND ESI BY TH E ASSESSEE BEFORE THE DUE DATE. 8. IT WAS SUBMITTED BY LD.DR THAT LD.CIT(A) HAD DE LETED THE ADDITION BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF C.I.T VS. INDUSTRIAL SECURITY AND INTELLIGENCE INDI A (P) LTD., IN ITA ITA NOS.1268 & 1269/CHNY/2018 :- 5 -: NOS.2048 AND 2049/MDS/2014. IT WAS A PRAYER THAT TH E ORDER OF THE LD. CIT(A) IS LIABLE TO BE REVERSED. 9. IN REPLY, THE LD.AR DREW OUR ATTENTION TO THE D ECISION OF THE BOMBAY HIGH COURT IN THE CASE OF C.I.T VS. GHATGE PATIL T RANSPORTS LTD., REPORTED IN 368 ITR 749(BOM.) WHEREIN THE BOMBAY HIGH COURT CATEGORICALLY HELD THAT THE ISSUE ON BOTH EMPLOYEES AND EMPLOYERS CO NTRIBUTIONS ARE COVERED UNDER AMENDMENT TO SECTION 43B OF THE ACT A ND THE JUDGMENT OF SUPREME COURT IN C.I.T VS. ALOM EXTRUSIONS LTD., RE PORTED IN (2009) 319 ITR 306(SC). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF ORDER OF THE LD. CIT(A) SHOWS THAT LD.CIT(A) HAS FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T VS. INDUSTRIAL SECURITY AND IN TELLIGENCE INDIA (P) LTD. REFERRED TO SUPRA WHEREIN ALSO THE HONBLE JURISDIC TIONAL HIGH COURT HAS HELD THAT THE DECISION OF THE APEX COURT IN THE CAS E OF C.I.T VS. ALOM EXTRUSIONS LTD., REFERRED TO SUPRA IS ALSO APPLICAB LE IN RESPECT OF EMPLOYEES CONTRIBUTION AND THE AMENDMENT TO SECTIO N 43B OF THE ACT IS CURATIVE IN NATURE. AS IT IS NOTICED THAT THE LD.C IT(A) HAS FOLLOWED THE DECISIONS OF THE SUPREME COURT AND THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF C.I.T VS. INDUSTRIAL SECURITY AND IN TELLIGENCE INDIA (P) LTD., REFERRED TO SUPRA, WE FIND NO REASON TO INTERFERE W ITH THE ORDER OF THE LD. CIT(A). CONSEQUENTLY, GROUNDS NOS.3.1 TO 3.3 RAISED IN REVENUES APPEALS STAND DISMISSED. ITA NOS.1268 & 1269/CHNY/2018 :- 6 -: 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE R EVENUE FOR THE ASSESSMENT YEARS 2013-14 & 2014-15 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSIO N OF HEARING ON THE 09 TH DAY OF JULY, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 4 /DATED: 09 TH JULY, 2019. K S SUNDARAM - +56 76 /COPY TO: 1. * /APPELLANT 4. 8 /CIT 2. +,* /RESPONDENT 5. 6 + /DR 3. 8 ( ) /CIT(A) 6. /GF