Essilor Sankar & Co-optics P. Ltd., Coimbatore V. DCIT Corporate Circle 2, Coimbatore

ITA 1511/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5014 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARV SREENIVASAN JCIT
• Keywords: Depreciation; Question of law
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , ! , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI, M. BALAGANESH ACCOUNTANT MEMBER ./ I.T.A.NO.1511 & 1512/MDS./2017 /ASSESSMENT YEARS :2013-14 & 2014-15 M/S.ESSILOR SANKAR & CO - OPTICS P. LTD., 321 A &B, METTUPALAYAM ROAD, OPP. MURUGAN MILL ROAD, COIMBATORE 641 043 . VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, COIMBATORE. [PAN AABCE 9781 G ] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : NONE /RESPONDENT BY : MR.AR.V.SREENIVASAN,JCIT, DR /DATE OF HEARING : 15-01-2018 /DATE OF PRONOUNCEMENT : 16-01-2018 /O R D E R PER M. BALAGANESH, ACCOUNTANT MEMBER: THESE APPEALS OF THE ASSESSEE ARISE OUT OF THE OR DER OF THE LD COMMISSIONER OF INCOME TAX (APPEALS)I, COIMBATO RE, IN ITA NO.19/16-17 DATED 29.03.2017 FOR ASSESSMENT YEAR 2 013-14 AND IN ITA NO.163/16-17 DATED 29.03.2017 FOR ASSESSMENT YEAR 2014-15. AS IDENTICAL ISSUE IS INVOLVED IN BOTH THESE APPEALS , THEY ARE TAKEN UP ITA NOS.1511 & 1512/MDS./2017 :- 2 -: TOGETHER FOR THE SAKE OF CONVENIENCE AND DISPOSED O FF BY THIS COMMON ORDER. 2. THE FIRST COMMON ISSUE TO BE DECIDED IN THESE A PPEALS IS AS TO WHETHER THE LD.CIT(A) WAS JUSTIFIED IN UPHOLDING TH E DISALLOWANCE OF AMORTIZATION OF GOODWILL AMOUNTING TO ` 62,89,265/- IN BOTH THE ASSESSMENT YEARS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSES SEE IS A LIMITED COMPANY, ENGAGED IN THE BUSINESS OF PROCESSING AND DISTRIBUTION OF SPECTACLE LENSES. THE ASSESSEE ENTERED INTO BUSINES S PURCHASE AGREEMENT WITH ONE M/S.SHANKAR & CO., A PARTNERSHIP FIRM AND MR.DEEPAK SUNDARAM, WHO WERE CARRYING ON THE BUSINE SS OF PROCESSING AND DISTRIBUTION OF SPECTACLE LENSES. UNDER THE BU SINESS PURCHASE AGREEMENT, THE ASSESSEE TOOK OVER THE ENTIRE BUSINE SS FOR A LUMP SUM CONSIDERATION OF ` 4,70,49,000/-. SINCE THE ACQUISITION RESULTED IN PA YMENT OF CONSIDERATION OVER AND ABOVE THE VALUE OF ASSET S, THE DIFFERENCE WAS TREATED BY THE ASSESSEE AS PAYMENT MADE TOWARDS GOO DWILL. IN OTHER WORDS, THOUGH THE ACQUISITION WAS MADE ON SLUMP SA LE BASIS, THE ASSESSEE INDEED PAID EXCESS CONSIDERATION OVER AND ABOVE THE ASSET VALUE, THE DIFFERENCE WAS ATTRIBUTED TOWARDS ACQUIS ITION OF GOODWILL. ACCORDINGLY, THE ASSESSEE ATTRIBUTED A SUM OF ` 2,51,57,060/- TOWARDS VALUE OF GOODWILL. THE ASSESSEE WROTE OFF ONE TENTH (1/10 TH ) OF THE AMOUNT OF GOODWILL I.E ` 2,51,57,060/-. COMMENCING FROM THE ASSESSMENT YEAR 2009-10 ONWARDS IN ITS BOOKS OF ACC OUNTS, AND ADDED ITA NOS.1511 & 1512/MDS./2017 :- 3 -: BACK THE SAME IN THE COMPUTATION OF TOTAL INCOME AS THE SAME WAS NOT AN ALLOWABLE EXPENDITURE. THE ASSESSEE DID NOT CLA IM ANY DEDUCTION TOWARDS AMORTIZATION OF GOODWILL DURING ASSESSMENT YEARS 2009-10, 2010-11, 2011-12 & 2012-13. THE ASSESSEE, PURSUANT TO BEING MADE AWARE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECRUTIES LTD., REPORTED IN 348 ITR 302 (SC) DECIDED TO CLAIM DEPRECIATION ON VALUE OF GOODWILL TREATING THE SAME AS INTANGIBLE ASSETS. ACCORDINGLY, ASSESSEE CLAIMED DEPRECIATION ON GOODW ILL AMOUNTING TO ` 62,89,265/- (25% OF ` 2,51,57,060/-) FOR ASSESSMENT YEAR 2013-14 FOR THE FIRST TIME. THIS SUM OF DEPRECIATION CLAIMED B Y THE ASSESSEE WAS DISALLOWED BY THE LD. ASSESSING OFFICER ON THE GROU ND THAT SINCE ASSESSEE HAD PURCHASED ONLY ON SLUMP SALE BASIS, NO VALUE COULD BE ATTRIBUTED TOWARDS GOODWILL AS DONE BY THE ASSESSEE AND HENCE, IN THE OPINION OF THE LD. ASSESSING OFFICER, THE ASSESSEE WAS NOT ENT ITLED TO DEPRECIATION ON GOODWILL THEREON. AGGRIEVED BY THE ORDER OF LD. AS SESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 4. BEFORE THE LD.CIT(A), THE ASSESSEE REITERATED I TS CLAIM MADE BEFORE THE LD. ASSESSING OFFICER AND ARGUED THAT THE CLAIM OF DEPRECIATION WAS MADE FOR THE FIRST TIME ONLY IN ASSESSMENT YEAR 201 3-14 BY THE ASSESSEE. THE LD.CIT(A) DID NOT HEED TO THE CONTENTIONS OF TH E ASSESSEE AND ALSO HELD THAT SINCE THE VALUE OF GOODWILL ARISES IN THE ASSESSMENT YEAR 2009- 10, THE AMORTIZATION THEREON CALCULATED AT 25% WOUL D HAVE GOT EXHAUSTED AND THE SAME WOULD BE ELIGIBLE ONLY DURIN G THE ASSESSMENT ITA NOS.1511 & 1512/MDS./2017 :- 4 -: YEARS 2009-10 TO 2012-13 AND NOT IN ASSESSMENT YEA R 2013-14. AGGRIEVED BY THE ORDER OF LD.CIT(A), NOW THE ASSESS EE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS I N HOLDING THAT THE APPELLANT IS NOT ENTITLED TO DEPRECIATION ON GO ODWILL. 3. THAT THE LD.CIT(A) OUGHT TO HAVE ARRIVED AT THE CORRECT WRITTEN DOWN VALUE AS ON 1.4.2012 AND ALLOWED THE DEPRECIATION ACCORDINGLY. 4. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ENTIRE SUM OF ` 2,51,57,060/- HAS BEEN DEEMED TO HAVE BEEN ALLOWED AS DEPRECIATION IN THE ASSESSMENT YEARS 2009-10 TO 2012-13 AND SUCH A FINDING IS PERVERSE I N LAW AS NOT BEING IN ACCORDANCE WITH THE FACTS. 5. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE GOODWILL BY TAKING THE ORIGINAL COST AS WRITTEN DOWN VALUE AS ON 1.4.2012 BECAUSE NO DEPRECIATION WAS EVER CLA IMED EARLIER. 6. THAT THE LD.CIT(A) OUGHT TO HAVE ALLOWED THE A MORTIZED AMOUNT OF ` 62,89,265/-. 5. THE DECISION RENDERED HEREIN FOR ASSESSMENT YEA R 2013-14 WOULD APPLY WITH EQUAL FORCE FOR ASSESSMENT YEAR 2014-15 ALSO IN VIEW OF IDENTICAL FACTS. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAV E HEARD THE SUBMISSIONS OF LD.D.R AND PERUSED THE MATERIALS AVA ILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE ASSESSEE HAD PAID TOTA L PURCHASE CONSIDERATION OF ` 4,70,49,000/- PURSUANT TO BUSINESS PURCHASE ITA NOS.1511 & 1512/MDS./2017 :- 5 -: AGREEMENT WITH ONE M/S.SHANKAR & CO., ENTERED BY TH E ASSESSEE DURING ASSESSMENT YEAR 2009-10. IT IS NOT IN DISPUTE THAT THE SAID PURCHASE WAS MADE ON SLUMP SALE BASIS. IT IS NOT IN DISPUTE TH AT THE ASSESSEE HAD INDEED MADE PAYMENT OVER AND ABOVE THE VALUE OF ACT UAL ASSETS AND ACCORDINGLY, WAS FORCED BY THE OPERATION OF LAW, TO TREAT THE DIFFERENCE OF EXCESS CONSIDERATION PAID TOWARDS ACQUISITION OF GO ODWILL. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE INSTANT CASE RESULTED IN PAYMENT MADE TOWARDS ACQUISITION OF GOODWILL, I.E THERE WAS AN A CTUAL PAYMENT OF CONSIDERATION FOR ACQUIRING GOODWILL. THOUGH THE E NTIRE TRANSACTION WAS CARRIED OUT ON SLUMP SALE BASIS, WHEREIN NO INDIV IDUAL ATTRIBUTION OF VALUES COULD BE MADE TOWARDS INDIVIDUAL ASSETS, IN THE INSTANT CASE, THE ASSESSEE WAS FORCED TO ATTRIBUTE THE VALUE OF ` 2,51,57,060/- TOWARDS GOODWILL PORTION AS IT HAD MADE PAYMENT OVER AND AB OVE THE VALUE OF EXISTING ASSETS. SO, THIS IS EFFECTIVELY DONE, ONLY PURSUANT TO THE OPERATION OF LAW. WE ARE NOT IN AGREEMENT WITH THE OBSERVATI ONS OF THE LD.CIT(A) THAT ASSESSEE SHOULD HAVE CLAIMED THIS IN ASSESSMEN T YEARS 2009-10 TO 2012-13 AND NOT IN ASSESSMENT YEAR 2013-14. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION EITHER I N THE FORM OF DEPRECIATION / AMORTIZATION OF GOODWILL DURING ASSE SSMENT YEARS 2009-10 TO 2012-13. SINCE THE GOODWILL OF ` 2,51,57,060/- HAD BEEN ACTUALLY ACQUIRED BY THE ASSESSEE BY PAYMENT OF PURCHASE CON SIDERATION, AND SINCE NO CLAIM ON DEPRECIATION / AMORTIZATION OF GO ODWILL WAS MADE BY THE ASSESSEE UPTO ASSESSMENT YEAR 2012-13, WE HOLD THAT THE ASSESSEE ITA NOS.1511 & 1512/MDS./2017 :- 6 -: WOULD BE ENTITLED TO CLAIM OF DEPRECIATION THEREON AS PER THE RATIO LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CIT VS . SMIFS SECRUTIES LTD.,(SUPRA) WHEREIN IT WAS HELD THAT GOODWILL HAS TO BE TREATED AS AN INTANGIBLE ASSET AND THEREBY, THE ASSESSEE IS ENTIT LED FOR DEPRECIATION THEREON. HENCE, THE GROUND NOS.2 TO 6 RAISED BY THE ASSESSEE IN ITS APPEALS FOR ASSESSMENT YEARS 2013-14 & 2014-15 ARE ALLOWED. 7. THE NEXT GROUND RAISED IN ASSESSMENT YEAR 2013- 14 PERTAINS TO WHETHER THE LD.CIT(A) WAS JUSTIFIED IN UPHOLDING TH E DISALLOWANCE MADE TOWARDS EMPLOYEES CONTRIBUTION TO PF / ESI AMOUNTI NG TO ` 6,50,447/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE BRIEF FACTS OF THE ISSUE ARE THAT ASSESSEE DID NOT MAKE THE REMITTANCE OF PF / ESI WITHIN THE DUE DATE PRESCRIB ED UNDER THE RESPECTIVE ACTS, BUT INSTEAD MADE REMITTANCE OF THE SAME BEFORE THE DUE DATE OF FILING RETURN OF INCOME U/S.139(1) OF THE I NCOME TAX ACT AND HENCE, THE LD. ASSESSING OFFICER DISALLOWED THE SAM E IN THE ASSESSMENT BY TREATING THE SAME AS INCOME U/S.2(24)(X) R.W.S. 36(1)(VA) OF THE ACT. THIS ACTION OF THE LD. ASSESSING OFFICER WAS UPHELD BY THE LD.CIT(A). AGAINST THE ORDER OF LOWER AUTHORITIES, NOW THE AS SESSEE IS IN APPEAL BEFORE TRIBUNAL ON THE FOLLOWING GROUNDS:- 7. THE LD.CIT(A) OUGHT TO HAVE DISPOSED OFF THE GR OUND REGARDING THE DISALLOWANCE OF EMPLOYEES CONTRIBUTION OF ESI. ITA NOS.1511 & 1512/MDS./2017 :- 7 -: 8. THAT THE LD.CIT(A) OUGHT TO HAVE ALLOWED THE SU M OF ` 6,50,447/- BEING THE EMPLOYEES CONTRIBUTION WHICH H AS BEEN PAID EVEN BEFORE THE END OF THE PREVIOUS YEAR. 9. WE HAVE HEARD THE SUBMISSIONS OF LD.D.R AND PER USED THE MATERIALS ON RECORD. WE FIND THAT THE GRIEVANCE OF THE ASSESSEE PERTAINING TO EMPLOYEES CONTRIBUTION TOWARDS PF & ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RESPECTIVE ACTS IS SQUARELY COVERED BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MIS. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. IN TC(APPEAL) NOS.585 & 586 OF 2015 DATED 24.7.2015 AND HELD AS UNDER:- 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUS IONS LTD. REPORTED IN 319 ITR 386, WHEREBY, THE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMEND MENT TO FIRST PROVISO BY FINANCE ACT, 2003 ARE CURATIVE AND ARE EFFECTIVE RETROSPECTIVELY, I.E., WITH EFFECT FROM 1.4.1988 I. E., THE DATE OF INSERTION OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD. REPORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEES CONTRIBUTION TOWA RDS PROVIDENT FUND AND ESI AFTER DUE AS PRESCRIBED UNDE R THE RELEVANT ACT, BUT BEFORE THE DUE DATE OF FILING OF RETURN UNDER THE INCOME TAX ACT, NO DISALLOWANCE COULD BE MADE IN VI EW OF THE PROVISIONS OF SECTION 43B AS AMENDED BY FINANCE ACT , 2003. 6. IN THE PRESENT CASE, THE ASSESSEE HAD REMITTED T HE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE FOR PAYM ENT, BUT WITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME . HENCE, FOLLOWING THE ABOVE-SAID DECISIONS, WE FIND NO REAS ON TO DIFFER WITH THE FINDINGS OF THE TRIBUNAL. ACCORDINGLY, WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW ITA NOS.1511 & 1512/MDS./2017 :- 8 -: ARISES FOR CONSIDERATION IN THESE APPEALS. ACCORDIN GLY, BOTH THE TAX CASE (APPEALS) STAND DISMISSED. NO COSTS. CONSEQUENTLY, M.P.NO. 1 OF 2015 IS ALSO DISMISSED. WE ALSO FIND THAT THE ISSUE IN DISPUTE IS ALSO COVE RED BY THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF ACIT VS. VIJAY SHREE LTD REPORTED IN 43 TAXMANN.COM 396. RESPECTIVELY FOLLO WING THE SAME, WE HAVE NO HESITATION IN DIRECTING THE LD. ASSESSING O FFICER TO GRANT DEDUCTION TOWARDS EMPLOYEES CONTRIBUTION OF PF/ESI AMOUNTING TO ` 6,50,447/-. ACCORDINGLY, GROUND NOS.7 & 8 RAISED BY THE ASSESSE E IN ITS APPEAL IN ASSESSMENT YEAR 2013-14 STANDS ALLOWED. 10. THE GROUND NO.1 RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E FOR THE ASSESSMENT YEARS 2013-14 & 2014-15 ARE ALLOWED. ORDER PRONOUNCED ON 16 TH JANUARY, 2018 AT CHENNAI. SD/- SD/- ( ! . . ! . '# ) ( N.R.S. GANESAN) / JUDICIAL MEMBER ( !$ % & '# ) (M. BALAGANESH) ' / ACCOUNTANT MEMBER & '( /CHENNAI, )* /DATED: 16 TH JANUARY,2018. K S SUNDARAM *# +, -, /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. . ( ) /CIT(A) 4. . /CIT 5. ,/' 0 /DR 6. '1 2 /GF