Metal One Corporation India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1761/DEL/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8943 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M BARNWAL
• Keywords: Depreciation; Transfer pricing; International transaction; Wholly owned subsidiary; Valuation report; Revised return
• Section: 92C; 92F; 37(1); 80G; 43(5); 13

Judgement Text

, -2 , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI , '# . $ , & ' BEFORE MS. SUSHMA CHOWLA, VP & DR. B.R.R. KUMAR, AM [THROUGH VIDEO CONFERENCING] ( / ITA NO. 1761/DEL/2015 ) / ASSESSMENT YEAR: 2010-11 METAL ONE CORPORATION INDIA PVT.LTD., 1 ST FLOOR, SOOD TOWER, 25, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAFCM1225 .... ......... /APPELLANT VS THE DCIT, CIRCLE-16(2), NEW DELHI . / RESPONDENT / APPELLANT BY: SH. NAGESHWAR RAO, SR.ADV . / RESPONDENT BY: SH. M.BARNWAL, SR.DR ) / DATE OF HEARING : 01.06.2020 / DATE OF PRONOUNCEMENT: 31.07.2020 / ORDER PER SUSHMA CHOWLA, VP THE PRESENT APPEAL FILED BY ASSESSEE IS AGAINST OR DER OF DCIT, CIRCLE- 16(2), NEW DELHI DATED 27.01.2015 RELATING TO ASSES SMENT YEAR 2010-11 AGAINST THE ORDER PASSED UNDER SECTION 143(3)/144C OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN ASSESSING THE TOTAL INCOME OF THE A PPELLANT FOR THE RELEVANT AY AT INR 13,29,17,212 AS AGAINST RETURNED INCOME OF INR 12,08,08,280. TRANSFER PRICING 2 . THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') / AO / TRA NSFER PRICING OFFICER ('TPO') ERRED IN MAKING A TRANSFER PRICING ADJUSTME NT OF INR 92,84,585 IN RESPECT OF THE INTERNATIONAL TRANSACTION RELATING T O PROVISION OF SALES SUPPORT SERVICES (HELD AS MARKETING SUPPORT SERVICE S) ALLEGING THE SAME TO BE NOT AT ARM'S LENGTH IN TERMS OF THE PROVISION S OF SECTIONS 92C(1) AND 92C(2) OF THE ACT READ WITH RULE 100 OF THE INCOME- TAX RULES, 1962 ('THE RULES'). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE FACT S AND IN LAW, THE DRP/AO /TPO ERRED IN NOT APPRECIATING THE BUSINESS MODEL, FUNCTIONAL, ASSET AND RISK ANALYSIS UNDERTAKEN BY THE APPELLANT AND HAVE FURTHER ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERT AKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ W ITH RULES FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE FOR RENDERI NG SALES SUPPORT SERVICES. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP/ASSESSING OFFICER/TPO HAVE ERRED IN ARBITRARILY REJECTING COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT TH AT WERE FUNCTIONALLY COMPARABLE AND IN ARBITRARILY SELECTING COMPARABLE COMPANIES WHICH WERE NOT FUNCTIONALLY COMPARABLE, AND THEREBY CHOOS ING AN INCORRECT SET OF COMPARABLE COMPANIES IN AN ARBITRARY AND SUBJECT IVE MANNER. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP/ ASSESSING OFFICER/ TPO ERRED IN ARBITRARILY RE JECTING I MODIFYING THE SEARCH PROCESS AND THE FILTERS ADOPTED BY THE APPEL LANT FOR THE PURPOSE OF BENCHMARKING ITS INTERNATIONAL TRANSACTION OF RENDI TION OF SALES SUPPORT SERVICES. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW, THE DRP/ ASSESSING OFFICER/ TPO ERRED IN NOT PROVIDING APPROPRIATE ECONOMIC ADJUSTMENTS, AS REQUIRED UNDER RULE 108(1)(E)(III) OF THE RULES, ON ACCOUNT ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 3 OF DIFFERENCES IN WORKING CAPITAL AND RISK PROFILE BETWEEN THE APPELLANT AND THE COMPARABLE COMPANIES. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP/ASSESSING OFFICER/TPO HAVE ERRED BY IGNORING TH E PROVISIONS OF RULE 108(4) OF THE RULES AND JUDICIAL PRONOUNCEMENTS, WH ICH ADVOCATE USAGE OF MULTIPLE YEAR DATA OF COMPARABLE COMPANIES FOR T HE PURPOSE OF DETERMINATION OF THE ARM'S LENGTH PRICE AS DEFINED UNDER SECTION 92F OF THE ACT. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP/ASSESSING OFFICER/TPO HAVE ERRED IN NOT RESTRIC TING THE ADJUSTMENT TO THE VALUE OF INTERNATIONAL TRANSACTIONS . 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP / AO / TPO ERRED IN NOT PROVIDING THE APPELLANT THE BENEFIT OF (+ / -) 5% RANGE AS PROVIDED BY THE PROVISO TO SECTION 92C( 2) OF THE ACT. CORPORATE TAX 10. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP / AO ERRED IN REJECTING THE APPELLANT'S CLAIM F OR DEPRECIATION ON GOODWILL BY PLACING RELIANCE ON THE DECISION OF THE APEX COURT IN THE CASE OF GOETZE INDIA PRIVATE LIMITED VS CIT: 284 ITR 323 (SC) HOLDING THAT THE AO HAS NO POWER TO ALLOW THE CLAIM OF THE APPELLANT UNLESS MADE BY WAY OF A REVISED RETURN. 11. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP / AO ERRED IN REJECTING THE CLAIM OF THE APPELL ANT FOR DEPRECIATION ON GOODWILL AMOUNTING TO INR 6,09,00,000 IN PURSUANCE TO THE BUSINESS TRANSFER AGREEMENT DATED JUNE 01, 2008 FOR ACQUISIT ION OF METAL DIVISION OF MITSUBISHI CORPORATION INDIA PVT LTD ('MCIPL'), ALLEGING THAT THE APPELLANT HAS NOT FILED ANY VALUATION REPORT FOR TH E ASSETS TAKEN OVER FROM MCIPL. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, DRP / AO ERRED IN DISALLOWING MARK- TO-MARKET FOREIGN EXC HANGE LOSS AMOUNTING TO INR 28,14,307 IN RELATION TO FORWARD C OVERS TAKEN BY THE APPELLANT TO HEDGE FOREIGN CURRENCY RISK ALLEGING I T TO BE NOTIONAL AND SPECULATIVE IN NATURE. 13. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP / AO ERRED IN DISALLOWING THE EXPENDITURE OF IN R 10,040 PAID FOR ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 4 SUBSCRIPTION CHARGES FOR PUBLICATION OF ADVERTISEME NT ALLEGING THE SAME TO BE IN THE NATURE OF DONATION AND THEREFORE, NOT AN ALLOWABLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 14. THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW, THE AO HAS ERRED IN CHARGING INTEREST UNDER SECTIONS 23 4A, 234B, 234C AND 2340 OF THE ACT. 3. GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION; HENCE, DISMISSED . 4. THE ISSUE RAISED VIDE GROUND OF APPEAL NOS. 2 TO 9 IS WITH REGARD TO TRANSFER PRICING ADJUSTMENT MADE IN PROVISION OF SA LES SUPPORT SERVICES TO THE ASSOCIATED ENTERPRISES (IN SHORT AES). THE LD.AR FOR THE ASSESSEE POINTED OUT THAT IT WISHES TO PRESS GROUND OF APPEAL NOS. 2 , 4 & 9 IN THIS REGARD AND ALSO THE ADDITIONAL GROUND NO.9A. 5. THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GRO UND OF APPEAL:- 9A. AS FACTS OF CASE AND APPLICABLE LAW REMAIN IDE NTICAL DURING PERIOD UNDER APPEAL AS IN YEAR RELATING TO WHICH ADVANCE P RICING AGREEMENT (APA) WAS ENTERED INTO SUBSEQUENTLY, APPROACH, BA SIS ADOPTED AND CONCLUSION REACHED IN APA YEARS DESERVES TO BE CONS ISTENTLY APPLIED TO YEAR UNDER APPEAL. 6. THE LD.AR FOR THE ASSESSEE POINTS OUT THAT THE A LTERNATE GROUND WAS THAT IN SUBSEQUENT YEARS, THE ADVANCE PRICING AGREE MENT (IN SHORT APA) PROCEEDINGS HAVE BEEN ACCEPTED AND THE FAR ANALYSI S WAS SAME IN THE YEAR UNDER APPEAL ALSO AND THE BENEFIT OF APA PROCEEDING S MAY ALSO BE ALLOWED TO THE YEAR UNDER APPEAL. ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 5 7. THE LD.DR FOR THE REVENUE ON THE OTHER HAND STRO NGLY OPPOSED THE ADMISSION OF ADDITIONAL GROUND AND POINTED OUT THAT THERE WAS NO ROLL BACK OF THE APA PROCEEDINGS FOR EARLIER YEARS. IN CASE THE YEAR UNDER CONSIDERATION WAS TO BE TAKEN AS PART OF APA PROCEEDINGS THEN THE ASSESSEE SHOULD HAVE INCLUDED THE SAME IN THE LIST AND THE TRANSFER PRIC ING OFFICER (IN SHORT TPO) SHOULD HAVE BEEN EXAMINED THE CLAIM OF THE ASSESSEE . THE LD.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT ON MERITS OF ISSU E OF ADJUSTMENT ON ACCOUNT OF TRANSFER PRICING, THE LIMITED ISSUE WAS SELECTIO N OF COMPARABLE, ALLOWABILITY OF WORKING CAPITAL AND RISK ADJUSTMENTS. 8. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF METAL ONE JAPAN AND IS IN OPERATION S INCE 01.06.2008. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE WAS ENGAG ED IN THE IMPORT OF STEEL AND ALLIED PRODUCTS FROM ITS AES AND RESALE OF THE SAME TO LOCAL CUSTOMERS THROUGH ITS DISTRIBUTION NETWORK IN INDIA. THE ASS ESSEE ALSO PROVIDED SALES SUPPORT SERVICES (INDENTING SERVICES) TO ITS AES. T HE ADJUSTMENT HAS BEEN MADE ON ACCOUNT OF SEGMENT OF PROVISION OF SALE SUP PORT SERVICES BY THE ASSESSEE TO ITS AES. THE ASSESSEE HAD SELECTED TRA NSACTIONAL NET MARGIN METHOD (IN SHORT TNMM') AS MOST APPROPRIATE METHO D FOR BENCHMARKING THE TRANSACTION AND DETERMINED PROFIT LEVEL INDICATOR ( IN SHORT PLI) OF OP/OC. THE ASSESSEE HAS SELECTED 17 COMPANIES AS COMPARABL E AND BASED ON THREE YEARS DATA HAD CONCLUDED THAT THE TRANSACTION WAS A T ARMS LENGTH PRICE. THE ASSESSING OFFICER MADE REFERENCE TO THE TPO U/S 92C A(1) OF THE ACT. THE TPO HAD ACCEPTED THE TNMM AS THE MOST APPROPRIATE METHO D AND DETERMINED THE ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 6 PLI AT 11.38%. THE TPO SELECTED FRESH SET OF 09 COMPARABLES COMPANIES WITH AVERAGE PLI OF 23.25% AND MADE ADJUSTMENT OF R S.93,51,561/-. THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER AGA INST WHICH THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP. CONSEQUENT TO THE DIRECTIONS OF THE DRP, THE TPO RE-DETERMINED THE ADJUSTMENT AFTER CONSIDERING THE CORRECT MARGIN OF 02 COMPANIES AND MADE ADJUSTMENT OF RS.92,84,585/-. T HE ASSESSING OFFICER PASSED FINAL ASSESSMENT ORDER MAKING AFORESAID ADJU STMENT IN THE HANDS OF THE ASSESSEE, AGAINST WHICH THE ASSESSEE IS IN APPE AL BEFORE US. 9. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS O F APPEAL BUT BEFORE US IT HAS POINTED OUT THAT IF LIMITED ISSUES ARE DECID ED THEN THE MARGIN SHOWN BY THE ASSESSEE WOULD BE WITHIN THE MARGINS OF THE FIN ALLY SELECTED COMPARABLES. THE ASSESSEE IS AGGRIEVED BY THE INCLUSION OF CERTA IN COMPANIES AS COMPARABLES. 10. THE FIRST CONCERN IS APITCO LTD. OUR ATTENTION WAS DRAWN TO THE AUDITED FINANCIAL OF THE SAID COMPANY AND IT WAS PO INTED OUT THAT IT WAS ENGAGED IN MULTIPLE SEGMENTS AND WAS NOT FUNCTIONAL LY COMPARABLE TO THE ASSESSEE. FURTHER, ARGUMENTS WERE MADE FOR THE EXC LUSION OF GLOBAL PROCUREMENT CONSULTANTS LTD.; TSR DARASHAW LTD.; QU IPPO VALUERS & AUCTIONEERS PVT.LTD. THE LD.AR OF THE ASSESSEE FUR THER POINTED OUT THAT VIDE GROUND NO.9A, IT HAS RAISED ADDITIONAL ISSUE THAT I N CASE THE APPROACH, BASIS ADOPTED AND CONCLUSION REACHED IN APA PROCEEDINGS F OR THE SUBSEQUENT YEARS ARE APPLIED TO THE YEAR UNDER CONSIDERATION, WHERE THE FAR WAS SAME, THEN NO ADJUSTMENT IS TO BE MADE IN THE HANDS OF THE ASS ESSEE. ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 7 11. WE FIND THAT THE ADDITIONAL GROUND OF APPEAL RA ISED BY THE ASSESSEE IS TO BE ADMITTED BEING A LEGAL ISSUE. VARIOUS BENCHE S OF THE TRIBUNAL HAVE HELD THAT THE CONCLUSION REACHED IN APA PROCEEDINGS DESE RVES TO BE APPLIED IN CASE FACTS AND CIRCUMSTANCES, FAR ARE SIMILAR TO THE SUB SEQUENT YEARS. SIMILAR VIEW HAS BEEN APPLIED IN THE CASE OF PUNE BENCH OF THE TRIBUNAL IN M/S. HONEYWELL AUTOMATION INDIA LTD. VS ACIT, CIRCLE-7, PUNE IN ITA NO.359/PUNE/2013 VIDE ORDER DATED 02.11.2018 AND AL SO IN RANBAXY LABORATORIES LTD. VS. ACIT IN ITA NO.196/DEL/2013 VIDE ORDER DATED 25.04.2016. APPLYING THE SAID PARITY OF REASONING, WE HOLD THAT ONCE THE APA HAS BEEN CONCLUDED IN THE HANDS OF THE ASSESSEE THE N THE SAME APPROACH/BASIS IS TO BE ADOPTED FOR INSTANT ASSESSM ENT YEAR. ACCORDINGLY, THE ASSESSING OFFICER/TPO IS DIRECTED TO FOLLOW THE APPROACH/BASIS OF APA APPLIED FOR THE SUBSEQUENT YEAR TO THE INSTANT ASSE SSMENT YEAR. 12. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT IN CASE THE SAME IS SO APPLIED THEN NO ADJUSTMENT NEEDS TO BE MADE IN THE HANDS OF THE ASSESSEE. SINCE WE HAVE ALLOWED ADDITIONAL GROUND IN THE HAN DS OF THE ASSESSEE, THERE IS NO NEED TO ADJUDICATE THE ISSUE ON MERIT. 13. NOW, COMING TO THE CORPORATE ISSUES RAISED BY T HE ASSESSEE. THE FIRST ISSUE RAISED VIDE GROUND OF APPEAL NOS. 10 & 11 IS AGAINST THE DISALLOWANCE OF DEPRECIATION ON GOODWILL CLAIMED BY THE ASSESSEE PURSUANT TO THE BUSINESS TRANSFER AGREEMENT. THE ASSESSEE HAD MADE NO CLAIM OF DEPRECIATION OF GOODWILL IN ITS RETURN OF INCOME AND THE CLAIM WAS MADE FOR THE FIRST TIME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A SSESSING OFFICER PLACING ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 8 RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N GOETZE (INDIA) LTD. [2006] 284 ITR 323 (SC) REJECTED THE CLAIM OF THE A SSESSEE. THE SAID CLAIM WAS ALSO REJECTED ON MERITS BY THE ASSESSING OFFICE R. THE ASSESSING OFFICER PROPOSED THE ADDITION IN THE HANDS OF THE ASSESSEE AGAINST WHICH OBJECTIONS WERE FILED BEFORE THE DRP, WHO DID NOT ADJUDICATE T HE ISSUE. THE ASSESSING OFFICER PASSED FINAL ASSESSMENT ORDER, NOT GRANTIN G DEPRECIATION ON GOODWILL, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 14. THE LD. AR FOR THE ASSESSEE AFTER POINTING OUT TO THE FACTUAL ASPECTS REFERRED TO THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2011-12 AND POINTED OUT THAT AFTER OBTAINING REMAND REPORT FROM THE ASS ESSING OFFICER, THE SAID CLAIM WAS ALLOWED IN THE HANDS OF THE ASSESSEE. TH E LD.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT PURSUANT TO THE AGREEMENT OF SLUM SALE, VIDE AGREEMENT DATED 20.06.2008, SUM OF RS.34 CRORES WAS PAID TO MITSUBISHI AND THE DIFFERENCE BETWEEN SALE VALUE AND BOOK VALUE O F THE ASSETS WAS BOOKED AND DEPRECIATION WAS CLAIMED, THOUGH DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. THE LD. AR FOR THE ASSESSEE POINTS OU T THAT THE HONBLE SUPREME COURT IN SMIFS SECURITIES LTD.: (2012) 348 ITR 302 HAS HELD THAT GOODWILL WAS INTANGIBLE ASSET AND DEPRECIATION IS T O BE ALLOWED ON IT. OUR ATTENTION WAS DRAWN TO THE ORDER OF THE CIT(A) IN A SSESSMENT YEAR 2011-12 AND THE REMAND REPORT OF THE ASSESSING OFFICER WHIC H ARE PLACED AT PAGES 25 TO 29 OF THE PAPERBOOK. THE ASSESSEE FURTHER POINT ED OUT THAT THE HONBLE DELHI HIGH COURT IN TRIUNE ENERGY SERVICES (P.) LTD . VS DCIT [2016] 237 TAXMAN 230 (DELHI) OBSERVED THAT IN VIEW OF ACCOUNT ING STANDARD 10, ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 9 CONSIDERATION PAID IN EXCESS OF VALUE OF TANGIBLE A SSETS WAS RIGHTLY CLASSIFIED AS GOODWILL AND THEREFORE, FURTHER EXERCISE TO VALU E GOODWILL WAS NOT WARRANTED. 15. THE LD.DR FOR THE REVENUE TOOK US THROUGH VARIO US CONVENANTS OF THE BUSINESS TRANSFER AGREEMENT AND POINTED OUT THAT N O DEPRECIATION WAS CLAIMED IN ANY OF THE ASSESSMENT YEARS I.E ASSESSME NT YEAR 2009-10 TO 2011- 12. HE FURTHER POINTED THAT PAYMENT OF GOODWILL IS NOT DEFINED ANYWHERE IN THE AGREEMENT. FURTHER, NO VALUATION REPORT OF ANY COMPETENT PERSON WAS AVAILABLE; SO, NO DEPRECIATION IS TO BE ALLOWED ON GOODWILL. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE IS WHETHER THE CLAIM WHICH HAS NOT BEEN MADE IN THE RETURN OF INCOME, CAN THE SAME BE ALLOWED IN THE HANDS OF THE ASSESSE E, IF SUBSEQUENTLY RAISED DURING THE ASSESSMENT PROCEEDINGS. THE HONBLE DEL HI HIGH COURT IN CIT VS JAI PARABOLIC SPRINGS LTD. 306 ITR 42 (DEL.) AND HO NBLE BOMBAY HIGH COURT IN CIT VS PRUTHVI BROKERS & SHAREHOLDERS PVT.LTD. 3 49 ITR 336 (BOM.) HAS HELD THAT EVEN IF A CLAIM MADE BY ASSESSEE-COMPANY DOES NOT FORM PART OF ORIGINAL RETURN OR EVEN REVISED RETURN, THE SAME I S TO BE ALLOWED IN ACCORDANCE WITH LAW. IN SUCH FACTS AND CIRCUMSTANC ES, WE ARE OF THE VIEW THAT THE CLAIM OF DEPRECIATION ON GOODWILL NEEDS TO BE CONSIDERED IN THE HANDS OF THE ASSESSEE. THE BUSINESS TRANSFER AGREEMENT I S DATED 20.06.2008 AND NO DEPRECIATION ON GOODWILL WAS CLAIMED IN THE RETU RN OF INCOME. THE CASE OF THE ASSESSEE IS THAT THE SAID DEPRECIATION ON GOODW ILL IS ALLOWABLE IN THE HANDS OF THE ASSESSEE. ON THE OTHER HAND, THE CASE OF THE REVENUE IS THAT THE ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 10 PAYMENT OF GOODWILL ITSELF IS NOT DEFINED IN THE AG REEMENT AND THERE IS NO VALUATION REPORT FROM ANY COMPETENT AUTHORITIES SO THE SAID CLAIM OF DEPRECIATION ON GOODWILL IS NOT ALLOWABLE. WE ARE OF THE VIEW THAT THE CLAIM CAN BE CONSIDERED IN THE HANDS OF THE ASSESSEE SUBJ ECT TO VERIFICATION OF THE FACTUAL ASPECTS IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAIM WAS NOT ALLOWABLE BECAUSE OF TH E DECISION OF HONBLE SUPREME COURT IN GOETZ INDIA LTD. (SUPRA); THOUGH H E HAS MADE SOME REFERENCE TO THE FACTUAL ASPECTS OF THE CASE. THE DRP HAS NOT ADJUDICATED THIS ISSUE; THOUGH THE CIT(A) HAS ALLOWED THE CLAIM OF T HE ASSESSEE IN ASSESSMENT YEAR 2011-12. THE PRESENT ASSESSMENT YEAR BEING TH E YEAR IN WHICH AGREEMENT WAS ENTERED INTO I.E. DATED 20.06.2008, I T IS CONSIDERED FIT TO REMIT THIS ISSUE OF DETERMINING RESULTANT AMOUNT OF GOODW ILL ON WHICH DEPRECIATION IS ALLOWABLE IN THE HANDS OF THE ASSESSEE, CONSEQUE NT TO THE TERMS AND CONDITIONS OF THE BUSINESS TRANSFER AGREEMENT, BACK TO THE FILE OF ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO VERI FY THE CLAIM OF THE ASSESSEE AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE ALL THE FACTS BEFORE THE ASSES SING OFFICER, WHO SHALL DECIDE THE SAME IN ACCORDANCE WITH LAW. 17. THE NEXT ISSUE RAISED VIDE GROUND OF APPEAL NO. 12 IS AGAINST THE DISALLOWANCE OF RS.28,14,307/-. THE ASSESSING OFFI CER TREATED THE SAID LOSS ON ACCOUNT OF RESTATEMENT OF FORWARD CONTRACTS TO B E NOTIONAL LOSS FOLLOWING CBDT INSTRUCTION NO.3 OF 2010 AND DISALLOWED THE SA ME. THE ASSESSING OFFICER ALSO TREATED THE TRANSACTION TO BE SPECULAT IVE TRANSACTION UNDER ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 11 SECTION 43(5) OF THE ACT. THE DRP CONFIRMED THE DI SALLOWANCE OF MARK TO MARKET FOREIGN EXCHANGE LOSS AND IN CONSEQUENCE THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER, AGAINST WHICH TH E ASSESSEE IS IN APPEAL BEFORE US. 18. THE LD.AR FOR THE ASSESSEE PLACED RELIANCE ON T HE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS INDUSTRIAL FINANCE CORPO RATION OF INDIA LTD. [2009] 185 TAXMAN 296 (DEL.). THE LD.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT IN THE SUCCEEDING YEAR, THE GAIN ARISING ON SIMILAR TRANSACTION WAS ASSESSED TO TAX. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE IS RAISED AGAINST THE DISALLOWANCE OF MARK TO MARKE T FOREIGN EXCHANGE LOSS OF RS.28,14,307/-. THE ASSESSEE HAS BOOKED THE SAID L OSS ON ACCOUNT OF REINSTATEMENT OF FORWARD CONTRACT. THE ASSESSING O FFICER HAD TREATED IT TO BE NOTIONAL AND ALSO SPECULATIVE IN NATURE. THE ISSUE STANDS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS INDU STRIAL FINANCE CORPORATION OF INDIA LTD. (SUPRA); FURTHER REVENUES SLP(C).CC NO.10349 OF 2020 AGAINST THIS DECISION WAS DISMISSED BY HONBLE SUPREME COUR T VIDE ORDER DATED 09.07.2020. THE HONBLE BOMBAY HIGH COURT IN PR.CI T VS INTERNATIONAL GOLD COMPANY LTD. TAX APPEAL 1827 OF 2016 ALLOWED MARK TO MARKET LOSS ON REVALUATION OF FORWARD EXCHANGE CONTRACTS AND ALSO HELD THAT CBDT INSTRUCTION NO.3 OF 2010 DATED 23.03.2010 CANNOT BE APPLIED. ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 12 20. FOLLOWING THE SAME PARITY OF REASONING, WE REVE RSE THE ORDERS OF ASSESSING OFFICER IN THIS REGARD AND DIRECT THE ASS ESSING OFFICER TO DELETE THE DISALLOWANCE MADE ON ACCOUNT OF MARK TO MARKET FORE IGN EXCHANGE LOSS. GROUND OF APPEAL NO.12 RAISED BY THE ASSESSEE IS TH US ALLOWED. 21. NOW, COMING TO THE GROUND NO.13 RAISED BY THE A SSESSEE WHICH IS AGAINST THE DISALLOWANCE OF SUBSCRIPTION CHARGES O F RS.10,000/-. THE AMOUNT WAS TREATED AS DONATION BY ASSESSING OFFICER AND DISALLOWED U/S 37(1) OF THE ACT AND THE FINAL ASSESSMENT ORDER WAS PASSED. WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE WHERE THE AMOUNT IS PAI D AS DONATION TO SOCIETY. THE ASSESSEE HAS ENCLOSED THE RECEIPT AND AT BEST THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 80G OF THE ACT. THE ASSESSING OFFICER MAY VERIFY THE SAME AND ALLOW THE CLAIM IN ACCORDANCE WITH LAW. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2020. SD/- SD/- (DR. B.R.R. KUMAR) (SUSHMA CHOWLA) /ACCOUNTANT MEMBER / VICE PRESIDENT / ) DATED : 31 ST JULY, 2020 * AMIT KUMAR * ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 13 *)+),-./0)10.2 COPY OF THE ORDER IS FORWARDED TO : 1. 34) / THE APPELLANT 2. ,534) / THE RESPONDENT 3. ) 6. 7 8) / THE CIT(A) 4. 9)) 6.) / THE PR. CIT 5. 6. ) 0:;),-.- <) )) < ) / DR, ITAT, DELHI ;'=)>)2) GUARD FILE. ) * / BY ORDER , 50.),-. // TRUE COPY // ? @A'B , )) )< ) ASSISTANT REGISTRAR, ITAT, DELHI