Inox Leisure Ltd., Baroda V. ACIT, Circle-1(1)(2), Baroda

ITA 1924/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5503 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: S N SOPARKARSR
• Keywords: Depreciation; Deemed to accrue or arise in india; Scheme of amalgamation
• Section: 143(3); 115JB; 13; 22; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (THROUGH VIRTUAL COURT) BEFORE: SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEM BER INOX LEISURE LTD., 2 ND FLOOR, ABS TOWERS, OLD PADRA ROAD, VADOARA PAN: AAACI6063J (APPELLANT) VS THE ACIT, CIRCLE-1(1)(2), VADODARA (RESPONDENT) REVENUE BY: SHRI L.P. JAIN, SR. D.R. ASSESSEE BY: SHRI S.N. SOPARKAR, SR . A.R. AND SHRI PARIN SHAH, A.R. DATE OF HEARING : 04-01-2021 DATE OF PRONOUNCEMENT : 27-01-202 1 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THESE TWO APPEALS FILED BY ASSESSEE FOR A.Y. 2013-1 4 & 2014-15, ARISE FROM ORDER OF THE CIT(A)-1, VADODARA DATED 06 -07-2018, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - I, VADODRA, ERRED IN CONFIRMING DISALLOWANCES AND A DDITIONS AND THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER IN RESPECT OF THE FOLLOWING POINTS. HE ERRED IN: ITA NOS. 1924 & 1925/AHD/2018 ASSESSMENT YEAR 2013-14 & 2014-15 I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 2 1. IN RESPECT OF DEPRECIATION ON GOODWILL ARISIN G ON AMALGAMATION-. A) IN CONFIRMING NOT ADJUDICATION AND CONSIDERATI ON APPELLANT'S CLAIM MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR DEPRECIATION ON GOODWIL L ARISING ON AMALGAMATION OF SUBSIDIARY WITH THE APPELLANT COMPANY B) IN CONFIRMING NON ALLOWANCE OF DEDUCTION ON AC COUNT OF DEPRECIATION ON GOODWILL ARISING ON AMALGAMATION OF SUBSIDIARY WITH THE COMPANY. C) IN CONCLUDING THAT THE GROUND RAISED BY THE A PPELLANT IN RESPECT OF DEPRECIATION ON GOODWILL IS NOT AT ALL MAINTAINABLE. D) IN HOLDING THAT THE ACTION OF THE ASSESSING OF FICER IN NOT ALLOWING FRESH CLAIM IS AS PER THE LAW SINCE THE APPELLANT HAD NOT FILED REVISE RETURN OF INCOME & ACCORDINGLY ASSESSE DOES NOT DESERVE ANY RELIEF ON THE ACCOUNT. E) IN CONCLUDING THAT THERE IS NO ERROR OR ILLEG ALITY IN THE ORDER OF THE AO WHICH CAN BE CHALLENGED IN THE APPELLATE PROCEEDINGS. F) IN NOT DIRECTING THE ASSESSING OFFICER TO ALL OW DEPRECIATION ON GOODWILL AS CLAIMED BY THE ASSESSE. 2. IN CONFIRMING THE DISALLOWANCE OF RS. 19,65,3 97/- ON ACCOUNT OF DELAY PAYMENTS OF EMPLOYEE'S CONTRIBUTION. 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME SHOWI NG DEEMED INCOME U/S. 115JB OF RS. 31,08,52,427/- WAS FILED ON 30 TH NOV, 2013. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143( 2) OF THE ACT WAS ISSUED ON 5 TH SEP, 2014. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FINALIZED ON 23 RD MARCH, 2016 AND TOTAL INCOME WAS DETERMINED AT RS. 21,14,65,778/-. THE REMAINING FACTS ARE DISCUSSED WHILE ADJUDICATIN G THE GROUNDS OF APPEAL OF THE ASSESSEE AS UNDER:- GROUND NO. 1 (CLAIM OF DEPRECATION ON GOODWILL) 4. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSM ENT UNDER SECTION 143(3) OF THE ACT ON 23-03-2016. THE ASSESSEE SUBM ITTED BEFORE THE LD. CIT(A) THAT ASSESSING OFFICER HAD NOT AT ALL DISCU SSED ITS CLAIM OF GOODWILL ARISING ON ACCOUNT OF AMALGAMATION OF ITS SUBSIDIAR Y COMPANY IN THE ASSESSMENT ORDER IN SPITE OF THAT FACT THAT ITS CLA IM OF DEPRECIATION ON ACCOUNT OF AMALGAMATION WAS MADE VIDE LETTER DATED 20 TH JANUARY, 2016 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE IMPUGNED CLAI M OF DEPRECIATION ON GOODWILL WAS NOT MADE IN THE RETURN OF INCOME. THE LD. CIT(A) HAS I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 3 REPRODUCED THE SUBMISSION OF THE ASSESSEE VIDE ITS LETTER DATED 22-01-2016 AT PAGE NO. 22 TO 27 OF CIT(A)S ORDER. THE ASSESSEE HAS SUBMITTED THAT UNDER SECTION 391 TO 394 OF THE COMPANIES ACT, 1956, ITS SUBSIDIARY NAMED FAME INDIA LTD WAS AMALGAMATED INTO INOX AS PER HONBLE HIGH COURT OF GUJARAT ORDER DATED 12 TH MARCH, 2013 W.E.F. 1 ST APRIL, 2012. PURSUANT TO THE SCHEME, SHAREHOLDER OF ERSTWHILE FAME WERE ENTITLED TO 5 SH ARES OF INOX FOR EVERY 8 SHARES HELD BY THEM IN FAME. AS PER THE DETAILS EL ABORATED AT PAGE 22 TO 25 IN THE ORDER OF LD. CIT(A), ASSESSEE HAS COMPUTED GOODWILL AMOUNTING TO RS. 56.7 CRORES ARISES ON AMALGAMATION OF FAME GROU P WITH INOX AND CLAIMED DEPRECIATION @ 25% AMOUNTING TO THE AMOUNT OF RS. 14.19 CRORES. THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSE SSEE STATING THAT THE ISSUE RAISED BY THE ASSESSEE REQUIRED A LOT OF INVESTIGAT ION AND VERIFICATION OF THE FACT AND RATHER REVISION OF ITS BOOKS OF ACCOUNT IN CLUDING THE BALANCE SHEET AND P & L A/C WHICH TO HIS UNDERSTANDING IS NOT PE RMITTED UNDER THE EXISTING LAW. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL FILED COPIES OF DOCUMENTS/DETAILS/FURNISHED BEFORE THE LOWER AUTHORITIES INCLUDING COPIES OF SUBMISSION DATED 20 TH JAN, 2016 IN RESPECT OF CLAIM OF GOODWILL ON AMALGAMATION OF ITS SISTER CONCERN ALON G WITH COPIES OF COMPOSITE SCHEME OF AMALGAMATION FILED WITH HIGH CO URT OF GUJARAT. THE LD. COUNSEL CONTENDED THAT IN SPITE OF FILING RELEV ANT DETAIL IN SUPPORT OF ITS CLAIM OF DEPRECIATION ON GOODWILL TO THE AMOUNT OF RS. 14.19 CRORES, THE ASSESSING OFFICER HAS NOT CONSIDERED ITS CLAIM WITH OUT ANY REASON AT THE TIME OF ASSESSMENT PROCEEDINGS. THE LD. COUNSEL ALSO SU BMITTED THAT LD. CIT(A) HAS NOT ADJUDICATED THE CLAIM OF THE ASSESSEE ON ME RIT. THE LD. COUNSEL HAS I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 4 PLACED RELIANCE ON THE DECISION OF HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF PRINCIPAL CIT-4 VS. ZYDUS WELLNESS LTD. (20 17) 87 TAXMAN.COM 82 (GUJ), CIT VS. MITESH IMPEX (2014) 46 TAXMAN.COM 30 (GUJ), UTI BANK LTD. (T.A. NO. 382 TO 384 OF 2016 AND IN THE CASE O F PRUTHAVI BROKERS & SHAREHOLDERS 349 ITR 346 (BOMBAY HIGH COURT), URMI N MARKETING (P.) LTD. 122 TAXMANN.COM ITAT, AHMEDABAD. THE LD. D.R . HAS PLACED RELIANCE ON THE ORDER OF LD. CIT(A). 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS CLAIMED DEPRECIATION ON GOODWILL ARISED ON AMALGAMATION OF FAME INDIA LTD. INTO INOX LEISURE LTD. THE ASSESSING OFFICER HAS NOT MADE ANY REFERENCE OR DISCUSSION TO THE IMPUGNED CLAIM OF DEPRECIATION ON GOODWILL IN SPITE OF THE FACT THAT THE ASSESSEE HAS MADE DETAILED SUBMISSION DURING THE CO URSE OF ASSESSMENT VIDE LETTER DATED 20 TH 2016 REPRODUCED AS UNDER:- 'THE CLAIM FOR DEPRECIATION ON GOODWILL ARISING ON AMALGAMATION WAS NOT MADE IN THE RETURN OF INCOME FILED BY THE APPELLANT COMPANY. HOWEVER, THE CLAIM FOR THE SAME WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND DETAILED SUBMI SSIONS IN THIS REGARD WERE MADE BY THE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 20:1.2016 AS UNDER: 20 TH JANUARY 2016 ASST COMMISSIONER OF INCOME 'LAX - CIR.L(2), ROOM 1 03, AAYKAR BHAVAN, RACE COURSE, BARODA 390007 SIR, PAN NO. AAACI6063J A.Y.2013-14 SUB: CLAIM OF GOODWILL IN RESPECT OF AMALGAMATION O F FAME INDIA LIMITED ALONGWITH ITS SUBSIDIARIES_INTO INOX LEISURE LIMITED ASSESSMENT OF CAPTIONED ASSESSMENT YEAR IN UNDER PR OGRESS AND WE REQUEST YOU TO ALLOW OUR CLAIM OF GOODWILL ARISING ON AMALGAMATION AND DEPRECIATIO N THEREON BASED ON FOLLOWING FACTS: FACTS: 1) INOX LEISURP LTD. ('INOX') HAVING ITS REG ISTERED OFFICE AT ABS TOWERS, OLD PADRA ROAD, VADODARA 390007, GUJARAT, IS A PUBLIC LIMITED LISTE D COMPANY INCORPORATED UNDER THE COMPANIES ACT, 195G, IT IS A SUBSIDIARY OF GUJARAT FLUOROCHEM ICALS LIMITED ('GFL'). 2) ERSTWHILE FAME INDIA LTD ('TAME') WAS A PUBL IC LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT CITI MALL, 2ND FLOOR, OSHIWARA LINK ROAD, AND ANDHERI (WEST), MUMBAI 400053. 3) BOTH INOX AND FAME IS/WAS ENGAGED IN THE BUS INESS OF EXHIBITING CINEMATOGRAPHIC FILMS TO ITS PATRONS IN MULTIPLE SCREEN CINEMA THEATRE COMPL EXES ('MULTIPLEX') AND SINGLE SCREEN CINEMA I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 5 THEATRES (''THEATRE') LOCATED IN VARIOUS CITIES IN INDIA, UNDER THE BRAND NAMES OF INOX AND FAME RESPECTIVELY. IN ADDITION TO EXHIBITION OF CINEMATO GRAPHIC FILMS, THEY ALSO SELL SNACKS, BEVERAGES AND OTHER REFRESHMENTS TO PATRONS IN THESE MULTIPLE XES AND THEATERS. THUS BOTH THE COMPANIES ARE ENGAGED IN SAME BUSINESS. 4) IN FEBRUARY 2010, INOX ACQUIRED 1,75,65,28 8 SHARES (THROUGH TWO SEPARATE BLOCK DEALS) OF FAME AT COST OF RS. 85,02,17,781 INCLUDING EXPENSES CAPITALIZED. 5) AFTER ACQUISITION OF AFORESAID SHARES, AS RE QUIRED UNDER SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOV ERS) REGULATIONS, 1997, INOX MADE AN OPEN OFFER TO THE SHAREHOLDERS OF FAME AND ACQUIRED 1,07 5 FURTHER EQUITY SHARES OF FAME IN THE OPEN OFFER IN DURING THE YEAR 2010-11 AT COST OF P,S. 54 ,825. 6) FAME BECAME A SUBSIDIARY OF INOX ON 6TH JA NUARY 2011 VIZ. ON COMPLETION OF OPEN OFFER. 7) SUBSEQUENTLY IN THE FINANCIAL YEAR 2011-12 , INOX ACQUIRED FURTHER 2,02,12,212 SHARES OF FAME BY WAY SUBSCRIPTION TO RIGHT'S ISSUE OF FAME A T COST OF RS. 88,93,37,328. 8) INOX ALSO PURCHASED 6,59,737 EQUITY SHARES OF FAME FROM OPEN MARKET DURING THE FINANCIAL YEAR 2011-12, AND THEN ANOTHER 6,52,200 E QUITY SHARES OF FAME FROM OPEN MARKET IN THE FINANCIAL YEAR 2012-13 TOTAL COST RS. 9,52,34,7 71. 9) IN THIS MANNER, INOX ACQUIRED A TOTAL OF 3 ,90,90,512 EQUITY SHARES OF FAME FOR A TOTAL COST OF RS. 183.48 CRORES 10) A SUMMARY OF TOTAL COST OF INVESTMENT IN 3, 90,90,512 EQUITY SHARES OF FAME IS ENCLOSED AS ANNEXURE 1. 11) SUBSEQUENTLY UNDER A COMPOSITE S CHEME OF AMALGAMATION (SCHEME) (ANNEXURE 2) UNDER SECTION 391 TO 394 OF THE COMPANIES ACT, 1956 , FAME, ALONG WITH ITS SUBSIDIARIES (FAME GROUP), WAS AMALGAMATED INTO INOX AS PER HON'BLE HI GH COURT OF GUJARAT ORDER DATED 12 MARCH 2013 READ WITH ORDER DATED 20 MARCH 2013 (ANN EXURE 3) AND BOMBAY HIGH COURT ORDER DATED 10 MAY 2013 (ANNEXURE 4) WITH AN APPOINTED DA TE BEING 1 APRIL 2012 IS WITH EFFECT FROM L ST APRIL 2012.(COPY OF THE ORDERS ALONGWITH COPY OF TH E SCHEME ARE ENCLOSED) 12) ACCORDINGLY, ALL THE MOVABLE AND IMMOVABLE PRO PERTIES INCLUDING PLANT AND MACHINERY, EQUIPMENTS, FURNITURE, FIXTURES, VEHICLES, STOCKS A ND INVENTORY, LEASEHOLD ASSETS AND OTHER PROPERTIES, ETC. AND ALL THE DEBTS, LIABILITIES, DU TIES AND OBLIGATIONS INCLUDING CONTINGENT LIABILITI ES OF THE TRANSFEROR COMPANIES, AS ON THE APPOINTED DA TE VESTED IN THE COMPANY WITH EFFECT FROM 1 APRIL, 2012 (THE APPOINTED DATE). ACCORDINGLY A SUM MARY OF GROSS ASSETS AND LIABILITIES TAKEN OVER IS ENCLOSED AS ANNEXURE 5. 13) PURSUANT TO THE SCHEME, SHAREHOLDERS OF ER STWHILE FAME WERE ENTITLED TO 5 SHARES OF INOX FOR EVERY 8 SHARES HELD BY THEM IN FAME (PLEASE REF ER CLAUSE 8.3 OF THE SCHEME). 14) AS PER THE SCHEME OF AMALGAMATION SHARES WE RE ALSO ISSUED TO INOX BENEFIT TRUST('IBT') TOWARDS SHARES ALREADY HELD BY INOX IN FAME INDIA L IMITED, THESE SHARES ARE HELD BY THE TRUST FOR THE BENEFIT OF INOX.(PLEASE REFER TO CLAUSE NO 8.1 TO THE SCHEME) 15) THE AGGREGATE CONSIDERATION PAID, ON THE BAS IS OF ACTUAL PURCHASE PRICE PAID BY INOX FOR ACQUISITION OF FAME SHARES OVER THE PERIOD AND FARE VALUE OF SHARES ISSUED BY INOX TO OUTSIDE SHAREHOLDERS OF FAME (EXCLUDING FACE VALUE OF SHARE S ISSUED TO IBT AS STATED ABOVE) OVER THE NET ASSETS RECEIVED ON AMALGAMATION OF FAME GROUP AS ON 1.4.2012 BY INOX RESULTED IN EXCESS AMOUNT PAID. THE WORKING IS AS UNDER ' ' SR. NO PARTICULARS RS. RS. RS. 1 A GROSS ASSETS ( DETAILS IN ANNEXURE 5 ) 2,131,371,294 B LESS: LOANS AND OTHER LIABILITIES DETAILS IN ANNEXURE 5) 518,323,331 C NET ASSETS TAKEN OVER ( 1A -1B) 1,613,017,963 I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 6 2 LESS: COST OF INVESTMENT IN 3,90,90,512 EQU ITY SNARES OF FAME INDIA LID. ( DETAILS IN ANNEXURE 1 ) 1,334,844,705 3 SUB -TOTAL (3)- (1 - 2 ) DEBIT 721,796,742 4 ADD: FACE VALUE OF SHARES ISSUED TO THE SHAREHOLDERS OF ERSTWHILE FAME INDIA LTD, PURSUANT TO THE SCHEME OF AMALGAMATION A TOTAL SHARES ISSUED (NO'S) 34,562,206 B LESS: ISSUED TO INOX BENEFIT TRUST ( NO'S. ) 24,131,570 C SHARES ISSUED TO OUTSIDE SHAREHOLDERS 10,130,636 FACE VALUE OF SHARES ISSUE D TO OUTSIDE SHAREHOLDERS - 4C TO RS. 10/- 101,306,360 5 EXCESS OF COST OF ACQUIRED SHARES AND FACE VALUE OF SH ARES ISSUED TO OUTSIDE SHARP HOLDER OVER NET ASSETS RECEIVED IN AMALGAMATION - (5) = (4-3) 323,103,102 6 DEPRECIATION ON GOO DWILL ALLOWABLE UNDER INCOME TAX ACT. 25% 80,775,776 RECONCILIATION WITH THE FINANCIALS TOTAL GOODWILL AS ABOVE 323,103,105 LESS: COST OF FAME SHARES, CARRIED IN THE BALANCE SHEET 1,834,841,705 CREDIT 1,511,741,603 RESERVES AND SURPLUS OF FAME INDIA - TAKEN UNDER RESPECTIVE HEAD OF ACCOUNTS 1,231,150,335 LESS: FACE VALUE OF SHARES ISSUED TO INOX CREDIT 280,591,268 BENEFIT TRUST 344,315,700 AMALGAMATION RESERVE AS PER FINANCIAL STATEMENTS 36,275,568 ON THE BASIS OF ABOVE WORKING, IT WILL BE OBSERVED THAT THERE ARISES, ON THE BASIS OF EXCESS CONSIDERATION, A GOODWILL OF RS 3,231.U3 LACS ON AM ALGAMATION OF FAME AND ITS SUBSIDIARIES WITH INOX ON 1.04.2012. THE TREATMENT IN BOOKS OF ACCOUNTS INCLUDING THE DE TAILS OF AMALGAMATION SCHEME ARE AS PER NOTE 30 IN NOTES TO FINANCIAL STATEMENTS FOR THE YEAR EN DING 31 ST MARCH 2013. I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 7 THE NET SURPLUS CREDITED TO AMALGAMATION RESERVE IN BOOKS IS CONSIDERING THE FACE VALUE OF SHARES ISSUED TO IBT AND POSITION OF RESERVES AND SURPLUS IN THE BOOKS OF FAME GROUP. THE SHARES ISSUED TO IBT ARE IN THE FIELD OF CAPITAL ACCOUNT. THIS AC COUNTING TREATMENT IN THE BOOKS OF ACCOUNTS IS ON THE BASIS OF 'POOLING OF INTEREST' METHOD AS PRESCR IBED IN ACCOUNTING STANDARD (AS 14} NOTIFIED UNDER THE COMPANIES(ACCOUNTING STANDARDS) RULES, 20 06. 16) HONOURABLE SUPREME COURT OF INDIA IN THE CA SE OF SMIFS SECURITIES LIMITED [2012] 24 TAXMANN.COM 222 (SC) HELD THAT GOODWILL IN THE FORM OF DIFFERENCE BETWEEN CONSIDERATION PAID AND THE COST OF NET ASSETS ACQUIRED FROM THE AMALGA MATING COMPANY WAS AN ASSET UNDER EXPLANATION 3(B) OF SECTION 32(1) OF THE INCOME TAX ACT, AND THEREFORE ELIGIBLE FOR DEPRECIATION UNDER THE ACT, 'SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIAT ION -ALLOWANCE/RATE OF -ASSESSMENT YEAR 2003-04 - WHETHER 'GOODWILL' IS AN ASSET UNDER EXPL ANATION 3(B) TO SECTION 32(1) - HELD, YES - DURING RELEVANT ASSESSMENT YEAR, ONE 'Y' LTD. AMALG AMATED WITH ASSESSEE-COMPANY - ACCORDING TO ASSESSES, EXCESS CONSIDERATION PAID BY IT OVER VALU E OF NET ASSETS ACQUIRED OF 'Y' LTD. AMOUNTED TO GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED - AUTHORITIES BELOW RECUIDED A FINDING THAT ASSETS AND LIABILITIES OF 'Y' LTD. WERE TRANSFERRED LA ASSESSEE FOR A CONSIDERATION; THAT DIFFERENCE BETWEEN COST OF AN ASSET AND AMOUNT PAID CONSTITUTE D GOODWILL AND THAT ASSESSEE COMPANY IN PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGH T IN FORM OF GOODWILL BECAUSE OF WHICH MARKET WORTH OF ASSESSEE-COMPANY STOOD INCREASED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - WHETHER SINCE REVENUE COULD NOT REBUT FACTUAL FINDI NGS RECORDED BY AUTHORITIES BELOW, IMPUGNED ORDER PASSED BY THEM WAS TO BE UPHELD - HELD, YES [PARA 8] [IN FAVOUR OF ASSESSES]' 17) ACCORDINGLY GOODWILL AMOUNTING TO RS. 32,3 1,03,102/-ARISES ON AMALGAMATION OF FAME GROUP WITH INOX ON THE BASIS OF THE ACTUAL COST INC URRED AND CONSIDERATION PAID AS ABOVE. 18) IT WILL BE APPRECIATED THAT THE ABOVE WORKI NG OF GOODWILL IS ON THE CONSERVATIVE BASIS I.E, EXCLUDING FACE VALUE OF SHARES ISSUED TO I8T IN LIE U OF SHARES HELD BY INOX IN ERSTWHILE FAME INDIA LIMITED. HOWEVER, THESE SHARES KNOWN AS 'TREASURY S HARES' IN ACCOUNTING PARLANCE ARE IN CAPITAL FIELD AND WHEN SOLD TO OUTSIDERS, PROFIT OR INSS IS IN THE CAPITAL FIELD. IN SHORT, BY CREDITING TREAS URY SHARES FRESH SHARES ARE NOT REQUIRED TO BE ISSUED B UT EXISTING SHARES ARE TRANSFERRED. HOWEVER THE EFFECT REMAINS THE SAME THAT IS IN BOTH THE CASES C ONSIDERATION RECEIVED TOWARDS TRANSFER OF TREASURY SHARES OR ISSUE OF FRESH EQUITY SHARES THE PROCEEDS ARE ON ACCOUNT OF CAPITAL ACCOUNT. THEREFORE, IN FACT, THE ABOVE GOODWILL IS REQUIRED TO BE INCREASED BY THE FACE VALUE OF THE SHARES OF RS.24,43,15,700 ISSUED TO IST. SR. N 3 PARTICULARS RS RS 1 COST OF INVESTMENT IN 3,90,90,512 EQUITY SHARES OF FAME INDIA LTD AS PER BOOKS OF INOX. 1,834,344,705 2 A FACE VALUE OF SHARES ISSUED TO THE OUTSIDE SHAREHOLDERS OF ERSTWHILE FAME INDIA LTD. PURSUANT TO THE SCHEME OF AMALGAMATION. 101,306,360 B FACE VALUE OF SHARPS ISSUED TO INOX BENEFIT TRUST FOR THE BENEFIT OF INOX IN TERMS OF SCHEME OF AMALGAMATION. 244,315,700. I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 8 TOTAL - ( 2A+ 2B ) 345,622,060 3 TOTAL (3) = ( 1+2 ) 2,180,466,765 4 LESS; NET ASSETS RECEIVED FROM FAM E GROUP ON AMALGAMATION ( DETAILS IN ANNEXURE 5 ) 1,013,047,963 5 EXCESS OF COST OF ACQUIRED SHARES AND FACE VALUE OF SHARES ISSUED TO OUTSIDE SHAREHOLDER OVER NET ASSETS RECEIVED IN AMALGAMATION. ( 5) - ( 3-4) 567,418,802 6 DEPRECIATION ON GO ODWILL ALLOWABLE UNDER INCOME TAX ACT. (6) = 5 X 25% 25% 141,854,701 THEREFORE ON THIS BASIS GOODWILL AMOUNTING TO RS 56 .74 CRORES ARISES ON AMALGAMATION OF FAME GROUP WITH INOX AND HENCE WE REQUEST YOU TO ALLOW D EPRECIATION THEREON @ 25% AMOUNTING TO RS 14.19 CRORES. WE SHALL BE PLEASED TO FURNISH ANY FURTHER INFORMAT ION REQUIRED IN THIS CONNECTION. THANKING YOU, YOURS TRULY. FOR INOX LEISURE LIMITED UPEN SHAH CHIEF FINANCE OFFICER A COPY OF THE AFORESAID SUBMISSIONS, ALONGWITH ANNE XURES REFERRED TO IN THE SAID SUBMISSIONS, ARE ATTACHED HEREWITH AS ANNEXURE 15. THE ASSESSING OFFICER HAS NOT DEALT WITH THIS ISSUE IN THE ASSESSMENT ORDER. IN THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICE R, WE HAVE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (348 IIP, 302) WHEREIN THE SUPREME COURT HAS HELD THAT THAT GOODWILL IN THE FORM OF DIFFERENCE B ETWEEN CONSIDERATION PAID AND THE COST OF NET ASSETS ACQUIRED FROM THE AMALGAMATING COMPANY WAS A N ASSET UNDER EXPLANATION 3(B) OF SECTION 32(1) OF THE INCOME TAX ACT, AND THEREFORE ELIGIBLE FOR DEPRECIATION UNDER THE ACT. HEADNOTE: SECTION 32 OF THE INCOME-TAX ACT, 1961 -D EPRECIATION - ALLOWANCE/RATE OF -ASSESSMENT YEAR 2003-04 -WHETHER 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) - HELD, YES - DURING RELEVANT ASSESSMENT YEAR, ONE 'Y' LTD. AMALG AMATED WITH ASSESSEE-COMPANY - ACCORDING TO ASSESSES, EXCESS CONSIDERATION PAID BY IT OVER VALU E OF NET ASSETS ACQUIRED OF 'Y 1 LTD. AMOUNTED TO GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED - AUTHORITIES BELOW RECORDED A FINDING THAT ASSETS AND LIABILITIES OF 'Y 1 LTD. WERE TRANSFERRED TO ASSESSEE FOR A CONSIDERAT ION; THAT DIFFERENCE BETWEEN COST OF AN ASSET AND AMOUNT PAID CONSTITUTE D GOODWILL AND THAT ASSESSEE COMPANY IN PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGH T IN FORM OF GOODWILL BECAUSE OF WHICH MARKET WORTH OF ASSESSEE-COMPANY STOOD INCREASED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 9 WHETHER SINCE REVENUE COULD NOT REBUT TACTUAL FINDI NGS RECORDED BY AUTHORITIES BELOW, IMPUGNED ORDER PASSED BY THEM WAS TO BE UPHELD - HELD, YES [ PARA 8] [IN FAVOUR OF ASSESSEE] A COPY OF THE ABOVE DECISION IS AS PER ANNEXURE 16. NOW THE JURISDICTIONAL GUJARAT HIGH COURT IN THE CA SE OF ZYDUS WELLNESS LTD. HAS ALSO DECIDED SIMILAR ISSUE. THE GUJARAT HIGH COURT HAS HELD AS U NDER: A) THE ISSUE OF THE TENABILITY OF A CLAIM THOUGH NO T RAISED IN THE ORIGINAL RETURN IS EXAMINED BY THE COURTS IN VARIOUS DECISIONS. THE GUJARAT HIGH COURT IN CASE OF MITESH IMPEX REFERRED TO AND RELIED ON SEVERAL DECISIONS OF THE SUPREME COURT AN D HIGH COURTS INCLUDING THE DECISION OF BOMBAY HIGH COURT IN CASE OF PRUTHVI BROKERS & SHAR EHOLDERS (P.) LTD. AND OBSERVED THAT IF A CLAIM THOUGH AVAILABLE IN LAW IS NOT MADE EITHER IN ADVERTENTLY OR ON ACCOUNT OF ERRONEOUS BELIEF OF COMPLEX LEGAL POSITION, SUCH CLAIM CANNOT BE SHUT O UT FOR ALL TIMES TO COME MERELY BECAUSE IT IS RAISED FOR THE FIRST TIME BEFORE THE APPELLATE AUTH ORITY WITHOUT RESORTING TO REVISING THE RETURN BEFORE THE AO B) WITH RESPECT TO THE CLAIM OF DEPRECIATION, THE D ECISION OF SUPREME COURT IN CASE OF SMIFS SECURITIES LTD. IS APPLICABLE. THERE IS NO MATERIAL PROVIDED BY THE AO TO HOLD THAT THE CLAIM OF DEPRECIATION WAS FICTITIOUS. IF THE HIGH COURT READ HIS ENTIRE EXPRESSION IN THIS RESPECT, THE' AO SEEMS TO BE SUGGESTING THAT BEING AN INTANGIBLE ASS ET ACQUISITION THEREOF WOULD NOT QUALIFY FOR DEPRECIATION. IF THAT BE SO, THE VIEW OF THE AO WAS OPPOSED TO THE DECISION OF THE SUPREME COURT IN CASE OF SMIFS SECURITIES LTD, ON THE OTHER HAND, IF THE OBSERVATIONS OF THE AO LDN BE SEEN AS HIS FINDINGS THAT THE CLAIM ITSELF WAS BASELESS, THERE WDS NO DISCUSSION OR REFERENCE TO ANY MATERIAL TO ENABLE HIM TO COME TO SUCH A CONCLUSION A COPY OF THE ABOVE DECISION IS AS PER ANNEXURE 17. FURTHER COPY OF ORDER OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF DCIT (OSD) V. ZYDUS WELLNESS LTD, IS ATTACHED AS ANNEXURE 18. IN VIEW OF ABOVE SUBMISSION, WE REQUEST YOU TO KIND LY DIRECT THE A.O. TO ALLOW DEPRECIATION ON GOODWILL ARISING FROM AMALGAMATION.' WITHOUT SPECIFICALLY CONSIDERING THE DETAILED SUBMI SSION OF THE ASSESSEE, THE LD. CIT(A) HAS DISMISSED THE CLAIM AFTER TAKING PRE SUMPTUOUS VIEW THAT AS PER HIS UNDERSTATING THE CLAIM OF DEPRECIATION ON G OODWILL WAS NOT PERMITTED UNDER THE EXISTING LAW. IT IS OBSERVED THAT LD. C IT(A) HAS NOT MADE ANY DISCUSSION OR REFERENCE TO THE MATERIAL FURNISHED B Y THE ASSESSEE IN SUPPORT OF ITS CLAIM OF GOODWILL ARISED ON ACCOUNT OF AMALG AMATION OF ERSTWHILE FAME INDIA LTD. THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF PR. CIT VS. ZYDUS WELLNESS LTD HELD THAT IN VIEW OF RATIO L AID DOWN BY HONBLE SUPREME COURT IN CIT VS. SMITH SECURITIES LTD. (201 2) 348 ITR 302 THAT ASSESSEE WAS TO BE ALLOWED DEPRECATION ON GOODWILL. IN THE CASE OF PR. CIT VS. ZYDUS WELLNESS LTD. (2017) 87 TAXMANN.COM 82 (G UJ), THE ASSESSEE HAD NOT RAISED A CLAIM HOWEVER DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSEE PRESENTED A REVISED COMPUTATION WHICH INCL UDED THE ASSESSEES I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 10 CLAIM OF DEPRECIATION OF RS. 7.19 CRORES ON THE GOO DWILL EXPANDED AT THE TIME OF AMALGAMATION OF THE COMPANIES. THE ASSESSI NG OFFICER HAS DISALLOWED THE CLAIM ON TWO GROUNDS FIRSTLY THAT TH E CLAIM WAS NOT MADE IN THE ORIGINAL RETURN NOR DID THE ASSESSEE FILE THE R EVISED RETURN. THE JURISDICTIONAL HIGH COURT HAS ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (2012) 24 TAXMANN.COM 222 (SC). T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MITESH IMPEX (201 4) 46 TAXMANN.COM 30 (GUJ) HAS HELD AT PARA 39 THAT IF A CLAIM THOUGH AV AILABLE IN LAW IS NOT MADE EITHER INADVERTENTLY OR ON ACCOUNT OF ERRONEOUS BEL IEF ON COMPLEX LEGAL POSITION, SUCH CLAIM CANNOT BE SHUT FOR ALL TIME TO COME MERELY BECAUSE IT IS RAISED FOR THE FIRST TIME BEFORE THE APPELLATE AUTH ORITY WITHOUT RESORTING TO REVISING THE RETURN BEFORE THE ASSESSING OFFICER. SIMILARLY, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. UTI B ANK LTD., T.A. NOS. 382 TO 384 OF 2016 DATED 13-06-2016 AFTER REFERRING THE DECISION OF MITESH IMPEX HAS RECOGNIZED THE POWER OF THE APPELLATE CO MMISSIONER TO ENTERTAIN A NEW CLAIM FOR THE FIRST TIME THOUGH NOT MADE BEFO RE THE ASSESSING OFFICER AND THE INTENTION OF THE REVENUE WOULD BE TO TAX RE AL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS GIVEN A COMPLETE DETAIL ALONG WITH SUPPORTING DOCUMENTS DEMONSTRATING THAT GOODWILL WAS ARISED ON ACCOUNT OF AMALGAMATION OF COMPANIES, HOWEVER, THE ASSESSING OFFICER HAS NOT MADE ANY DISCUSSION TO THE CLAIM OF THE ASSESSE E. AT THE APPELLATE STAGE, THE LD. CIT(A) HAS HELD IN A UNWARRANTED MANNER THA T THE CLAIM OF THE ASSESSEE IS NOT PERMITTED UNDER THE EXISTING LAW ON THE PRETEXT THAT THE ISSUE RAISED REQUIRES INVESTIGATION AND VERIFICATION. WE CONSIDER THAT THE DECISION OF THE LD. CIT(A) IS UNJUSTIFIED AND HE HAD NOT MAD E ANY DISCUSSION TO THE I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 11 LEGAL FINDINGS AND NOT SUBSTANTIATED HIS DECISION W ITH ANY MATERIAL TO COME TO THE CONCLUSION. AS PER LAW IT IS REQUIRED TO CAR RY OUT THE REQUIRED INVESTIGATION AND VERIFICATION OF THE FACTS TO TAX THE REAL INCOME. IN THE LIGHT OF THE ABOVE FACTS AND JUDICIAL FINDINGS, WE DIRECT THE LD. CIT(A) TO CONSIDER THE CLAIM OF THE ASSESSEE ON MERIT AFTER VERIFICATI ON/EXAMINATION OF THE MATERIAL TO BE PRODUCED BY THE ASSESSEE WITH REFERE NCE TO CLAIM OF GOODWILL ARSIED ON ACCOUNT OF AMALGAMATION OF COMPANIES. TH EREFORE, WE RESTORE THIS ISSUE TO THE FILE OF LD. CIT(A) FOR ADJUDICATING TH E IMPUGNED ISSUE OF CLAIM OF DEPRECIATION ON GOODWILL AFRESH ON MERIT AFTER E XAMINATION AS PER THE DIRECTION LAID DOWN BY THE HONBLE JURISDICTIONAL H IGH COURT OF GUJARAT IN THE DECISION OF ZYDUS WELLNESS LTD. SUPRA. ACCORDI NGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 2 (DISALLOWANCE OF RS. 19,65,397/- ON AC COUNT OF DELAY PAYMENT OF EMPLOYEE CONTRIBUTION) 7. THE ASSESSEE HAS DISALLOWED THE CLAIM OF EMPL OYEES CONTRIBUTION TOWARDS PF & ESIC FOR NOT CREDITING THE AMOUNT ON O R BEFORE DUE DATE AS PRESCRIBED U/S. 36(1)(VA) AFTER FOLLOWING THE HONB LE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. GUJARAT STA TE ROAD TRANSPORT CORPORATION. THE LD. CIT(A) HAS DISMISSED THE APPE AL OF THE ASSESSEE. 8. HEARD BOTH THE SIDES AND PERUSED THE MATERIA L ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS BROUGHT TO OUR NOTICE THAT HONBLE JURISDICTIONAL HIGH COURT OF GU JARAT IN THE CASE OF CIT VS. AMOLI ORGANICS P. LTD. (2014) 41 TAXMANN.COM 49 (GUJ) HELD THAT ASSESSEE WAS ENTITLED TO MAKE PAYMENT WITHIN GRACE PERIOD UNDER THE I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 12 PROVIDENT FUND ACT AND IF WITHIN THAT GRACE PERIOD EMPLOYEES CONTRIBUTION HAVE BEEN DEPOSITED BY THE ASSESSEE, IT CANNOT BE S AID THAT ASSESSEE HAS NOT DEPOSITED THE AMOUNT WITHIN DUE DATE PRESCRIBED UND ER THE PROVIDENT FUND ACT. FOLLOWING THE DECISION OF HONBLE GUJARAT HIG H COURT AS CITED SUPRA, WE RESTORE THIS ISSUE TO THE FILE OF CIT(A) FOR DEC IDING AFRESH AFTER EXAMINATION OF THE CLAIM OF ASSESSEE THAT AMOUNT WA S DEPOSITED WITHIN THE GRACE PERIOD AS PROVIDED IN THE PROVIDENT FUND ACT. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO ALLOWED FOR STATISTI CAL PURPOSES. ITA NO. 1925/AHD/2018 A.Y. 2014-15 9. AS THE FACTS AND ISSUE INVOLVED IN GROUNDS OF AP PEAL VIDE ITA NO. 1924/AHD/2018 ASSESSMENT YEAR 2013-14 ARE SIMILAR A S IN ITA NO. 1925/AHD/2018 ASSESSMENT YEAR 2014-15 THEREFORE AFTER APPLYING THE DECISION ADJUDICATED VIDE ITA NO. 1924 /AHD/2018 AS SUPRA IN THIS ORDER, THIS APPEAL OF THE ASSESSEE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27-01-2021 SD/- SD/- (RAJPAL YADAV) (AMARJIT SINGH) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD : DATED 27/01/2021 I.T.A NOS. 1924 & 1925 /AHD/2018 A.Y. 2013-14 & 2 014-15 PAGE NO INOX LEISURE LTD. VS. ACIT 13 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,