CONFIDENCE PETROLEUM INDIA LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 1938/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79121 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S J JOSHI
• Keywords: Business income; Depreciation; Earning of tax free income; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO.2083/M/2012 ( AY: 2008 - 2009 ) ./I.T.A. NO.1938/M/2012 ( AY: 2009 - 2010 ) CONFIDENCE PETROLEUM INDIA LIMITED, B - 13, PRABHU KRUPA HOUSING SOCIETY, NANDA PATKAR MARG, NEAR TELEPHONE EXCHANGE, VILLE PARLE (E), MUMBAI 400057. / VS. DCIT - 8(1), MUMBAI. ./ PAN : AAACD3659C ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI S.J. JOSHI / REVENUE BY : SHRI SANJEEV JAIN, DR / DATE OF HEARING :11 .6.2014 / DATE OF PRONOUNCEMENT :11 .6.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE CIT (A) - 16, MUMBAI DATED 20.01.2012 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 2010. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPH S OF THIS ORDER. 2. FIRSTLY, WE SHALL TAKE UP APPEAL ITA NO.2083/M/2012 FOR THE AY 2008 - 2009, WHICH IS FILED BY THE ASSESSEE ON 29.3.2012. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1 ) THE LD CIT (A) ERRED IN DISALLOWING D EPRECIATION CLAIM AMOUNTING TO RS. 93,75,000/ - ON GOODWILL WHICH WAS IN THE NATURE OF BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. ON AMALGAMATION , AMOUNT PAID IN EXCESS OF NET 2 ASSETS OF AMALGAMATING COMPANY WAS ACCOUNTED FOR AS GOODWILL . THE EXCESS AMOUNT WAS PAID FOR THE RIGHT TO CARRY ON EXISTING RUNNING BUSINESS OF AMALGAMATING COMPANY WITH ALL LICENSES, MANUFACTURING FACILITY AND ESTABLISHED CUSTOMERS. RELIANCE IS PALCED ON FOLLOWING DECISIONS. I) KOTAK FOREX BROKERAGE LTD VS. ACIT (ITA NO.2692/M/2 007) II) KEC INTERNATIONAL VS. ADDL CIT (ITA NO.4420/M/2009) III) CIT VS. HINDUSTAN COCA COLA BEVERAGES (P) LTD [2011] 331 ITR 192 (DEL) IV) B. RAVINDRAN PILLAI VS. CIT [2011] 332 ITR 531 (KER) (2 ) THE LD CIT (A) HAD ERRED IN TAXING THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF TAXING IT UNDER THE HEAD INCOME FROM BUSINESS. 3. AT THE OUTSET, SHRI S.J. JOSHI, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION THAT THERE IS A DELAY OF 5 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION THE AFFIDAVIT DATED 30.03.2014 FILED BY MR. NITIN KHARA, DIRECTOR OF M/S. CONFIDENCE PETROLEUM INDIA LIMITED AND READ OUT THE RELEVANT CONTENTS OF THE SAME WHICH R EAD AS UNDER: 1 ) 2 ) . 3 ) THAT THE EMPLOYEE OF THE ASSESSEE - COMPANY MR. MILIND MAHADIK WAS COMING TO THE OFFICE OF THE TRIBUNAL TO FILE MEMORANDUM OF APPEAL DULY SIGNED BY THE MANAGING DIRECTOR OF THE COMPANY ON 23/3/2012 FROM NAGPUR BY VIDARBHA EXPRES S BUT DUE TO SOME UNAVOIDABLE PERSONAL REASONS HE HAD TO RETURN TO NAGPUR MID WAY FOR SOME URGENT WORK AND AS SUCH HAD NOT ATTAINED THE OFFICE UP TO 27/3/2012, AND THEREFORE, APPEAL COULD NOT BE FILED IN TIME. 4. AFTER HEARING THE LD COUNSEL ON THE ISSUE OF DELAY OF 5 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL AS WELL AS ON PERUSAL OF THE AFFIDAVIT FILED BY THE DIRECTOR OF THE ASSESSEE - COMPANY, WE ARE OF THE OPINION THAT THERE IS A SUFFICIENT AND REASONABLE CAUS E FOR NOT FILING THE APPEAL BEFORE THE ITAT WITHIN THE STIPULATED TIME. CONSIDERING THE SUFFICIENT AND REASONABLE CAUSE AND ALSO THE SMALLNESS OF DELAY OF 5 DAYS IN FILING THE APPEAL, WE CONDONE D THE DELAY AND PROCEED TO DECIDE THE APPEAL ON MERITS. 5. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE FIRST ISSUE RAISED IN GROUND NO.1 RELATES TO THE DISALLOWANCE OF DEPRECIATION OF CLAIM ON GOODWILL. IN THIS REGARD, IT IS THE CASE OF THE ASSESSEE THAT GOODWILL BEING AN INTANGIBLE ASSET IS ENT ITLED TO DEPRECIATION AND RELIED ON VARIOUS DECISIONS MENTIONED IN THE GROUNDS ABOVE. IN ADDITION, HE FILED A PAPER BOOK CONTAINING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE 3 OF CIT VS. SMIFS SECURITIES LTD , 348 ITR 302 (SC). FURTHER, HE MENTI ONED THAT THE SAID JUDGMENT OF THE APEX COURT WAS NOT AVAILABLE TO THE CIT (A) AT THE RELEVANT POINT OF TIME. THEREFORE, THE CIT (A) DID NOT GRANT THE DEPRECIATION ON GOODWILL. SINCE, THE ISSUE OF ALLOWING OF DEPRECIATION ON GOODWILL IS NOW REACHED F INALITY AND IN FAVOUR OF THE ASSESSEE . THEREFORE, THE ORDER OF THE CIT (A) IS REQUIRED TO BE REVERSED. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. WE HAVE ALSO PERUSED THE CITED JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD (SUPRA). ON HEARI NG BOTH THE PARTIES ON THE LIMITED ISSUE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) HAS TO BE REVERSED FOLLOWING THE SAID JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF SMIFS SECURITIES LTD (SUPRA), WHEREIN IT WAS HELD THAT THE GOODWILL CONSTI TUTES AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. CONSEQUENTLY, THE ASSESSEE IS ENTITLED TO DEPRECIATION. ACCORDINGLY, GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 8. IN CONNECTION WITH GROUND NO.2 , WHICH RELATES TO THE TAXING OF THE INTEREST INCOME, LD REPRESENTATIVES OF BOTH THE PARTIES CONCURRED WITH THE FACT THAT THERE ARE DIVERGENT DECISIONS ON T HE ISSUE RAISED IN THIS GROUND I.E., IF THE INTEREST INCOME IS TAXABLE UNDER THE HEAD BUSINESS INCOME OR UNDER THE HEAD INCOME FROM OTHER SOURCES. CONSIDERING THE CONCURRENCE OF BOTH THE PARTIES, WE REMAND THIS ISSUE TO THE FILE OF THE AO FOR ADJUDICATING THE ISSUE AFRESH AFTER CONSIDERING THE VARIOUS DECISIONS AVAILABLE ON THE SUBJECT AND AFTER EXAMI NING THE RELEVANT FACTS OF THE ISSUE. ACCORDINGLY, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4 ITA NO.1938/M/2012 (AY 2009 - 2010) 10. THIS APPEAL FILED BY THE ASSESS EE ON 22.3.2012 IS A GAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 20.1.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 11. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1 ) THE LD CIT (A) ERRED IN DISALLOWING DEPRECIATION CLAIM AMOUNTING TO RS. 70,31,250/ - ON GOODWILL WHICH WAS IN THE NATURE OF BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. ON AMALGAMATION, AMOUNT PAID IN EXCESS OF NET ASSETS OF AMALGAMATING COMPANY WAS AC COUNTED FOR AS GOODWILL . THE EXCESS AMOUNT WAS PAID FOR THE RIGHT TO CARRY ON EXISTING RUNNING BUSINESS OF AMALGAMATING COMPANY WITH ALL LICENSES, MANUFACTURING FACILITY AND ESTABLISHED CUSTOMERS. RELIANCE IS PALCED ON FOLLOWING DECISIONS. I) KOTAK FOREX BROKERAGE LTD VS. ACIT (ITA NO.2692/M/2007) II) KEC INTERNATIONAL VS. ADDL CIT (ITA NO.4420/M/2009) III) CIT VS. HINDUSTAN COCA COLA BEVERAGES (P) LTD [2011] 331 ITR 192 (DEL) IV) B. RAVINDRAN PILLAI VS. CIT [2011] 332 ITR 531 (KER) (2 ) THE LD CIT (A) HAD ERR ED IN DISALLOWING THE EXPENDITURE U/S 14A, AS THERE IS NO DIRECT EXEMPT INCOME AND THE INDIRECT BENEFITS HAVE ALREADY INCREASED BOOK PROFIT WHICH IS ALREADY OFFERED FOR TAX UNDER BUSINESS INCOME. (3) THE LD CIT (A) HAD ERRED IN TAXING THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF TAXING IT UNDER THE HEAD INCOME FROM BUSINESS. 12. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT GROUND NO. 2 RAISED IN THIS APPEAL IS NOT PRESSED. AFTER HEARING THE LD DR, THE SAID GROUND NO.2 IS DISMISSED AS NOT PRESSED . 13. REFERRING TO GROUND NO.1 AND 3 OF THE PRESENT APPEAL, LD COUNSEL MENTIONED THAT BOTH THESE GROUNDS ARE EXACTLY IDENTICAL TO THAT OF THE G ROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09. CONSIDERING THE HOMOLOGY OF THE GROUNDS, WE ARE OF THE OPINION THAT THE DECISION GIVEN BY US WHILE ADJUDICATING THE GROUND NO.1 AND 2 OF APPEAL ITA NO.2080/M/2012 (AY 2008 - 2009) IN THE ABOVE PARAGRAPHS OF THIS ORDER SQUARELY APPLIES TO THE GROUND NOS.1 AND 3 OF THE INSTANT APPEAL TOO. ACCORDINGLY, GROUND NO.1 IS ALLOWED AND GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 5 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED F OR STATISTICAL PUR P OSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2014. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 11 .6 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI