Sunij Pharma Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-8(2), Ahmedabad

ITA 2046/AHD/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1192 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS USHA SHROLE
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Valuation report
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO. 2046/AHD/2011 ASST. YEAR: 2008-09 SUNIJ PHARMA PVT. LTD., C/O VINOD & NARENDRA, 101/102, SHAILY, NR. OLD GUJ HIGH COURT, NAGRANGPURA, AHMEDABAD VS. INCOME-TAX OFFICER, WARD 8(2), AHMEDABAD. APPELLANT RESPONDENT AAFCS 2899M APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY MRS.USHA SHROLE, SR.DR DATE OF HEARING: 27/11/2015 DATE OF PRONOUNCEMENT: 03/12/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A) XIV, AHMEDABAD DATED 6.7.2011 IN APPEAL NO.C IT(A) XIV/WD.8(2)/171/2010-11 FOR ASST. YEAR 2008-09. ASS ESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON 27 TH DECEMBER, 2010. 2. GROUNDS OF APPEAL ARE NOT IN CONSONANCE WITH RUL E 8 OF INCOME- TAX APPELLATE TRIBUNAL RULES, 1963, AS THEY ARE DES CRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCES OF THE ASSESSEE ARE TWO FOLDS (A) DISALLOWANCE OF REMUNERATION PAID TO DIRECTOR AT ITA NO. 2046/AHD/2011 ASST. YEAR 2008-09 2 RS.6,96,660/- UPHELD BY LD. CIT(A) AND (B) DISALLOW ANCE OF DEPRECIATION OF GOOD-WILL AT RS.4,33,710/- CONFIRME D BY LD. CIT(A), WHEREAS ITO DISALLOWED RS.3,98,114/-. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPA NY IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF MEDICINES/PHARMACEUTICAL PRODUCTS. IT FILED ITS RET URN OF INCOME ON 29.9.2008 FOR ASST. YEAR 2008-09 DECLARING TOTAL IN COME AT RS.1,54,72,370/-. ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISS UED ON 8/9/2009 AND WAS DULY SERVED ON ASSESSEE ON 14/9/2009. ASSES SING OFFICER MADE ADDITION OF RS.13,56,515/- OUT OF WHICH RS.6,9 6,660/- WAS ON ACCOUNT OF DISALLOWANCE OF DIRECTORS REMUNERATION, RS.3,98,114/- WAS ON ACCOUNT OF DEPRECIATION ON GOODWILL AND RS.2,61, 741/- AS ADDITION U/S 41(1) OF THE ACT AND ASSESSEE WAS ASSESSED AT R S.16,828,890/-. 4. ON APPEAL, LD. CIT(A) SUSTAINED THE ADDITION FOR DISALLOWANCE OF DIRECTORS REMUNERATION AT RS. 6,96,660/- & DISALLO WANCE ON ACCOUNT OF DEPRECIATION ON GOODWILL AT RS. 3,98,114/- AND D ELETED THE ADDITION U/S 41(1) OF THE ACT. AGGRIEVED, THE ASSESSEE IS NO W IN APPEAL BEFORE THE TRIBUNAL. 5. FIRST WE TAKE UP GROUND NO.1 FOR DISALLOWANCE OF DIRECTORS REMUNERATION AT RS.6,96,660/-. 6. THE LD. AR OF THE ASSESSEE BRIEFED THAT REMUNERA TION OF THE DIRECTOR, MR. N. C. DALAL WAS RS.20,000/- PER MONTH AND THE SAME ITA NO. 2046/AHD/2011 ASST. YEAR 2008-09 3 WAS INCREASED TO RS.1,00,000/- PER MONTH W.E.F. 1. 4.2007 AS PER THE DECISION TAKEN IN THE BOARD OF DIRECTORS MEETING O N 15.12.2007. FURTHER TO SATISFY THE QUERIES RAISED BY THE ASSESS ING OFFICER THE PROOF OF INCREASE IN DIRECTORS REMUNERATION FROM R S.20,000/- TO RS.1,00,000/-, ASSESSEE PRODUCED RELEVANT EXTRACT O F BOARDS RESOLUTION DATED 15.12.2007. LD. AR SUBMITTED THAT DUE TO CLERICAL MISTAKE AT THE PLACE OF MENTIONING W.E.F. 1.4.2007 IT WAS INADVERTENTLY MENTIONED AS 20 TH DECEMBER, 2007. DUE TO THIS CLERICAL MISTAKE ASSESSING OFFICER DISALLOWED THE INCREASED REMUNERA TION OF RS.6,96,660/- OUT OF THE TOTAL DIRECTORS REMUNERAT ION OF RS.12 LACS DEBITED IN THE PROFIT AND LOSS ACCOUNT. 7. THE LD. AR FURTHER SUBMITTED THAT IN THE ORIGINA L MINUTES OF MEETING OF BOARD OF DIRECTORS, THE DATE MENTIONED F OR INCREASE IN REMUNERATION FROM RS.20,000/- TO RS.1,00,000/- WAS W.E.F. 1.4.2007 AND ALSO ASSESSEE HAS DULY DEDUCTED TAX AT SOURCE O N THE DIRECTORS SALARY OF RS.1 LAC PER MONTH BY EFFECTING IT IN QUA RTER 3 RD OF THE YEAR UNDER APPEAL. 8. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY REASON FOR DISALLOWANCE OF DIRE CTORS REMUNERATION AT RS.6,96,660/- WAS THE MENTIONING OF EFFECTIVE DATE OF INCREASE IN REMUNERATION WHICH AS PER ASSESSEE WAS W.E.F. 1.4.2007 WHEREAS ASSESSING OFFICER TOOK IT W.E.F. 20.12.2007 ON THE BASIS OF ITA NO. 2046/AHD/2011 ASST. YEAR 2008-09 4 COPY OF EXTRACT OF MINUTES OF THE BOARDS MEETING S UBMITTED BY ASSESSEE DURING ASSESSMENT PROCEEDINGS. 10. ORIGINAL MINUTES OF BOARD MEETING WERE SHOWN DU RING THE COURSE OF HEARING WHEREIN IT WAS DECIDED FOR INCREA SING REMUNERATION OF DIRECTOR, MR. N. C. DALAL FROM RS.20,000/- TO RS .1,00,000/- PER MONTH W.E.F. 1.4.2007, ALONG WITH LEDGER OF DIRECTO RS REMUNERATION, FORM NO.16 FOR CERTIFICATE U/S 203 OF THE ACT FOR T DS FROM INCOME CHARGEABLE UNDER THE HEAD SALARIES ALONG WITH PROOF OF DEPOSIT OF TDS ON SALARY FOR INCREASED AMOUNT OF REMUNERATION EFFECTIVE FROM 1.4.2007 WHICH WAS PAID ON 22.12.2007. ALL THESE EV IDENCES HAVE NOT BEEN CONTROVERTED BY LD. DR. AS SUCH LOOKING T O THE ABOVE FACTS, WE ARE OF THE VIEW THAT THERE WAS A GENUINE INCREAS E IN THE REMUNERATION OF THE DIRECTOR EFFECTIVE FROM FIRST A PRIL, 2007 AND, THEREFORE, LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDIN G THE ACTION OF ASSESSING OFFICER. WE SET ASIDE THE ORDER OF CIT(A) ON THIS GROUND AND DELETE THE IMPUGNED ADDITION. THIS GROUND OF AP PEAL IS ALLOWED. 11. GROUND NO.2 IS AGAINST CONFIRMATION OF DISALLOW ANCE OF DEPRECIATION ON THE GOOD-WILL AT RS.3,98,114/- BY A SSESSING OFFICER WHICH WAS INCREASED BY LD. CIT(A). 12. THE LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE IN ITA NO.3884/AHD/2007 FOR ASST. YEAR 2004-05 AND OTH ERS VIDE ITS ORDER DATED 19/12/2014 (COPY OF THE ORDER IS PLACED ON RECORD). ITA NO. 2046/AHD/2011 ASST. YEAR 2008-09 5 13. THE LD. DR SUPPORTED THE ORDERS OF LOWER AUTHOR ITIES AND COULD NOT REBUT THE SUBMISSION OF LD. AR. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. FROM PERUSAL OF THE ORDER OF CO-ORDINATE BENCH, WE FIND THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESS EE IN ITA NO.3884/AHD/2007 FOR ASST. YEAR 2004-05 VIDE ITS OR DER DATED 19/12/2014 WHEREIN THE TRIBUNAL HAS OBSERVED AS UND ER :- 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A), AND ALSO VARIOUS CASE LAWS R ELIED ON BY THE PARTIES. WE FIND THAT THE ISSUE OF ALLOWANCE OF DEP RECIATION ON INTANGIBLE ASSET IN THE FORM OF GOODWILL IS COVER ED IN FAVOUR OF THE ASSESSEE WITH THE VARIOUS DECISIONS INCLUDING THAT OF THE HONBLE APEX COURT IN COMMISSIONER OF INCOME-TAX V. SMIFS S ECURITIES LTD. (SUPRA), AND THE DECISION OF ITAT, AHMEDABAD IN DCI T VS. TALENT INDIA (SUPRA). WE HAVE GONE THROUGH THE MEMORANDUM OF TRANSFER OF BUSINESS, A COPY OF WHICH HAS BEEN FILED IN THE COM PILATION BEFORE US, WHICH IS DATED 1.4.2001 WHEREIN IT IS SPECIFICALLY PROVIDED THAT ALL THE TRADE NAMES, TRADE-MARKS, PERMITS AND LICENSES, GOO DWILL AND KNOWHOW ATTACHED TO THE BUSINESS CARRIED ON IN INDI A OR ELSEWHERE WERE TRANSFERRED TO THE ASSIGNEES I.E. THE ASSESSEE -COMPANY. IT IS NOW WELL SETTLED THAT THE GOODWILL IS AN INTANGIBLE ASSET ENTITLED TO DEPRECIATION. THE QUANTIFICATION OF GOODWILL AT RS. 75 LAKHS IN THIS CASE SEEMS TO BE REASONABLE. THE ASSESSEE HAS FILED A CO PY OF WORKING OF THE VALUATION OF THE GOODWILL AS GIVEN BY M/S.ANMOL SEKHRI & ASSOCIATES, MUMBAI, VALUER, AND A COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BEFORE THE TRIBUNAL. A PERUSAL OF THE S AID VALUATION REPORT JUSTIFIES THE REASONABLENESS OF THE VALUATION OF TH E GOODWILL AS CLAIMED BY THE ASSESSEE. IN THESE FACTS OF THE CASE , WE HOLD THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON GOODWILL WAS JUSTIFIED, AND ACCORDINGLY, THE GROUND NO.2 AND 3 OF THE ASSESSEE ARE ALLOWED. ITA NO. 2046/AHD/2011 ASST. YEAR 2008-09 6 AS THE GROUND IN THIS APPAL IS SIMILAR TO THE GROUN D RAISED BEFORE THE TRIBUNAL REFERRED ABOVE AND FOLLOWING THE RATIO OF THE ABOVE DECISION, WE ARE OF THE VIEW THAT THIS GROUND SHOULD BE ALLOW ED AND WE DO SO ACCORDINGLY. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DECEMBER, 2015 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 03/12/1015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 2046/AHD/2011 ASST. YEAR 2008-09 7 1. DATE OF DICTATION: 1/12/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 1/12/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 03/12/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: