Vodafone India Services Private Ltd., Mumbai V. The ACIT, Circle-4(1)(2), Ahmedabad

ITA 2638/AHD/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5906 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VASUNDRA UPMANYU
• Assessee Lawyers: S N SOPARKAR SHRI PARIN SHAH
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A; 115JB; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMB ER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO. 2638/AHD/2017 (ASSESSMENT YEAR : 2013-14) VODAFONE INDIA SERVICES PRIVATE LTD. [FORMERLY KNOWN AS 3 GLOBAL SERVICES PRIVATE LTD. (GSPL/ 3GSPL], 127 MAKER CHAMBER III, NARIMAN POINT, MUMBAI 400 021, MAHARASHTRA, INDIA. APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(2), B WING, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, NEAR POLYTECHNIC, AMBAWADI, AHMEDABAD 380015, GUJARAT, INDIA RESPONDENT PAN: AAACZ1849D / BY ASSESSEE : SHRI S. N. SOPARKAR, SHRI PARI N SHAH & SHRI MRUNAL PAREKH, A.R. / BY REVENUE : SMT. VASUNDRA UPMANYU, SR. D.R. /DATE OF HEARING : 15.03.2018 /DATE OF PRONOUNCEMENT : 19.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2013-14, ARISES AGAINST THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(2), A HMEDABADS ASSESSMENT ITA NO. 2638/AHD/2017 (VODAFONE INDIA SERVICES P. L TD. VS. ACIT) A.Y. 2013-14 - 2 - ORDER DATED 26.10.2017 PASSED U/S. 143(3) R.W.S. 14 4C OF THE INCOME TAX ACT, 1961, HEREINAFTER THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. LEARNED COUNSEL REPRESENTING ASSESSEE FILES A CHA RT OF ALL THE ISSUES RAISED IN THE INSTANT APPEAL. THE REVENUE IS FAIR ENOUGH I N NOT DISPUTING CORRECTNESS THEREOF. IT EMERGES THEREFROM THAT THE ASSESSEES FIRST SUBSTANTIVE GRIEVANCE IS THAT THE ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN DISALLOWING ITS DEPRECIATION CLAIM OF RS.14,65,48,090/- IN RESPECT OF GOODWILL RELATING TO ACQUISITION OF CALL CENTER BUSINESS OF M/S. VODAFON E ESSAR GUJARAT LIMITED VEGL. BOTH THE PARTIES FAIRLY STATE THAT A CO-ORD INATE BENCHS ORDER IN ASSESSEES CASE ITSELF OF PRECEDING ASSESSMENT YEAR 2012-13 DATED 23.01.2018 REPORTED AS (2018) 89 TAXMANN.COM 299 (AHMEDABAD-TR IB.) HAS RESTORED THE VERY ISSUE BACK TO THE ASSESSING OFFICER AS UNDER: 161. IN GROUND NOS. 15 AND 16 PLEAD THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FACTS IN DENYING DEPRECI ATION ON GOODWILL AMOUNTING TO RS.19,53,97,454/- ON ACCOUNT OF ITS AMORTIZATION . THESE GROUNDS ARE AS FOLLOWS:- 15. THAT THE AO AND DRP ERRED IN MAKING A DISALLOW ANCE OF RS.19,53,97,454/- IN RESPECT OF DEPRECIATION CLAIME D BY THE APPELLANT ON GOODWILL RELATING TO ACQUISITION OF CALL CENTRE BUSINESS OF VGEL, BY MECHANICALLY FOLLOWING THE DRP DIRECTIONS FOR AY 2011-12, WITHOUT APPRECIATING THAT GOODWILL IS AN 'INTANGIBL E ASSET' UNDER SECTION 32 OF THE ACT. 16. THAT THE AO AND DRP ERRED IN FOLLOWING ORDER OF AY 2011-12 AND NOT CONSIDERING THE BIFURCATION OF ASSETS AND LIABI LITIES ACQUIRED BY THE APPELLANT DETAILS OF WHICH WERE PROVIDED TO THE AO VIDE SUBMISSION DATED 29.02.2016.' 162. THERE IS NO DISPUTE ABOUT THE ASSESSEE HAVING ACQUIRED M/S. 'VEGL' CALL CENTER BUSINESS ON 08.11.2008 BY WAY OF A BUSI NESS TRANSFER AGREEMENT (BTA) AS A GOING CONCERN ON SLUM SALE BASIS EFFECTI VE FROM 01.11.2008. ITS CASE THROUGHOUT HAS BEEN THAT THE SAID AGREEMENT DE FINES 'BUSINESS ASSETS' TO MEAN ASSETS AND LIABILITIES, WORKING CAPITAL, EMPLO YEES AND ASSUMED CONTRACTS PERTAINING TO THE ABOVE CALL CENTER BUSINESS. THE A SSESSEE FURTHER PLEADED TO HAVE PAID CONSIDERATION AMOUNT OF RS.160.54CRORES T O THE ABOVE ENTITY. IT ITA NO. 2638/AHD/2017 (VODAFONE INDIA SERVICES P. L TD. VS. ACIT) A.Y. 2013-14 - 3 - COMPUTED NET ASSETS VALUE AT RS.1.84 CRORES WHEREAS THE REMAINING CONSIDERATION WAS RECORDED AS 'GOODWILL'. THIS FOLL OWED ASSESSEE'S IMPUGNED DEPRECIATION CLAIM. THE ASSESSING OFFICER DECLINES THE SAME IN ASSESSMENT ORDER IN VIEW OF HIS CORRESPONDING FINDINGS IN ALL PRECEDING ASSESSMENT YEARS RIGHT FROM 2009-10 ONWARDS DISALLOWING THE VERY CLA IM AS REPRODUCED IN ASSESSEE'S WRITTEN SUBMISSIONS BEFORE US. 163. LEARNED SENIOR COUNSEL VEHEMENTLY CONTENDS THA T THE ISSUE AS TO WHETHER THE GOODWILL IN QUESTION FORMS AN INTANGIBL E ASSET U/S.32(1)(II) OF THE ACT OR NOT TO BE ENTITLED FOR DEPRECIATION RELIEF I S NO MORE RES INTEGRA AS HON'BLE APEX COURT'S LAND MARK JUDGMENT IN CIT V. S MIFFS SECURITIES LTD. CASE [2012] 24 TAXMANN.COM 222/210 TAXMAN 428/348 ITR 30 2 (SC) HAS SETTLED THE LAW IN ASSESSEE'S FAVOUR. WE SEE NO SUBSTANCE IN TH E INSTANT ARGUMENT SINCE THERE IS NO CHANGE SO FAR AS ALL FACTS PERTINENT TO THIS ISSUE VIS-A-VIS THOSE INVOLVED IN PRECEDING ASSESSMENT YEARS ARE CONCERNE D. THE AUTHORITIES BELOW HAVE ALREADY ADOPTED THE VERY REASONING AS IN SAID EARLIER YEARS TO REJECT ASSESSEE'S INSTANT CLAIM. IT IS NOT CLEAR AS TO WHA T IS THE FATE OF THESE ASSESSMENT YEARS BEFORE THIS TRIBUNAL. LEARNED COUN SEL AT THIS STAGE SUBMITS THAT ASSESSEE'S APPEAL FOR THE SAID EARLIER ASSESSM ENT YEAR 2011-12 IS PENDING BUT THE POSITION OF THE EARLIER YEARS IS NOT CLEAR. IN ANY EVENT, THERE IS NO INDEPENDENT ADJUDICATION ON THIS ISSUE BY THE ASSES SING OFFICER. IN VIEW OF THESE DISCUSSIONS, IN OUR CONSIDERED VIEW, THE MATT ER IS REQUIRED TO BE REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATI ON DE NOVO BY DEALING WITH THE SPECIFIC ISSUES RAISED BY THE ASSESSEE AND IN THE L IGHT OF WHATEVER IS THE POSITION IN RESPECT OF EARLIER ASSESSMENT YEARS- PA RTICULARLY AS WE HAVE DONOT HAVE THE BENEFIT OF KNOWING THE PRECISE STATUS OF O UTCOME OF APPEALS BEFORE THIS TRIBUNAL. AS LEARNED COUNSEL STATES THAT 2011-12 IS PENDING BEFORE THIS TRIBUNAL, THE ASSESSING OFFICER IS DIRECTED TO TAKE INTO ACCOUNT THE DECISION OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2011-12, AS I NDEED ANY OTHER ASSESSMENT YEAR, AS MAY BE AVAILABLE TO THE ASSESSING OFFICER AT THE POINT OF TIME WHEN HE SO DECIDES THE MATTER AFRESH. 164. IN THE RESULT, GROUND NOS. 15 TO 16 ARE ALLOWE D FOR STATISTICAL PURPOSES. 3. THERE IS NO DISTINCTION EITHER ON FACTS OR LAW PO INTED AT BOTH THE PARTIES BEHEST QUA THE INSTANT SUBSTANTIVE GROUND. WE THER EFORE RESTORE THE INSTANT ISSUE BACK TO THE ASSESSING OFFICER FOR AFRESH ADJUDICATI ON TAKING INTO ACCOUNT THE RELEVANT CONSEQUENTIAL ASSESSMENTS FRAMED IN SAID E ARLIER ASSESSMENT YEARS. THE ASSESSEES INSTANT FIRST SUBSTANTIVE GROUND IS T HEREFORE ACCEPTED FOR STATISTICAL PURPOSES. 4. THE ASSESSEES SECOND SUBSTANTIVE GROUND IS THAT ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING SECTION 14A R.W. RULE 8D ITA NO. 2638/AHD/2017 (VODAFONE INDIA SERVICES P. L TD. VS. ACIT) A.Y. 2013-14 - 4 - DISALLOWANCE OF RS.8,30,32,750/- IN RELATION TO ITS EXEMPT INCOME. LEARNED SENIOR COUNSEL SUBMITS THAT ASSESSEES EXEMPT INCOM E IN THE IMPUGNED ASSESSMENT YEAR IS ONLY RS.1,18,301/-. HE THEN REF ERS TO TRIBUNALS CO-ORDINATE BENCHS DECISION IN CADILA PHARMACEUTICALS LTD. VS. DCIT [2017] 85 TAXMANN.COM 354 (AHMEDABAD-TRIB.) FOLLOWING HONBLE DELHI HIGH COURTS JUDGMENT IN JOINT INVESTMENTS PVT. LTD. VS. CIT (2015 ) 372 ITR 694 (DELHI) THEREBY RESTRICTING THE IMPUGNED DISALLOWANCE TO TH E EXTENT OF EXEMPT INCOME ONLY. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OT HER HAND VEHEMENTLY CONTENDS THAT ASSESSING OFFICER HAS RIGHTLY MADE TH E IMPUGNED DISALLOWANCE. HE HOWEVER FAILS TO DISPUTE THE ABOVESTAED FACTS RE GARDING ASSESSEES EXEMPT INCOME COMING TO RS.1,18,301/- AS WELL AS THE JUDIC IAL PRONOUNCEMENTS HEREINABOVE RESTRICTING THE IMPUGNED DISALLOWANCE T O THE EXTENT OF EXEMPT INCOME ONLY. WE THUS FOLLOW SIMILAR COURSE OF ACTI ON HEREIN AS WELL TO PARTLY ACCEPT ASSESSEES INSTANT SUBSTANTIVE GROUND FOR UP HOLDING THE AMOUNT IN QUESTION TO THE EXTENT OF EXEMPT INCOME ONLY. THE ASSESSEES OTHER ARGUMENTS CHALLENGING APPLICATION OF SECTION 14A R.W. RULE 8D IN PRINCIPLE ARE THEREFORE RENDERED INFRUCTUOUS AT THIS STAGE. 5. THE ASSESSEES NEXT CONTENTION CHALLENGES CORRECT NESS OF ASSESSING OFFICERS ACTION IN ADDING THE ABOVE DISALLOWANCE O F RS.8,30,32,750/- FOR THE PURPOSE OF COMPUTING ITS BOOK PROFIT U/S. 115JB OF THE ACT. WE NOTICE THAT THIS TRIBUNALS RECENT SPECIAL BENCHS DECISION IN ACIT V S. VIREET INVESTMENT PVT. LTD. ITA NO. 502/DEL/2012 HAS HELD THAT SUCH AN ADDI TION IN COMPUTATION OF BOOK PROFITS IS NOT SUSTAINABLE. WE THEREFORE ACCE PT ASSESSEES INSTANT ARGUMENT. THE ASSESSING OFFICER IS DIRECTED TO DEL ETE THE IMPUGNED BOOK PROFIT ADJUSTMENT ADDITION. 6. LEARNED COUNSEL LASTLY SUBMITS THAT THE ASSESSEE NO MORE WISHES TO PRESS FOR ITS LAST SUBSTANTIVE GROUND CHALLENGING ADDITIO N OF RS.1,888/- ON ACCOUNT OF MISMATCH IN INCOME CREDITED TO P&L ACCOUNT AND FORM 26AS KEEPING IN MIND ITA NO. 2638/AHD/2017 (VODAFONE INDIA SERVICES P. L TD. VS. ACIT) A.Y. 2013-14 - 5 - THE SMALLNESS OF THE AMOUNT. THIS LAST SUBSTANTIVE GROUND IS ACCORDINGLY REJECTED AS NOT PRESSED. 7. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF MARCH, 2018.] SD/- SD/- (N. K. BILLAIYA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 19/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0