Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 4913 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-02-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
07-02-2019
Assessment Year
2013-2014
Appeal Filed On
21-11-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI VIKAS AWASTHY, JM / ITA NO. 2646/PUN/2016 / ASSESSMENT YEAR : 2013-14 M/S. MAYA ENTERTAINMENT LTD. (EARLIER KNOWN AS AVALON AVIATION ACADEMY PVT. LTD.) A-WING, 2 ND FLOOR, NEAR PMT BUILDING, SHANKARSHET ROAD, SWARGATE, PUNE-411 037 PAN : AAFCA8287M ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX-1(1), PUNE. / RESPONDENT ASSESSEE BY : SHRI S.C. TIWARI REVENUE BY : SHRI SANJEEV GHEI / DATE OF HEARING : 07.02.2019 / DATE OF PRONOUNCEMENT : 14.02.2019 / ORDER PER VIKAS AWASTHY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, PUNE DATED 22.09.20 16 FOR THE ASSESSMENT YEAR 2013-14. 2 ITA NO. 2646/PUN/2016 A.Y.2013-14 2. THE SOLITARY ISSUE RAISED IN THE APPEAL BY ASSESSEE IS AGAINST DISALLOWANCE OF DEPRECIATION ON GOODWILL RS.4,52,944/-. 3. SHRI S.C. TIWARI APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED AT THE OUTSET THAT THE ISSUE RAISED BY ASSESSEE IN APPEA L IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2011-12 IN ITA NO.485/PUN/2016 DATED 20.12.2017. THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF AVIATION TRAINING AND HOSPITALITY INDUSTRY. THE ASSESSEE HAD ENTERED INTO A GREEMENT WITH AVALON AVIATION ACADEMY, AND HAD ACQUIRED ASSETS AND LIA BILITIES FOR A LUMP-SUM CONSIDERATION OF RS.75 LAKHS IN FINANCIAL YEAR 2005 -06. THE EXCESS OF THE CONSIDERATION OVER THE FAIR VALUE OF ASSETS AS ON THE DATE OF ACQUISITION WAS TREATED AS GOODWILL. THE ASSESSEE IN ITS RET URN OF INCOME CLAIMED DEPRECIATION ON GOODWILL ON THE GROUND THAT IT IS A RIGHT SIMILAR IN NATURE OF KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICE NSES, FRANCHISEES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE BEING INTANGIBLE ASSET. HOWEVER, THE CLAIM OF ASSESSEE WAS REJECT ED BY THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS). T HE ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL WAS DISALLOWED IN EARLIER YEARS, AS WELL FOR SIMILAR REASONS. THE MATTER TRAVELLED TO THE TR IBUNAL. THE TRIBUNAL IN APPEAL BY ASSESSEE IN ITA NO.1914/PUN/2014 FOR ASSESSMENT YEAR 2007-08 DECIDED ON 03.03.2017, ALLOWED THE ASSESSEE S CLAIM. THEREAFTER, IN THE ASSESSMENT YEAR 2011-12, THE CLAIM OF D EPRECIATION ON GOODWILL WAS AGAIN DISALLOWED BY THE REVENUE AUTHORITIES. THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL IN ITA NO.485/P UN/2016 VIDE ORDER DATED 20.12.2017 FOLLOWING THE ORDER OF CO-ORDINA TE BENCH IN 3 ITA NO. 2646/PUN/2016 A.Y.2013-14 ASSESSEES OWN CASE ALLOWED THE ASSESSEES CLAIM. THE LD . AR FURNISHED THE COPY OF TRIBUNAL ORDER IN ITA NO.485/PUN/2016 (SUPRA.). 3.1 THE LD. AR FURTHER SUBMITTED THAT FOR ASSESSMENT YEAR 2014-15, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLAIM O F THE ASSESSEE VIDE ORDER DATED 25.09.2018. 4. SHRI SANJEEV GHEI REPRESENTING THE DEPARTMENT VEHEM ENTLY DEFENDED THE IMPUGNED ORDER. HOWEVER, THE LD. DR FAIRLY ADMITTED THA T THE ISSUE RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN ADJUDICAT ED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERU SED. THE SOLITARY ISSUE RAISED IN THE APPEAL BY ASSESSEE IS AGAINST DISALLOWING OF DEPRECIATION ON GOODWILL RS.4,52,944/-. WE FIND THAT THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2007-08 AND 2011-12. THE T RIBUNAL HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION ON GOODWILL. FO R THE SAKE OF COMPLETENESS, THE RELEVANT EXTRACT OF THE ORDER OF TRIBU NAL IN ITA NO.485/PUN/2016 FOR ASSESSMENT YEAR 2011-12 IS REPRODU CED HEREIN BELOW: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH R ESPECT TO DEPRECIATION ON GOODWILL. WE FIND THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE IN A.Y. 2007-08 BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL. THE CO- ORDINATE BENCH OF THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE ARISING IN THE PRESENT APPEAL IS I N RELATION TO THE CLAIM OF DEPRECIATION ON GOODWILL. THE ASSESSEE HAD TAKEN 4 ITA NO. 2646/PUN/2016 A.Y.2013-14 OVER THE SOLE PROPRIETARY CONCERN UNDER THE NAME AN D STYLE OF AVALON AVIATION ACADEMY AS A GOING CONCERN AS PER T HE AGREEMENT DATED 09TH SEPTEMBER, 2006. THE SAID GOIN G CONCERN WAS TAKEN OVER ALONG WITH ALL THE ASSETS, LIABILITI ES, RIGHTS, PRIVILEGES, PENDING CONTRACTS, PERMISSIONS, ETC. AS A SLUMP SALE, IN AN AS-IS-WHERE-IS IS CONDITION FOR THE GOOD AND VALUABLE CONSIDERATION. AS PER THE TERM OF THE AGREEMENT THE TOTAL CONSIDERATION WAS FIXED AT RS.75,00,000/-. IT WAS A GREED BETWEEN THE PARTIES THAT THE SALE OF THE ACQUIRED BUSINESS UNDERTAKING BY THE SELLER TO THE PURCHASER PURSUAN T THERETO WAS AS AND BY WAY OF A SLUMP SALE AND THE PURCHASE CONSIDERATION WAS A COMPOSITE PURCHASE CONSIDERATIO N FOR THE WHOLE OF THE ACQUIRED BUSINESS UNDERTAKING AND NO P URCHASE CONSIDERATION SHALL BE ASSIGNED TO SPECIFIC ITEMS T O THE ACQUIRED BUSINESS UNDERTAKING, AS PER ARTICLE 2.2 OF THE AGREEMENT. WHILE CLARIFYING AND INTERPRETING THE TE RM ACQUIRED BUSINESS UNDERTAKING, AS PER ARTICLE 1.1.1, IT WAS AGREED UPON THAT THE SELLERS BUSINESS RUN UNDER THE NAME AND S TYLE OF AVALON AVIATION ACADEMY WHICH IS, INTER ALIA, ENGAG ED IN AVIATION AND HOSPITALITY TRAINING; THE GOODWILL REL ATING TO THE SELLERS BUSINESS; ALL THE RIGHTS, ASSETS, CURRENT ASSETS AND OBLIGATION, ALL INTELLECTUAL PROPERTY RIGHTS, BRAND S, LOGOS, PROPERTIES OF EVERY KIND AND DESCRIPTION, ETC., INC LUDING THE RIGHTS IN THE LIST OF PROPERTIES SET OUT IN ANNEXUR E 1; THE LIABILITIES OF THE SELLER, AS ON THE TRANSFER DATE AS LISTED IN THE BALANCE SHEET AS ON 31ST MARCH, 2006; THE AND OBLIG ATION OF THE SELLER UNDER THE PENDING CONTRACTS, IF ANY AND THE EMPLOYEE, SHALL BE TAKEN OVER. MEANING THEREBY THAT BY PAYING THE AGREED CONSIDERATION THE ASSESSEE WAS NOT ONLY TAKING OVER THE BUSINESS AS A GOING CONCERN BUT WAS ALSO TAKING OVE R ALL THE RIGHTS, LIABILITIES, ASSETS, PENDING CONTRACTS BENE FITS AND OBLIGATION OF THE CURRENT CONTRACTS, AS BUNDLE OF R IGHTS. THIS WAS IN ADDITION TO RIGHTS OF OBLIGATION OF THE SELLER O N THE TRANSFER DATE, THE EMPLOYEES OF THE SAID CONCERN AND ALSO GO ODWILL RELATING TO THE SELLER BUSINESS. THE UNDERSTANDING BETWEEN THE PARTIES WAS CLEAR AND NO SPECIFIC PRICE WAS ATTRIBU TED TO THE ASSETS AND LIABILITIES SINCE IT WAS A CASE OF SUMP SUM CONSIDERATION BEING PAID FOR TAKEOVER OF THE ASSETS . THE COPY OF THE AGREEMENT IS PLACED AT PAGES 27 TO 40 OF THE PA PER BOOK. UNDER SUCH FACTS AND CIRCUMSTANCES THE ASSESSEE WHI LE FILING THE RETURN OF INCOME HAD WORKED OUT THE EXCESS CONS IDERATION OVER THE VALUE OF THE ASSETS AND LIABILITIES AT RS. 60,85,577/-, AS UNDER : PARTICULARS FAIR VALUE (RS.) FIXED ASSETS 10,59,825 CURRENT ASSETS 5,81,943 CURRENT LIABILITIES (2,27,345) 5 ITA NO. 2646/PUN/2016 A.Y.2013-14 NET ASSETS 14,14,423 CONSIDERATION 75,00,000 GOODWILL 60,85,577 10. ON SUCH GOODWILL, THE ASSESSEE CLAIMED DEPRECIA TION WHICH HAS BEEN DENIED BY THE AUTHORITIES BELOW HOLDING TH AT THE EXCESS AMOUNT OVER ASSETS AND LIABILITIES IS NOT GO ODWILL. THIS IS THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEA LS). THE ASSESSING OFFICER HAD DENIED THE DEPRECIATION AS GO ODWILL WAS NOT PART OF INTANGIBLE ASSETS U/S.32(1) OF THE ACT. THE DEPRECIATION WAS ALLOWABLE ONLY ON TANGIBLE ASSETS AND NOT INTANGIBLE ASSETS. THE BASIS FOR DISALLOWANCE WAS T HE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COM MISSIONER OF INCOME TAX VS. M/S. TECHNO SHARES STOCKS LTD. & OTHERS (SUPRA) WHICH WAS AGAINST THE ASSESSEE. HOWEVER, TH E HONBLE SUPREME COURT IN TECHNO SHARES & STOCKS LTD. & ORS. VS. COMMISSIONER OF INCOME TAX (SUPRA) HAS REVERSED THE FINDINGS OF HONBLE BOMBAY HIGH COURT AND CONSEQUENTLY THE R ATIO APPLIED BY THE ASSESSING OFFICER AND THE COMMISSION ER OF INCOME TAX (APPEALS) IS NOT AVAILABLE FOR APPLICATI ON. IN ANY CASE THE HONBLE SUPREME COURT IN LATER DECISION IN COMMISSIONER OF INCOME TAX VS. SMIFS SECURITIES LTD. (SUPRA) HAD HELD THAT GOODWILL IS AN INTANGIBLE ASSET AS PE R EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT AND CO NSEQUENTLY THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRECIATION ON SUCH GOODWILL. APPLYING THE SAID RATIO WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRECIATION ON GOODWILL. 11. NOW, COMING TO THE STAND OF COMMISSIONER OF INC OME TAX (APPEALS) THAT THE EXCESS AMOUNT PAID BY THE ASSESS EE OUT OF LUMP SUM CONSIDERATION IS NOT GOODWILL BUT SOMETHIN G ELSE. THE HONBLE DELHI HIGH COURT IN TRIUNE ENERGY SERVICES PRIVATE LIMITED & ORS. VS. DEPUTY COMMISSIONER OF INCOME TA X & ORS. (SUPRA) ON SIMILAR ISSUE OF SLUMP SALE AS PER BUSIN ESS TRANSFER AGREEMENT WHEREIN LUMP SUM CONSIDERATION WAS PAID, HAD HELD THAT THE BALANCE CONSIDERATION AFTER DEDUCTING THE VALUE OF ASSETS AND LIABILITIES IS GOODWILL WHICH EXPRESSION 'GOODWILL' SUBSUMES WITHIN IT A VARIETY OF INTANGIBLE BENEFITS THAT WERE ACQUIRED WHEN A PERSON ACQUIRES A BUSINESS OF ANOTH ER AS A GOING CONCERN. IT WAS FURTHER HELD THAT IT IS WELL ESTABLISHED THAT 'GOODWILL' IS AN INTANGIBLE ASSET, WHICH IS RE QUIRED TO BE ACCOUNTED FOR WHEN A PURCHASER ACQUIRES A BUSINESS AS A GOING CONCERN BY PAYING MORE THAN THE FAIR MARKET VALUE O F THE NET TANGIBLE ASSETS, THAT IS, ASSETS LESS LIABILITIES. THE HONBLE HIGH COURT THEREFORE HELD THAT GOODWILL INCLUDED A HOST OF INTANGIBLE ASSETS, WHICH A PERSON ACQUIRES, ON ACQU IRING A BUSINESS AS A GOING CONCERN AND VALUING THE SAME AT THE EXCESS CONSIDERATION PAID OVER AND ABOVE THE VALUE OF NET TANGIBLE ASSETS IS AN ACCEPTABLE ACCOUNTING PRINCIP LE AND THUS, 6 ITA NO. 2646/PUN/2016 A.Y.2013-14 FURTHER EXERCISE TO VALUE THE GOODWILL IS NOT WARRA NTED. IN THIS REGARD RELIANCE WAS PLACED ON THE RATIO LAID DOWN B Y THE HONBLE SUPREME COURT IN COMMISSIONER OF INCOME TAX VS. SMIFS SECURITIES LTD. (SUPRA) AND ON COMMISSIONER O F INCOME TAX VS. B.C. SRINIVASA SETTY REPORTED IN (1981) 128 ITR 294 (SC) AND THE CLAIM OF THE ASSESSEE WAS ALLOWED. 12. THE FACTS AND THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US ARE IDENTICAL TO THE FACTS AND ISSUE BEFORE THE HONBLE DELHI HIGH COURT (SUPRA) AND APPLYING THE SAID PRINCIPLE WE HOLD THAT THE BALANCE CONSIDERATION OUT OF SLUMP SALE CONSIDE RATION AFTER ADJUSTING THE VALUE OF ASSET AND LIABILITIES IS, TH E VALUE OF GOODWILL IN THE HANDS OF THE ASSESSEE, WHICH IS INT ANGIBLE ASSETS, ON WHICH THE ASSESSEE IS ELIGIBLE TO CLAIM THE DEPRECIATION. ACCORDINGLY, WE HOLD SO. 13. BEFORE PARTING WE MAY REFER TO RELIANCE PLACED BEFORE US BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE ON THE RATIO LAID DOWN IN CHOWGULE & CO. (P.) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA) WHICH DO NOT STAN D AFTER THE RATIO BEING LAID DOWN BY THE HONBLE DELHI HIGH COURT. IT MAY BE QUALIFIED HEREIN ITSELF THAT THE FACTS BEFOR E THE HONBLE DELHI HIGH COURT AND THE FACTS OF THE PRESENT CASE ARE IDENTICAL AND CONSEQUENTLY THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT SHALL PREVAIL. ACCORDINGLY, WE DIRECT THE ASS ESSING OFFICER TO ALLOW DEPRECIATION ON GOODWILL. THE GROUNDS OF A PPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 6. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY B INDING DECISION IN ITS SUPPORT NOR HAS POINTED OUT ANY DIS TINGUISHING FEATURE IN THE FACTS OF THE PRESENT CASE AND THAT OF EARLIE R YEAR. WE THEREFORE, FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN EARLIER YEAR AND FOLLOWING THE SAME REASONING, SET ASIDE TH E ORDER OF AO AND HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION ON GOODWILL AND DIRECT THE AO TO ALLOW THE SAME. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. THE REVENUE HAS NOT PLACED ANY CONTRARY DECISION AND HAS ALSO NOT DISPUTED SIMILARITY OF FACTS IN THE ASSESSMENT YEAR UNDER A PPEAL. THEREFORE, FOLLOWING THE ORDER OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS, WE ALLOW THE ASSESSEES CLAIM OF DEPREC IATION ON GOODWILL. THE IMPUGNED ORDER IS SET ASIDE AND APPEAL OF THE ASSESSEE IS ALLOWED. 7 ITA NO. 2646/PUN/2016 A.Y.2013-14 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 14TH DAY OF FEBRUARY, 2019. SD/- SD/- R. S. SYAL VIKAS AW ASTHY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 14 TH FEBRUARY, 2019. SB !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-1, PUNE. 4. THE PR. CIT-1, PUNE. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, A BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 8 ITA NO. 2646/PUN/2016 A.Y.2013-14 DATE 1 DRAFT DICTATED ON 12 .02.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 12.02.2019 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER
