ACIT Cir -08 Pune, Pune V. M/s Arm Products, Pune

ITA 271/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4306 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K OJHA
• Keywords: Sale consideration of property below Jantri Value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.271/PN/2012 (ASSTT. YEAR : 2007-08) ACIT, CIRCLE-8, PUNE. .. APPELLANT VS. M/S. ARM PRODUCTS, J-23, MIDC, BHOSARI, PUNE 411026. .. RESPONDENT PAN: AACFA3783G ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI K.K.OJHA DATE OF HEARING : 04.06.2013 DATE OF PRONOUNCEMENT : 20.06.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON FOLLOWING GROUND: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE A DDITION OF RS.56,65,400/- MADE ON ACCOUNT OF TRANSFER OF BRAND NAME/GOODWILL TO EACH SISTER CONCERN? 2. THE ASSESSING OFFICER MADE AN ADDITION OF RS.56, 65,400/- MADE ON ACCOUNT OF TRANSFER OF BRAND NAME/GOODWILL TO ITS SISTER CONCERN. MATTER WAS CARRIED BEFORE THE FIRST APPEL LATE AUTHORITY WHO HAS ALLOWED THE SAME, WHICH IS OPPOSED BEFORE US. 3. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.56 ,65,400/- MADE ON ACCOUNT OF TRANSFER OF BRAND NAME/GOODWILL TO ITS S ISTER CONCERN. 2 3.1 ON THE OTHER HAND, LD. AUTHORISED REPRESENTATIV E SUBMITTED THAT ASSESSEE TRANSFERRED ITS PLANT AND MACHINERY A ND STOCK TO ARM WELDER PVT. LTD. AS PER AGREEMENT, ASSESSEE TRAN SFERRED ITS PLANT AND MACHINERY TO ARM WELDER PVT. LTD. ACCORDING T O ASSESSING OFFICER THE ASSESSEE TRANSFERRED THE BUSINESS AS WE LL AS GOODWILL AS INTANGIBLE ASSET. THE ASSESSING OFFICER HAS MENTIO NED THAT NAME OF THE COMPANY IS ARM WELDER PVT. LTD. ACCORDINGLY, T HE ASSESSING OFFICER OBSERVED THAT COMPANY BE ABLE TO GET THE NA ME ARM. THE ASSESSING OFFICER HAS CONCLUDED THAT THE GOODWILL B Y CONSIDERING AVERAGE PROFIT EARNED BY THE ASSESSEE FOR LAST 5 YE ARS AND COMPUTED THE VALUE AT RS.56,65,400/-. THUS ASSESSING OFFICE R MADE THE ADDITION. STAND OF THE ASSESSEE HAS BEEN THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLD THAT AS PER AGREEMENT OF SALE THERE WAS NO MENTION OF GOODWILL BEING TRANSFERRED BY THE ASSESS EE TO THE SAID COMPANY. THE ASSESSING OFFICER HAS PRESUMED THAT A SSESSEE HAS TRANSFERRED GOODWILL WITHOUT APPRECIATING THAT NO S UCH GOODWILL WAS TRANSFERRED. SECONDLY, THE COMPANY ARM WELDER PVT. LTD. WAS INCORPORATED AND THEREAFTER THE ASSESSEE TRANSFERRE D PLANT AND MACHINERY. ONE COULD NOT CONTEND THAT ASSESSEE HAS BEEN ABLE TO USE A NAME ONLY AFTER FIRM TRANSFERRED THE BUSINESS AND ENTIRE ASSUMPTION OF THE ASSESSING OFFICER FOR MAKING THE ADDITION WAS INCORRECT. IT WAS ALSO STATED ON BEHALF OF THE ASS ESSEE THAT AS PER THE AGREEMENT OF SALE, THERE IS NO MENTION OF ANY G OODWILL BEING TRANSFERRED BY THE ASSESSEE. WHEN THE ASSESSEE DID NOT CHARGE FOR GOODWILL, THERE WAS NO QUESTION OF MAKING ANY ADDIT ION. ASSUMING WITHOUT ADMITTING THAT ASSESSEE HAS TRANSFERRED GOO DWILL TO THE COMPANY, STILL ASSESSEE SUBMITTED THAT ADDITION MAD E BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. THE ASSESSEE SUBMITTED THAT CAPITAL GAIN CANNOT BE CHARGED TO TAX ON NOTIONAL B ASIS BY CONSIDERING SOME ADHOC VALUE OF GOODWILL. IF THERE IS NO CONSIDERATION CHARGED FOR ALLEGED TRANSFER OF GOODW ILL, THE QUESTION OF CHARGING THE SAME ON NOTIONAL BASIS IS GROSSLY I NCORRECT. THE ASSESSEE CLARIFIED THAT THE ASSESSING OFFICER HAD N O POWER TO MAKE SUCH ADDITION. 3 4. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MA TERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE WITH THE F INDING OF THE CIT(A). THERE WAS NO BASIS FOR MAKING ESTIMATE FOR ALLEGED EXISTENCE OF GOODWILL ON AN ADHOC BASIS. THE AGREE MENT OF SALE DOES NOT MENTION ABOUT GOODWILL BEING TRANSFERRED BY THE FIRM TO COMPANY. MOREOVER, THE COMPANY WAS ALREADY INCORPO RATED PRIOR TO TRANSFER OF PLANT AND MACHINERY. THE ESTIMATION OF CAPITAL GAIN ON NOTIONAL BASIS IS NOT JUSTIFIED IN ABSENCE OF SPECI FIC PROVISION LIKE 50C OF THE ACT REGARDING TRANSFER OF IMMOVABLE PROP ERTY. IN THESE CIRCUMSTANCES, THERE IS NO JUSTIFICATION FOR MAKING ESTIMATION OF NOTIONAL GOODWILL AND COMPUTING CAPITAL GAIN THEREO N. ACCORDINGLY, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION O F RS.56,65,400/- MADE ON ACCOUNT OF TRANSFER OF BRAND NAME/GOODWILL TO ITS SISTER CONCERN. SAME IS UPHELD. 5. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF JUNE, 2013. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 20 TH JUNE, 2013 ANKAM COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ACIT, CIRCLE-8, PUNE. 3. THE CIT(A)-V, PUNE. 4. THE CIT-V, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.