Trio Elevators Company (India) Ltd., Ahmedabad V. The Dy.CIT.,Circle-4(1)(2), Ahmedabad

ITA 291/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8419 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 10-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Question of law; Valuation report; Scheme of amalgamation
• Section: 143(3); 32

Judgement Text

ITA NO. 291/AHD/2015 TRIO ELEVATORS CO. (INDIA) LTD VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO. 291/AHD/2015 ASSESSMENT YEAR: 2011-12 TRIO ELEVATORS COMPANY (INDIA) LTD .......... ...APPELLANT 404, SHIVAM COMPLEX, BHUYANGDEV CROSS ROAD, SOLA ROAD, GHATLODIYA, AHMEDABAD - 380061 [PAN: AACCT 4923 E] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX .......................RESPONDENT CIRCLE-4(1)(2) AHMEDABAD APPEARANCES BY: SN SOPARKAR & PARIN SHAH FOR THE APPELLANT VK SINGH FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 21.09.2017 DATE OF PRONOUNCING THE ORDER : 22.09.2017 O R D E R PER PRAMOD KUMAR, AM: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE APPELLAN T AND IS DIRECTED AGAINST THE ORDER DATED 08.12.2014 PASSED BY THE CIT(A)-8, AHME DABAD IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX A CT, 1961 FOR THE ASSESSMENT YEAR 2011-12. 2. GROUND NO. 1 IS GENERAL AND IT DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION. IT IS DISMISSED AS SUCH. 3. IN GROUND NO. 2, THE ASSESSEE-APPELLANT HAS RAIS ED THE FOLLOWING GRIEVANCE:- THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRM ING THE DISALLOWANCE OF THE CLAIM OF PROVISION FOR DOUBTFUL DEBT OF RS.31,5 7,448/- AND PROVISION FOR DOUBTFUL ADVANCES OF RS.5,57,805/- ON GROUND THAT I T IS JUST PROVISION AND NOT ADMISSIBLE AS EXPENSES. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THIS MATTER MAY BE REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF HONBLE JURISDICTIONAL HIGH COURTS FULL BENCH DECISION IN THE CASE OF CIT VS. VODAFONE ESSAR GUJARAT LTD IN T AX APPEAL NO.749 OF 2012. ITA NO. 291/AHD/2015 TRIO ELEVATORS CO. (INDIA) LTD VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 2 OF 4 LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT OBJECT TO THE SAME. IN VIEW OF ABOVE, WITH THE CONSENT OF THE PARTIES, THE MATTER IS REMI TTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF HON BLE GUJARAT HIGH COURTS FULL BENCH DECISION CITED SUPRA. THIS GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. 5. IN GROUND NO. 3, THE ASSESSEE-APPELLANT HAS RAIS ED THE FOLLOWING GRIEVANCE:- THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ALL OWING THE DEPRECIATION ON THE GOODWILL OF RS.1,56,17,576/- ON THE GROUND T HAT GOODWILL IS NOT COVERED UNDER EXPLANATION 3 TO SECTION 32(1) OF THE INCOME- TAX ACT, 1961 EVEN THOUGH THE ISSUE HAS BEEN DECIDED BY HONBLE SUPREME COURT IN FAVOUR OF THE ASSESSEE IN CASE OF SMIFS SECURITIES LIMITED, REPOR TED AT 348 ITR 302. 6. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AB OVE GRIEVANCE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY THE DECISION DATED 09.12 .2016 OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2007-08 WHEREIN THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS:- 3. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS OF THE LD. SENIOR COUNSEL. WE FIND THAT IN THE CASE OF SMIFS S ECURITIES LTD. (SUPRA), THE HONBLE SUPREME COURT WAS, INTERALIA, SEIZED WITH T HE FOLLOWING QUESTION OF LAW. QUESTION NO. (B) 'WHETHER GOODWILL IS AN ASSET WITHIN THE MEANING OF SECTION 32 OF THE INCOME TAX ACT, 1961, AND WHETHER DEPRECIATION ON' GOODWILL' IS ALLOWABLE UNDER THE SAID SECTION. ANSWER: 6. IN THE PRESENT CASE, THE ASSESSEE HAD CLAIMED DE DUCTION OF RS.54,85,430/- AS DEPRECIATION ON GOODWILL. IN THE COURSE OF HEARING, THE EXPLANATION REGARDING ORIGIN OF SUCH GOODWILL W AS GIVEN AS UNDER: 'IN ACCORDANCE WITH THE SCHEME OF AMALGAMATION OF Y SN SHARES & SECURITIES (P) LTD WITH SMIFS SECURITIES LTD (DULY SANCTIONED BY HON'BLE HIGH COURTS OF BOMBAY AND CALCUTTA) WITH RETROSPECT IVE EFFECT FROM 1ST APRIL, 1998, ASSETS AND LIABILITIES OF YSN SHARES & SECURITIES (P) LTD WERE TRANSFERRED TO AND VEST IN THE COMPANY. IN THE PROCESS GOODWILL HAS ARISEN I N THE BOOKS OF THE COMPANY.' 7. IT WAS FURTHER EXPLAINED THAT EXCESS CONSIDERATI ON PAID BY THE ASSESSEE OVER THE VALUE OF NET ASSETS ACQUIRED OF Y SN SHARES AND SECURITIES PRIVATE LIMITED (AMALGAMATING COMPANY) S HOULD BE CONSIDERED AS GOODWILL ARISING ON AMALGAMATION. IT WAS CLAIMED THAT THE EXTRA CONSIDERATION WAS PAID TOWARDS THE REPUTA TION WHICH THE AMALGAMATING COMPANY WAS ENJOYING IN ORDER TO RETAI N ITS EXISTING CLIENTELE. ITA NO. 291/AHD/2015 TRIO ELEVATORS CO. (INDIA) LTD VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 3 OF 4 8. THE ASSESSING OFFICER HELD THAT GOODWILL WAS NOT AN ASSET FALLING UNDER EXPLANATION 3 TO SECTION 32(1) OF THE INCOME TAX ACT, 1961 (THE ACT, FOR SHORT). 9. WE QUOTE HEREINBELOW EXPLANATION 3 TO SECTION 32 (1) OF THE ACT 'EXPLANATION 3.- FOR THE PURPOSES OF THIS SUB-SECTI ON, THE EXPRESSIONS 'ASSETS' AND 'BLOCK OF ASSETS' SHALL MEAN [A] TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PL ANT OR FURNITURE; [B] INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COP YRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE.' EXPLANATION 3 STATES THAT THE EXPRESSION 'ASSET SH ALL MEAN AN INTANGIBLE ASSET, BEING KNOW-HOW, PATENTS, COPYRIGH TS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE. A READING THE WORDS 'ANY OTHER BUSI NESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IN CLAUSE (B) OF EXPLANAT ION 3 INDICATES THAT GOODWILL WOULD FALL UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE'. THE PRINCIPL E OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRETING THE SAID EX PRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT 'GOOD WILL1 IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. IN THE PRE SENT CASE, THE ASSESSING OFFICER, AS A MATTER OF FACT, CAME TO THE CONCLUSION THAT NO AMOUNT WAS ACTUALLY PAID ON ACCOUNT OF GOODWILL. TH IS IS A FACTUAL FINDING. THE COMMISSIONER OF INCOME-TAX (APPEALS) ( 'THE CIT(A)', FOR SHORT) HAS COME TO THE CONCLUSION THAT THE AUTHORIZ ED REPRESENTATIVES HAD FILED COPIES OF THE ORDERS OF THE HIGH COURT O RDERING AMALGAMATION OF THE ABOVE TWO COMPANIES; THAT THE ASSETS AND LIA BILITIES OF M/S. YSN SHARES AND SECURITIES PVT. LTD. WERE TRANSFERRED TO THE ASSESSEE FOR A CONSIDERATION ; THAT THE DIFFERENCE BETWEEN THE COS T OF AN ASSET AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT THE ASSES SEE-COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WORTH OF THE A SSESSEE-COMPANY STOOD INCREASED. THIS FINDING HAS ALSO BEEN UPHELD BY THE INCOME-TAX APPELLATE TRIBUNAL ('THE ITAT', FOR SHORT). WE SEE NO REASON TO INTERFERE WITH THE FACTUAL FINDING. ONE MORE ASPECT WHICH NEEDS TO BE MENTIONED IS THAT , AGAINST THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL, THE REVENUE HAD PREFERRED AN APPEAL TO THE HIGH COURT IN WHICH IT H AD RAISED ONLY THE QUESTION AS TO WHETHER GOODWILL IS AN ASSET UNDER S ECTION 32 OF THE ACT. ITA NO. 291/AHD/2015 TRIO ELEVATORS CO. (INDIA) LTD VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 4 OF 4 IN THE CIRCUMSTANCES, BEFORE THE HIGH COURT, THE RE VENUE DID NOT FILE AN APPEAL ON THE FINDING OF FACT REFERRED TO HEREIN ABOVE. FOR THE AFORESTATED REASONS, WE ANSWER QUESTION NO. (B) ALSO IN FAVOUR OF THE ASSESSEE. 4. A PERUSAL OF THE AFORE-STATED DECISION OF THE HONBLE SUPREME COURT SHOWS THAT THE IMPUGNED ISSUE IS NO MORE RES INTEGR A. THEREFORE, RESPECTFULLY FOLLOWING THE AFORE-STATED DECISION OF THE HONBLE SUPREME COURT, THE A.O. IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION ON GOO DWILL ACQUIRED BY THE ASSESSEE DULY SUPPORTED BY VALUATION REPORT. 4. WE SEE NO REASON TO TAKE ANY OTHER VIEW OF THE M ATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. RESPECTFULLY FOLLOWING TH E SAME, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEPRECIATION ON GOODWILL ACQUIRED BY THE ASSESSEE IN THE LIGHT OF AFORESAID DECISION OF CO-ORDINATE BENCH. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON THE 22 ND DAY OF SEPTEMBER, 2017. SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 22 ND DAY OF SEPTEMBER, 2017 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ........21.09.2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ... 21.09.2017........ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 22.09.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: ... 22.09.2017...... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : .... 25.09.2017.. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: ..