DCIT, 14(2)(1), MUMBAI V. IMCD GROUP B.V. - INDIA BRANCH (CURRENTLY KNON AS IMDC INDIA PVT. LTD.), MUMBAI

ITA 3322/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4996 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 17-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALLIKARJAIN UTTURE
• Assessee Lawyers: SANDIP BAGMAR
• Keywords: Business income; Depreciation
• Section: 271(1)(c); 264; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.3322/MUM/2019 ASSESSMENT YEAR: 2015-16 THE DCIT 14(2)(1), MUMBAI VS. M/S. IMCD GROUP B V INDIA BRANCH (NOW IMCD INDIA P. LTD.), B WINGH, 1101-1103, ONE KBC, C-66, G BLOCK, BKC, BANDRA (E), MUMBAI 400 051. PAN AABCI8417R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MALLIKARJAIN UTTURE RESPONDENT BY : SHRI SANDIP BAGMAR DATE OF HEARING : 3 0 . 0 9 .20 20 DATE OF PRONOUNCEMENT : 12 . 1 0. 20 20 O R D E R THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST O RDER OF LEARNED CIT(A)- 56, MUMBAI, DATED 14.03.2019, PERTAINING TO ASSESSM ENT YEAR 2015-16. 2. THE ONLY GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DIRECTING THE AO TO ALL OW THE DEPRECIATION OF RS 8,34,91,830/- ON NON-COMPETE FEES WITHOUT APPREC IATING THE FACT THAT NON-COMPETE FEES IS NOT AN ASSET AND IS A RIGHT AVA ILABLE AGAINST THE CONTRACTING PARTIES ONLY AND HENCE NOT AN ASSET. 3. AT THE OUTSET, IN THIS CASE LEARNED COUNSEL OF T HE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBU NAL IN ITS OWN CASE FOR A.Y. 2012- 13. ITA NO.3322/MUM/2019 IMCD GROUP BV INDIA BRANCH (NOW IMCD INDIA P. LTD.) 2 4. PER CONTRA, THE LEARNED DR DID NOT DISPUTE THIS PROPOSITION. 5. WE FIND THAT THE ASSESSING OFFICER IN THIS CASE HAS MADE THE DISALLOWANCE OF DEPRECIATION ON NON-COMPETE FEES BY CONCLUDING AS U NDER: 4.3 THE HON'BLE DISPUTE RESOLUTION PANEL (DRP) IN ASSESSEE'S OWN CASE FOR AY 2012-13 HAS ACCEPTED-THE CONTENTION OF THE A SSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE JTAT, MUMBAI AGAINST THE DIRECTIONS OF D RP BEFORE HON'BLE ITAT MUMBAI AND THE MATTER IS SUB JUDICE. 4.4 IN VIEW OF THE ABOVE AND AS PER THE STAND TAKEN BY THE ASSESSING OFFICER IN EARLIER YEARS AND STAND TAKEN BY THE DEP ARTMENT THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON GOODWILL AMOUN TING TO RS, 83,491,831/-- IS HEREBY DISALLOWED. AS A RESULT THE SAME IS ADDED BACK TO THE BUSINESS INCOME RETURNED BY THE ASSESSEE. PENAL TY PROCEEDINGS ARE INITIATED SIMULTANEOUSLY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 6. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) DELET ED THE DISALLOWANCE PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE AND HIS OWN ORDER FOR EARLIER YEAR BY OBSERVING AS UNDER: THE LATEST POSITION ON ASSESSMENT OF SAME INCOME I S AS UNDER : A. IN AY 2012-13 APPEAL BY REVENUE AGAINST DE CISION OF DRP WHERE FOLLOWING- QUESTION WAS RAISED BEFORE HON. IT AT [IN ITA/1544/MUM/2016 DATED 11.07.2018.] WAS DISMISSED. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE HON'BLE DISPUTE RESOLUTION PANEL (DRP) WAS JUSTIFIE D IN DIRECTING THE AO TO ALLOW DEPRECIATION OF RS. 1,36,31,137/- O N GOODWILL AND NON-COMPETE FEES, WITHOUT APPRECIATING THE FACT S OF THE CASE THAT THE CONSIDERATION OF RS. 10 R 90,49,099/-PAID BY THE ASSESSEE INCLUDED CONSIDERATION OF RS. RESTRAINING THE SELLER TO CARRY ON A SIMILAR BUSINESS FOR A PERIOD OF 8 YEARS . B. IN AY 2013-14, THE SUM CLAIMED AS DEPRECIA TION ON GOODWILL WAS NOT ACCEPTED BE ME BUT WAS ALLOWED AS DEPRECIATION ON NON-COMPETE FEE VIDE ORDER DATED 17.01.2018. ITA NO.3322/MUM/2019 IMCD GROUP BV INDIA BRANCH (NOW IMCD INDIA P. LTD.) 3 C. IN AY 2014-15 THERE IS NO ADDITION TO GOO DWILL/NON-COMPETE FEE IS THERE AND DECISION FOR AY 2013-14 WAS TO CONTINU E. 5. IN A.Y. 2015-16 THERE IS NO ADDITION TO GOOD WIL L/NON-COMPETE FEE. THE DEPRECIATION IS ON ADDITION TO INTANGIBLE ASSET S ACQUIRED IN A.Y. 2012-13 AND 2013-14. THE OPENING WDV FOR A.Y. 2012- 13 STANDS CEMENTED BY HON'BLE ITAT AND IS FURTHER RECAST BASE D ON APPELLATE ORDER BY UNDERSIGNED FOR A.Y. 2013-14 AND 2014-15. DEPRECIATION IS TO BE GRANTED ON ACCOUNT OF DECISION OF HON'BLE ITAT I N THIS ASSESSMENT YEAR ALSO AS FACTS AND CIRCUMSTANCES ARE IDENTICAL AS FOR A.Y. 2011-12. 6. THE A.O. IS ACCORDINGLY DIRECTED TO GRANT DEPREC IATION ON INTANGIBLE ASSETS AS CLAIMED BY ASSESSEE ON GOODWILL/NON-COMPE TE FEE AFTER CORRECTING COMPUTING OPENING WDV BASED ON APPELLATE DECISION FOR A.Y. 2012-13, 2013-14 AND 2014-15. THE ALTERNATE GROUNDS TURNS INCONSEQUENTIAL AND NEEDS NO ADJUDICATION. 7. WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR A.Y. 2012-13 VIDE ORDER DATED 11.07.2018 HAS UPHELD THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIATION BY CONCLUDING AS UNDER: 11. WE HAVE DELIBERATED AT LENGTH ON THE FACTS OF T HE CASE IN THE BACKDROP OF THE SETTLED POSITION OF LAW, AND BEING OF THE VIEW THAT AS THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY CO VERED BY THE AFORESAID JUDGMENTS OF THE HONBLE HIGH COURT OF MADRAS IN TH E CASE OF PENTASOFT TECHNOLOGIES LTD. VS. DCIT (2014) 264 CTR 187 )(MAD ) AND THAT OF THE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. INGE RSOLL RAND INTERNATIONAL IND LTD. (2014) (48 TAXMAN.COM 349), THEREFORE, RESPECTFULLY FOLLOW THE SAME. WE, THUS, IN TERMS O F OUR AFORESAID OBSERVATIONS UPHOLD THE ORDER PASSED BY THE A.O. UN DER SEC. 14(3) R.W.S. 144C(13) IN COMPLIANCE TO THE DIRECTIONS OF THE DRP UNDER SEC. 144C(5) OF THE ACT. THE GROUND OF APPEAL NO.1 RAISED BY TH E REVENUE IS DISMISSED. THE GROUNDS OF APPEAL NO.2 AND 3 BEING GENERAL IN NATURE ARE DISMISSED AS NOT PRESSED. ACCORDINGLY, FOLLOWING THE ABOVE PRECEDENT, WE UPHO LD THE ORDER OF LD. CIT(A) 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE I TAT RULES ON 12 TH OCT, 2020. SD/- SD/- (PAVAN KUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 12 TH OCTOBER, 2020. ITA NO.3322/MUM/2019 IMCD GROUP BV INDIA BRANCH (NOW IMCD INDIA P. LTD.) 4 SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), 4. THE C I T 5. THE DR, C BENCH BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI