DCIT 1(1) OSD, MUMBAI V. WORLDWIDE MEDIA P.LTD, MUMBAI

ITA 3572/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5664 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 27-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Valuation report
• Section: 234B; 14A; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 4573 /MUM./ 2009 ( / ASSESSMENT YEAR : 2005 06 ) DY. COMMISSIONER OF INCOME TAX OSD 1(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APP ELLANT V/S WORLDWIDE MEDIA PVT. L TD. THE TIMES OF INDIA BUILDING DR. D.N. ROAD, FORT MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AADCM7563Q . / ITA NO. 5757 /MUM./ 2009 ( / ASSESSMENT YEAR : 2006 07 ) ASSTT. COMMISSIONER OF INCOME TAX 1(3) AAYAKAR BHAVAN, 101, M.K. ROAD MUMBAI 400 020 .. / APP ELLANT V/S WORLDWIDE MEDIA PVT. LTD. THE TIMES OF INDIA BUILDING DR. D.N. ROAD, FORT MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AADCM7563Q WORLDWIDE MEDIA PVT. LTD. 2 . / ITA NO. 5973 /MUM./ 2009 ( / ASSESSMENT YEAR : 2006 07 ) WORLDWIDE MEDIA PVT. LTD. THE TIMES OF INDIA BUILDING DR. D.N. ROAD, FORT M UMBAI 400 001 .. / APP ELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX 1(3) AAYAKAR BHAVAN, 101, M.K. ROAD MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AADCM7563Q . / ITA NO. 3572 /MUM./ 2011 ( / ASSESSMENT YEAR : 2007 08 ) JT. COMMISSIONER OF INCOME TAX 1(3) AAYAKAR BHAVAN, 101, M.K. ROAD MUMBAI 400 020 .. / APP ELLANT V/S WORLDWIDE ME DIA PVT. LTD. THE TIMES OF INDIA BUILDING DR. D.N. ROAD, FORT MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AADCM7563Q . / ITA NO. 4126 /MUM./ 2011 ( / ASSESSMENT YEA R : 2007 08 ) WORLDWIDE MEDIA PVT. LTD. THE TIMES OF INDIA BUILDING DR. D.N. ROAD, FORT MUMBAI 400 001 .. / APP ELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX 1(3) AAYAKAR BHAVAN, 101, M.K. ROAD MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AADCM7563Q WORLDWIDE MEDIA PVT. LTD. 3 . / C.O. NO. 76/MUM./2010 ( . 4573 /MUM./20 09 ) ( ARISING OUT OF ITA NO. 4573 /MUM./20 09 ( / ASSESSMENT YEA R : 200 5 06 ) WORLDWIDE MEDIA PVT. LTD. THE TIMES OF INDIA BUILDING DR. D.N. ROAD, FORT MUMBAI 400 001 .. / CROSS OBJECTOR V/S DY. COMMISSIONER OF INCOME TAX OSD 1(1), AAYAKAR BHAVAN 101 , M.K. ROAD, MUMBAI 40 0 020 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAATG2361E / ASSESSEE BY: MR. NIRAJ SHETH / RE VENUE BY : MR. B.P.K. PANDA A/W MR . S.D. SRIVASTAVA / DATE OF HEARING 27.01.2014 / DATE OF ORDE R 31.07.2014 / ORDER / PER BENCH THE APPEAL PREFERRED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005 - 06 IS AGAINST THE IMPUGNED ORDER DATED 19 TH MAY 2009, PASSED BY THE LEARNED COMMISSIONER (APPEALS) - XXI, MUMBAI, THE CROSS APPEALS FOR THE ASSESSME NT YEAR 2006 - 07 ARE AGAINST THE IMPUGNED ORDER DATED 25 TH AUGUST 2009, PASSED BY THE LEARNED COMMISSIONER (APPEALS) - XIII & XIV, MUMBAI, CROSS APPEALS FOR THE ASSESSMENT YEAR 2007 - 08 ARE AGAINST THE IMPUGNED ORDER 8 TH FEBRUARY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS) - II, MUMBAI. THE ASSESSEE ALSO PREFERRED CROSS OBJECTION, WHICH IS ARISING OUT OF THE REVENUE'S APPEAL FOR THE ASSESSMENT YEAR 2005 - 06. WORLDWIDE MEDIA PVT. LTD. 4 2 . SINCE THE FACTS & CIRCUMSTANCES AS WELL AS MOST OF THE GROUNDS RAISED BY THE EITHER PARTY IN THE IR RESPECTIVE APPEALS AND CROSS OBJECTION FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION BE ING IDENTICAL AND COMMON, THEREFORE, AS A MATTER OF CONVENIENCE THEREOF, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 3 . WE NOW PROCEED TO DISPOSE OF THE APPEAL PREFERRED BY T HE REVENUE IN ITA NO.4573/MUM./2009, FOR ASSESSMENT YEAR 2005 - 06, THE DECISION OF WHICH WOULD BE APPLICABLE MUTATIS MUTANDIS TO OTHER APPEALS WHEREVER IDENTICAL ISSUE HAS BEEN RAISED. THE GROUNDS OF APPEAL RAISED BY THE REVENUE, ARE AS UNDER: - '1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN HOLDING THAT EXPLANATION 3 TO SECTION 43(1) IS NOT APPLICABLE WITH REGARD TO CLAIM OF DEPRECIATION ON THE ASSETS COVERED IN THE DE ED OF ASSIGNMENT BETWEEN THE ASSESSEE AND BENNETT, COLEMAN & CO. LTD. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT( A) ERRED IN DIRECTING THE AO TO ALLOW DEPRECIATION @ 25 % ON THE ACTUAL COST OF THE COPY RIGHTS AND TRADEMARKS AS PER THE DEED OF ASSIGNMENT BETWEEN THE ASSESSEE AND BENNETT, COLEMAN & CO. LTD. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 7.02 LAKHS BEING PROVISION TOWARDS UNSOLD MAGAZINES AND DISCOUNT ON AD VERTISEMENT INCOME. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DIRECTING THE AO NOT TO ADD THE PROVISION OF RS. 7.02 LAKHS WHILE COMPUTING THE BOOK PROFIT U/E 115JB OF THE ACT THOUGH ASSESSEE HAS NOT PROVED IT AN ASCERT AINED LIABILITY. 4 . BRIEF FACTS, QUA THE ISSUE RAISED IN THE AFORESAID GROUND NO. 1 AN D 2 ARE THAT, THE ASSESSEE, WORLDWIDE MEDIA PVT. LTD., FORMERLY KNOWN AS MAGZ INTERNATIONAL LTD., IS A 50: 50 JOINT VENTURE BETWEEN BENNETT, COLEMAN & CO. LTD. (FOR SHORT 'BCCL') AND BBC WORLDWIDE LTD. (FOR SHORT 'B B C'). LATER COMPANY BBC HOLDS ITS INVESTMENT IN WORLDWIDE MEDIA PVT. LTD. 5 THE ASSESSEE THROUGH ITS SUBSIDIARY CALLED AS WORLDWIDE CHANNE L INVESTMENTS LTD. THE ASSESSEE'S MAIN BUSINESS IS OF PUBLICATION, PRINTING, DISTRIBUTION AND MARKETIN G OF MAGAZINE S AND ALSO ORGANIZING MASTHEADS EVENTS. DURING THE FINANCIAL YEAR 2004 - 05, THE ASSESSEE ACQUIRED THE BUSINESS OF MAGAZINES AND EVENTS DIVISION OF BCCL AS A GOING CONCERN ON A SLUM SALE BASIS. THIS DIVISION CONSIST S OF PUB LI CATIO N OF MAGAZINES NAMELY 'FAMINA', 'FILMFARE' AND STANDALONE , PUBLICATIONS AND ORGANISING EVENTS LIKE FAMINA BRIDAL SHOW, FAMINA CLOTH SHOW AND FILMFARE AWARDS. THE ASSESSEE HAD ENTERED INTO A BUSINESS TRANSFER AGREEMENT WITH BCCL FOR THE PURCHASE OF THE SAID BUSINESS UPON TH E TERMS AND CONDITIONS STATED IN THE AGREEMENT DATED 6 TH APRIL 2004 . IN THE TERMS OF ITS BUSINESS TRANSFER AGREEMENT, IT WAS AGREED THAT THE BUYER I.E., THE ASSESSEE WILL PAY TO THE SELLER I.E., BCCL , PURCHASE CONSIDERATION OF SUMS AGGREGATING TO ` 91 CR ORES. THIS AMOUNT CONSISTED OF ` 11 CRORES FOR THE NET CURRENT ASSET VALUE AND THE BALANCE WERE ON ACCOUNT OF COPY RIGHTS AND TRADE MARK. THE BREAK - UP OF THE SAID CONSIDERATION WAS AS UNDER: - PARTICULARS VALUE ( ` IN CRORES) NET CURRENT ASSETS 11 COPY RI GHT 68 TRADE MARKS 12 91 5 . THIS PURCHASE VALUE WAS DETERMINED ON THE BASIS OF VALUATION REPORT GIVEN BY M / S. LODHA & CO. C . A. WHICH HAS VALUED THE ENTIRE BUSINESS BETWEEN ` 91 CRORES TO ` 98 CRORES. SIMILARLY, THE COPY RIGHTS AND TRADE MARK WAS VALUED AS PER THE VALUATION REPORT GIVEN BY THE SAME FIRM. IN ADDITION TO THE SUM OF ` 91 CRORES, THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 5.4 CRORES ON ACCOUNT OF EXCHANGE RATE DIFFERENCE A ND ADDED TO THE VALUE OF THE COPY RIGHT AND TRADE MARK AT ` WORLDWIDE MEDIA PVT. LTD. 6 4.08 CRORES A N D ` 1.36 CRORES RESPECTIVELY. IN THE AUDITED ACCOUNTS, IN THE SCHEDULE OF FIXED ASSETS, THE TRADE MARK HAS BEEN ASSIGNED A TOTAL VALUE OF ` 22 CRORES AND COPY RIGHT AT ` 64.08 CRORES. ON THIS VALUE, THE ASSESSEE HAS CLAIMED DEPRECIATION @ 25%. THE ASSESSIN G OFFICER, ON A PERUSAL OF THE COPY OF ASSIGNMENT DETAILS OF THE COPY RIGHT AND TRADE MARK AN D COPY OF VALUATION REPORT FOR THE SAID INTANGIBLE ASSET, NOTED THAT WHILE CONSIDERING THE VALUATION OF BUSINESS, THE GOODWILL OF THE BRANDS OF THE MAGAZINE WHICH HAS BEEN GENERATED OVER THE YEARS HAS NOT BEEN TAKE N INTO CONSIDERATION AT ALL . EVEN THE VALUATION REPORT SUBMITTED BY THE ASSESSEE DOES NOT GIV E ANY SPECIFIC NARRATION OF METHOD ADOPTED FOR VALUATION OF COPY RIGHT A ND THE TRADE MARK. ON THIS PREMISE, HE O BSERVED THAT THE VALU E ASSIGNE D TO THE INTANGIBLE ASSETS , NAMELY TRADE MARK AND COPY RIGHT IS MERELY AN ARRANGEMENT FOR CLAIMING DEPRECIATION, WHEREBY THE LIABILITY OF INCOME TAX CAN BE REDUCED BY CLAIMING HIGHER DEPRECIATION ON THE VALUE OF THE ENHANCED C OST OF INTANGIBLE ASSETS. HE ALSO INVOKED THE PROVISIONS OF EXPLANATIO N - 3 TO SECTION 43(1) AND HELD THAT SUCH A HUGE VALUE HAS BEEN ASSIGNED TO TRADE MARK AND COPY RIGHT ONLY FOR THE PURPOSE OF REDUCING THE LIABILITY O F INCOME TAX BY CLAIMING DEPRECIATIO N WITH REFERENCE TO ENHANCED COST. HE ESTIMATED THE VALUE OF GOODWILL AT ` 25 CRORES AND APPORTIONED THE BALANCE SUM OF ` 60 CRORES TOWARDS COPY R IG H T AND TRADE MARK. HE THUS, DISALLOWED THE DEPRECIATION ON GOODWILL. TH E WORKING GIVEN BY THE ASSESSING OFFICE R IN THE ASSESSMENT ORDER IS AS UNDER: TOTAL CONSIDERATION PAID (INCLUDING AMOUNT ON ACCOUNT OF EXCHANGE RATE) ` 96,00,00,000 LESS: VALUE OF CURRENT ASSET ` 11,00,00,000 ` 36,00,00,000 GOODWILL ` 25,00,00,000 ` 60,00,00,000 WORLDWIDE MEDIA PVT. LTD. 7 THE VALUE OF COPYRIGHT AND TRADEMARK IS DETERMINED BY APPORTIONMENT OF THE SAID AMOUNT OF ` 60 CRORES IN THE RATIO OF THE VALUE DETERMINED BY THE VALUER OF BOTH ASSETS I.E., 22:64.08 AS UNDER AND THE BALANCE AMOUNT OF ` 25,00,00,000 IS TREATED AS THE VALUE OF GOODWILL. A) VALU E OF TRADEMARK: 22 X 60,00,00,000 86.08 = 15,33,45,725 B) VALUE OF COPYRIGHT 64.08 X 60,00,00,000 86.08 = 44,66,54,275 6 . BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE SUBMITTED THAT EXPLANATION - 3 TO SECTION 43(1) IS APPLICABLE IN THE CASE= WHERE THE TRANSACTIONS TAKE PLACE BETWEEN THE RELATED PARTIES WHERE THERE IS A CHANCE OF E NHANCING THE VALUE OF ASSETS FOR CLAIMIN G HIGHER DEPRECIATION. THE ASSESSEE SUBMITTED POINTWISE REBUTTAL OF THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER SUCH A REBUTTAL HAS BEEN DEALT BY THE LEARNED COMMISSIONER (APPEALS ) AT PAGE - S AND 6 OF THE APPELLATE ORDER. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS A JOINT VENTURE BETWEEN TWO INDEPENDENT UNRELATED PARTIES COMING TOGETHER TO CARRY ON THE BUSINESS. THE TANGIBLE A ND INTANGIBLE ASSETS WERE TRANSFERRED TO THE ASSESSEE FOR THE BUSINESS CONSIDERATION AND NOT FOR CLAIMI NG ANY HIGHER DEPRECIATION ON ENHANCE D COST. COPY RIGHT AND TRADE MARK ARE INTERNALLY GENERATED ASSETS WITHOUT ANY ACQUISITION OF COST ATTACHED TO IT AND, THEREFORE, ONE OF THE BA SIC CONDITIONS OF TRANSFERRING THE ASSETS HAD ENHANCED COST AS COMPARED TO T HE ACTUAL COST IS NOT SATISFIED. THE ASSESSEE ALSO DEFENDED THE VALUATION REPORT OF M / S. LODHA & CO. ON VARIOUS COUNTS. BESIDES THIS, VARIOUS JUDICIAL PRECEDENCE WERE ALSO CITED IN SUPPORT OF THE CONTEN TION RAISED. THE ASSESSEE'S SUBMISSIONS HAVE BEEN D EALT WITH BY THE LEARN ED COMMISSIONER (APPEALS) AT PAGE - 7 AND 8 OF THE APPELLATE ORDER. THE LEARNED CIT(A)S APPRECIATED THE ASSESSEE'S CONTENTION AND ALSO THE MATERIAL PLACED ON RECORD AND HELD THAT THE AMOUNT OF ` 25 CRORES WORLDWIDE MEDIA PVT. LTD. 8 CONSIDERED AS GOODWILL BY THE ASSESSING OFFICER IS WITHOUT ANY BASIS. THE LEARNED C IT(A)S OBSERVATION S ARE AS UNDER: - '5.3. I HAVE GONE THROUGH THE ORDER PASSED BY THE AO AND THE ARGUMENTS AND SUBMISSIONS MADE BY THE AR. IT IS RELEVANT TO NOTE THAT THE APPELLANT IS A JOINT VENTURE COMPANY BETWEEN TWO INDEPENDENT AND UNRELATED PARTIES, NAMELY BENNETT, COLEMAN & CO. LTD. AND BBC. THE APPELLANT HAD ACQUIRED THE INTANGIBLE ASSETS BY WAY OF COPYRIGHTS AND TRADEMARKS PURSUANT TO A DEED OF ASSIGNMENT DATED 1 ST DECEMBER, 2004. PRIOR TO THE DEED OF ASSIGNMENT, AN INDEPENDENT VALUER HAD VALUED THE COPYRIGHTS AND TRADEMARKS AT RS. 64. 08 CRORES AND RS.21.36. CRORES RESPECTIVELY. THE VALUATION ARRIVED AT BY THE VALUER WAS ACCEPTED BY BOTH THE INDEPENDENT PARTIES TO THE TRANSACTION. THE SCHEDUL ES TO THE DEED OF ASSIGNMENT ALSO CARRY DETAILS OF THE TRADEMARKS THAT ARE BEING ASSIGNED AND STAMP DUTY HAS ALSO BEEN PAID BY THE APPELLANT ON BOTH THE AGREEMENTS. THE STAMP AUTHORITIES HAVE ALSO ACCEPTED THE VALUATION AND THE FACT THAT WHAT HAS BEEN ACQ UIRED ARE COPYRIGHTS AND TRADEMARKS. IT IS NOBODY'S CASE, MUCH LESS THAT OF THE AO, THAT THE VALUES ARRIVED AT AND ASCRIBED TO THE TRADEMARKS AND COPYRIGHTS WERE COLLUSIVE IN NATURE ORE SHAM. THE TRANSACTIONS BEING AT ARMS LENGTH AND AT VALUES ACCEPTED BY TWO INDEPENDENT PARTIES WOULD GO TO SHOW THAT IT IS NOT AN ARRANGEMENT FOR CLAIMING DEPRECIATION WITH REFERENCE TO AN ENHANCED COST. IT IS, THEREFORE, A MERE CONJECTURE ON THE PART OF THE AO TO STATE THAT EXPLANATION TO 3 TO SECTION 43(1) OF THE I. T. ACT, 1961 IS ATTRACTED. FURTHERMORE, WHEN A TRANSACTION IS BETWEEN THE TWO INDEPENDENT AND UNRELATED PARTIES, AND THERE IS NOTHING BROUGHT ON RECORD TO JUSTIFY THAT THE VALUATION AT WHICH THE ASSETS ( IN THE PRESENT CASE INTANGIBLE ASSETS) HAVE BEEN TRANSFERRED ARE EXCESSIVE, THERE IS NO POWER TO REWRITE THE DEED OF ASSIGNMENT. BESIDES, THERE IS ALSO NO BASIS WHATSOEVER FOR THE AO TO ARRIVE AT RS.25 CRORES AS GOODWILL. AT THE MOST IT IS ONLY A MATHEMATICAL CALCULATION THAT HAS BEEN DONE BY THE AO. IN THIS REGARD , IT IS PERTINENT TO NOTE THE OBSERVATIONS OF THE HON'BLE BOMBAY HIGH COURT IN R.B. BARISILAL ABIRCHAND SPINNING & WEAVING MILLS VS. ERR 175 ITR PAGE 260J WHEREIN UNDER SIMILAR CIRCUMSTANCES AN ATTEMPT WAS MADE TO GO BEHIND THE VALUATION REPORT. 5.3 AP PLYING THE ABOVE RATIO TO THE FACTS OF THE CASE, THE ACTUAL COST OF THE COPYRIGHTS AND THE TRADEMARKS TRANSFERRED UNDER THE DEED OF ASSIGNMENT IS EVIDENTLY ` 64.08 CRORES AND ` 21.36 CRORES RESPECTIVELY ON WHICH THE APPELLANT IS ELIGIBLE FOR DEPRECIATION A T THE RATE OF 25%. THE A .O. ERRED IN NOT GRANTING DEPRECIATION ON THE ACTUAL COST OF COPYRIGHTS AND TRADEMARKS AS CLAIMED BY THE APPELLANT. THERE IS NOTHING ON RECORD TO SHOW THAT THERE IS ANY FURTHER BUSINESS ARRANGEMENT WITH THE B B C TO PLOUGH BACK MONEY, IF AT ALL THE PRESUMPTION OF HIGHER VALUE WAS TO BE ACCEPTED. THAT IS TO SAY THAT IF AT ALL THE FOREIGN PARTNER AGREED TO PAY A PRICE GREATER THAN THE FAIR MARKET PRICE, THERE IS BOUND TO BE A FURTHER BUSINESS ARRANGEMENT TO GET THE MONEY BACK, WHICH IS N OT THE CASE MADE OUT BY THE A.G. THE AMOUNT OF ` 25 CR O RES CONSIDERED AS GOODWILL BY THE A. O IS ALSO A MERE SURMISE AND A LEAP IN THE DARK WITHOUT ANY BASIS W HATSOEVER. WORLDWIDE MEDIA PVT. LTD. 9 7 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LEARNED COMMI SSIONER (APPEALS)'S FINDING THAT THE VALUE ARRIVED FOR THE TRADE MARK AND COPY RIGHT BY THE ASSESSEE ARE NO COLLUSIVE AND SHAM IS NOT CORRECT. THE ASSESSEE HAS ACQUIRED THE MEDIA DIVISION BELONGING TO ONE OF THE JOINT VENTURE PARTNER I.E., BCCL WHICH HAS 50% COLLABORATION. THUS, SUCH AN ARRANGEMENT AN D VALUATION OF INTANGIBLE ASSETS PUTS UNDER DOUBT. NO METHOD HAS BEEN GIVER IN THE VALUATION REPORT FOR VALUING THE TRADE MARK AND COPY RIGHT. IN SUCH A PURCHASE OF ON - GOING CONCERN, WHICH HAS AN ESTABLISHED BR A NDS AND THE PRODUCTS, THERE HAS TO BE GOODWILL ASSOCIATED WITH SUCH BUSINESS. THE VALUERS HAVE NOT GIVEN ANY COMMENT OR ASCRIBED AN D VALUE FOR THE GOODWILL. ONCE THE GOODWILL IS ALSO TAKEN INTO CONSIDERATION THEN THE ASSESSEE'S CLAIM FOR DEPRECIATION OF INTANGIBL E ASSETS WILL ALSO GET REDUCED. HE STRONGLY RELIED UPON THE REASONS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND SUBMITTED THAT EXPLANATION 3 TO SECTION 41 HAS RIGHTLY BEEN INVOKED BECAUSE B Y ASSIGNING HIGHER VALUE TO TRADE MARK AND COPY RIGHT, THE ASSESSEE S CLAIMING DEPRECIATION ON THE ENHANCED COST OF SUCH ASSET. 8 . THE LEARNED COUNSEL, ON THE OTHER HAND, ON BEHALF OF THE ASSESSEE SUBMITTED THAT FIRST OF ALL, THE VALUATION REPORT OF THE ON - GOING BUSINESS CONCERN AND ALSO THE VALUAT ION ON TRADE MARK AND COPY RIGHTS HAS BE EN GIVEN AFTER ASSIGNING DETAIL REASONING. HE DREW OUR ATTENTION TO TH E VALUATION REPORT OF M / S. LODHA & CO., PLACED IN THE PAPER BOOK. THE TANGIBLE ASSETS WERE ONLY TO THE TUNE OF ` 11 CRORES WHICH HAS BE EN ACCEPTED BY THE ASSESSING OFFICER . THE BALANCE CONSIDERATION WAS ON ACCOUNT OF INTANGIBLE ASSETS LIKE COPY RIGHT AND TRADE MARK. ONCE A JOINT VENTURE IS OWNED BY TWO INDEPENDENT PARTIES, THEN ONE OF THE PARTIES WILL NOT ALLOW THE OTHER PARTY TO ENHANCE THE VALUATI ON OF ANY ASSET. FURTHER BOTH THE PARTIES HAVE AGREED TO THE VALUATION DONE FOR THE BUSINESS ASSET AND THE INTANGIBLE ASSETS. HE WORLDWIDE MEDIA PVT. LTD. 10 FURTHER SUBMITTED THAT THE GOODWILL IS A GENERIC TERM WHICH COMPRISES OF TRADE MARK COPY RIGHTS ETC. THERE IS NO REASON TO HAVE SEPARATE VALUATION O N ACCOUNT OF GOODWILL. THE ASSESSING OFFICER HAS VALUED THE GOODWILL AT ` 25 CRORES WHICH DOES NOT HAVE ANY BASIS. ONE VERY IMPORTANT ASPECT WHICH NEEDS TO BE CONSIDERED IN THIS CASE IS THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE T OTAL CONSIDERATION I.E., THE ENTIRE BUSINESS WAS PURCHASED ON ` 91 CRPRES . IN ANY CASE, WHETHER THE DEPRECIATION IS TO BE ALLOWED O N GOODWILL OR NOT HAS NOW BEEN SETTLED BY THE HON'BLE SUPREME COURT IN CIT V/ S SNIFF SECURITIES LTD., [2012] 348 ITR 302 (SC) . HE THUS, SUBMITTED THAT IT CANNOT BE ALLEGED THAT THE ASSESSEE HAS NOT TAKEN THE VALUE OF GOODWILL ONLY FOR THE PURPOSE OF REDUCING ANY LIABILITY TO TAX , ON ACCOUNT OF DEPRECIATION. EXPLANATION TO SECTION 43(1) CANNOT BE INVOKED IN THIS CASE AS THERE CAN NOT BE ANY COLLUSIVE TRANSACTION FOR ACQUIRING THE BUSINESS , FIRSTLY, THE SAID TRANSACTION WAS WITH UNRELATED PARTY AND SECONDLY, THERE IS NO DISPUTE WITH REGARD TO THE VALUE OF CONSIDERATION RECEIVED. THUS, THE FINDING GIVEN BY THE LEARNED COMMISSIONER (A PPEALS) IS LEGALLY AND FACTUALLY CORRECT. 9 . BY WAY OF REJOINDER, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IT CANNOT BE SAID THAT THERE IS NO TRANSFER OF GOODWILL WHILE ACQUIRING ON - GOING BUSINESS WHICH HAS HIGH VALUE BRAND PRODUCTS. THE GOO DWILL CANNOT BE 'NIL' IN SUCH A CASE. IN THE ENTIRE VALUATION REPORT, THE ELEMENT OF GOODWILL HAS NOT BEEN TAKEN INTO CONSIDERATION WHICH GOES TO SHOW THAT THE FINDINGS OF THE ASSESSING OFFICER TO THIS EXTENT ARE CORRECT. HE FURTHER SUBMITTED THAT IF ONCE THE GOODWILL IS ACCEPTED THAT PART OF THE CONSIDERATION IS ON ACCOUNT OF GOODWILL ALSO, THEN DEPRECIATION CANNOT BE ALLOWED ON GOODWILL SIMPLICITOR. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBA I , BENCH, IN ACIT V/ S AMERI CAN EXPRESS SERVICES INDIA LTD., ITA NO.4106 / MUM./2007, ORDER DATED 3 RD FEBRUARY 2012. WORLDWIDE MEDIA PVT. LTD. 11 10 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS BEEN FORMED IN THE RAT IO OF 50: 50, A S A JOINT VENTURE COMPANY BETWEEN BBCL AND BBC. IT HAS ACQUIRED THE BUSINESS OF MAGAZINE AND EVENT DIVISION OF BCCL AS AN ON - GOING CONCERN ON A SLUM SALE BASIS. THE BUSINESS WHICH WAS ACQUIRED , CONSISTED OF PUBLICATION AND DISTRIBUTION O F POP ULAR MAGAZINE LIKE 'FAMINA' AND 'FILMFARE' AND ALSO THE ORGANISER OF MEGA EVENTS LIKE FILMFARE AWARDS'. BEFORE ACQUIRING THE BUSINESS, VALUATION FROM PROFESSIONALS WAS OBTAINED WHEREIN , THE TOTAL VALUATION OF TANGIBLE AND INTANGIBLE ASSETS WERE VALUED BET WEEN ` 91 TO 99 CRORES AS ON 31 ST MARCH 2005. BASED ON SUCH VALUE, THE AGREEMENT FOR TRANSFER OF BUSINESS UNDERTAKING WAS EXECUTED BETWEEN THE PARTIES. T HE CASE OF THE REVENUE IS THAT WHILE VALUING THE INTANGIBLE ASSETS IN THE FORM OF COPY RIGHT AND TRADE MARK, THE ASSESSEE HA S NOT ASCRIBED ANY VALUE FOR GOODWILL AND THIS HAS LED TO CLAIM OF HIGHER OR MORE DEPRECIATION ON INTANGIBLE ASSETS VIZ. TRADE MARK AND COPY RIGHTS, AS THE DEPRECIATION CANNOT BE ALLOWED FOR GOODWILL. THE ASSESSING OFFICER, HAS ASCRIB ED THE VALUE OF GOODWILL IN HIS OWN WAY AT ` 25 CRORES AND THEREBY REDUCING THE VALUE OF OTHER INTANGIBLE ASSETS OF TRADE MARK AND COPY RIGHTS. TH IS HAS BEEN DONE BY HIM AFTER HOLDING THAT FIRSTLY, THE VALUATION REPORT GIVEN BY M/ S. LODHA & CO., IS NOT APP ROPRIATE AND, SECONDLY, THE ASSESSEE HAS COLLUSIVELY TRIED TO REDUCE THE LIABILITY OF INCOME TAX BY CLAIMING DEPRECIATION WITH REFERENCE TO THE ENHANCED COST. 11 . ONE VERY IMPORTANT ASPECT IN THE PRESENT CASE WHICH IS WORTH CONSIDERATION IS THAT THE REVENUE IS NOT CHALLENGING THE OVERALL CONSIDERATION PAID BY THE ASSESSEE FOR ACQUIRING THE BUSINESS I.E., ` 91 CRORES . I F THE AMOUNT ON ACCOUNT OF FOREI G N EXCHANGE GAIN IS TAKEN INTO ACCOUNT THIS COMES TO ` 96 CRORES. OUT OF TH E AMOUNT, WORLDWIDE MEDIA PVT. LTD. 12 THERE IS NO DISPUTE WITH R EGARD TO THE VALUE OF CURRENT ASSETS AT ` 11 CRORES. THE SOLE DISPUTE IS WITH REGARD TO ADOPTION OF THE VALUE OF THE COPY RIGHT AND TRADE MARK. THE ASSESSEE'S CASE IS THAT ONCE THE COPY RIGHT AND TRADE MARK HAS BEEN VALUED OR TAKEN INTO CONSIDERATION THEN , THERE IS NO REQUIREMENT OF VALUING GOODWILL AND IN FACT THERE IS NO GOODWILL ON SUCH ACQUISITION OF A DIVISION. IN ANY CASE, IF THERE IS GOODWILL THEN THE SAME IS PAID FOR , WHICH IS WITHIN THE S UM OF OVERALL CONSIDERATION PAID FOR ` 91 CRORES. INSOFAR AS THIS CONTENTION OF THE ASSESSEE IS CONCERNED , THAT THERE IS NO ACQUISITION OF G OODW ILL WHILE PURCHASING THE MAGAZINE AND EVENT DIVISION , WE ARE NOT M UCH INCLINED TO AGREE ON SUCH CONTENTION. THE REASON BEING THAT THIS DIVISION CONSIST S OF PUBLICATION AND D ISTRIBUTION OF VERY POPULAR MAGAZINE S LIKE FEMINA AND F ILMFARE , WHICH HAS A VERY HUGE CUSTOMER BASE AND HAS A VERY HIGH BRAND VALUE FOR MORE THAN SIXTY YEARS. THE GOODWILL IS A KIND OF BENEFI T ARISING FROM THE REPUTATION OF A BRAND OR BUSINESS WHICH IS GEN ERATE D WITH THE PASSAGE OF TIME. G OODWILL IS A GENERIC TERM WHICH HAS A VERY WIDER MEANING AND IS GENERATED WHILE CARRYING ON THE BUSINESS AND THE BRAND VALUE ASSOCIATED WITH THE PRODUCTS. THE GOODWILL CAN BE IN THE FORM OF COPY RIGHT S, PATENT, TRADE MARK, MARKETING R IG HTS , PARTICULAR CUSTOMERS, FR A NCHISE E , BRAND VALUE, ETC. IN THIS CASE, THE ASSESSEE HA S ONLY TAKEN THE PART OF THE GOODWILL IN THE FORM OF TRA D E MARK AND COPY RIGHT, HOWEVER, THAT ALONE CANNOT BE SAID TO BE A PART OF GOODWILL , ESPECIALLY WHEN THE ASSESSEE HAS ACQUIRED SUCH A HIGH END BRAND PRODUCTS IN THE FORM OF ONE OF THE MOST POPULAR MAGAZINE AN D RIGHT TO ORGANIZE MEGA EVENTS UNDER SUCH BRAND NAME . THEREFORE, PART O F THE ACQUISITION CO ST CAN ALSO BE SAID TO BE FOR GOODWILL OF THE BRAND PRODU CT . HOWEVER, THE MANNER IN WHICH THE ASSESSING OFFICER HAS ADOPTED THE VALUE OF THE GOODWILL IS ABSOLUTELY INCORRECT AND WITHOUT ANY METHOD , WHICH IS GENERAL LY ADOPTED FOR EVALUATING THE GOODWILL. IN THIS CASE, ONCE THERE WORLDWIDE MEDIA PVT. LTD. 13 IS NO DISPUTE THAT THE TOTAL CONSI DERATION FOR TANGIBLE AND INTANGIBLE ASSETS IS FOR ` 91 CRORES , WHICH HAS ALSO BEEN ACCEPTED BY THE A .O. , THEN IT IS PRESUMED THAT SUCH CONSIDERATION ALSO INCLUDES G O O DW ILL ON ACCOUNT OF BRAND OR PRODUCT BESIDES TRADE MARK AND COPY RIGHTS. 12 . NOW, THE ISSUE WHETHER THE DEPRECIATION CAN BE ALLOWED ON SUCH INTANGIBLE ASSET IN THE FORM OF GOODWILL ALSO OR NOT IS NO LONGER RES INTEGRA , AS THE HON'BLE SUPREME COU RT IN SNIFFS SECURITIES LTD. (SUPRA) B ESIDES VARIOUS OTHER HIGH COURT S ALSO , HAVE HELD THAT THE DEPREC IATION IS TO BE ALLOWED ON SUCH INTANGIBLE ASSETS WHICH CONSTITUTE GOODWILL . ONCE THE DEPRECIATION ALLOWABLE ON GOODWILL AT THE SAME RATE O N WHICH THE ASSESSEE HA S CLAIMED DEPRECIATION ON TRADE MARK AND COPY RIGHT, THEN IT IS IM MATERIAL TO DISALLOW THE ENT IRE CLAIM OF D EPRECIATION MADE BY THE ASSESSEE ON INTANGIBLE ASSETS. THE REASON BEING THAT, THE AGGREGATE VALUE OF ALL THE INTANGIBLE ASSETS IS ` 80 CRORES A ND DEPRECIATION IS TO BE ALLOWED AT 25 % ON THIS COST, THEN IT DOES NOT MAKE ANY DIFFERENCE WHETHER PART OF THE DEPRECIATION IS TO BE ASCRIBED FOR GOODWILL OR NOT , BECAUSE RESULTANTLY, THERE WOULD BE NO EFFECT ON ASSESSEE'S QUANTUM OF CLAIM OF DEPRECIATION. THE VERY PREMISE OF THE ASSESSING OFFICER TO INVOKE THE PROVISIONS OF EXPLANATION 3 TO SECTION 43(1 ) AND TO ASCRIBE THE VALUE OF GOODWILL GETS VITIATED WHEN THE LAW HAS BEEN SETTLED BY THE HON'BLE SUPREME COURT THAT THE DEPRECIATION IS TO BE ALLOWED ON GOODWILL ALSO AS ANY OTHER INTANGIBLE ASSET . THUS, IT WILL NOT MAKE ANY DIFFERENCE IN THE PRESENT CASE TO SEGREGATE THE VARIOUS INTANGIBLE ASSETS FOR THE PURPOSE OR MAKING ANY DISALLOWANCE ON ACCOUNT OF DEPRECIATION. THUS, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS DISMISSED FOR THE REASONS GIVE N ABOVE. 13 . TH E ISSUE ARISING OUT OF GROUND NO .3 AND 4, R ELATES TO DELETION OF ADDITION OF ` 7.02 LAKHS BEING PROVISIONS TOWARDS UNSOLD MAGAZINES AND DISCOUNT ON ADVERTISEMENT INCOME. WORLDWIDE MEDIA PVT. LTD. 14 14 . BEFORE THE ASSESSING OFFICER, IN RESPONSE TO THE SHOW CAUSE NOTICE WITH REGARD TO THE NATURE OF PROVISIONS DEBITED ON ACCOUNT O F UNSOLD ITEMS, THE ASSESSEE SUBMITTED THAT THESE PROVISIONS HAVE BEEN MADE ON ACCOUNT OF UNSOLD MAGAZINES AND DISCOUNT ON ADVERTISEMENT FOR THE MONTH OF MARCH 2005. THE SALE FIGURES ARE NET OF UNS OLD PUBLIC ATIONS AND DISCOUNT. THE ASSESSING OFFICER OBSERV ED THAT ACTUAL UNSOLD FIGURE FOR THE MONTH OF MARCH 2005 IS ONLY FOR ` 10.03 LAKHS AN D CREDIT NOTE IS ONLY FOR ` 17.89 LAKHS. THUS, THE BALANCE AMOUNT OF ` 7.02 LAKHS IS IN THE NATURE OF PROVISIONS WHICH REQUIRES TO BE ADDE D BACK. 15 . BEFORE THE LEARNED COMM ISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE RECORDS THE SALE OF MAGAZINES WHEN THE MAGAZINES ARE DISPATCHED TO THE DEALERS AND AT THE END OF EVERY MONTH, THE COMPANY MAKES PROVISIONS FOR UNSOLD MAGAZINES , BASED ON SOME SCIENTIFIC METHOD AND PAST EXPERIENCE. UPON THE RECEIPT OF FINAL REPORTS OF UNSOLD MAGAZINES FROM THE DEALERS, THE PROVISIONS MADE EARLIER ARE EITHER REVERSED O R INCREASED. THE PROVISIONS OF ` 35.12 LAKHS AS ON 31 ST MARCH 2005 MAINLY COMPRISES OF PROVISIONS OF UNSOLD MAGAZINES FOR WHICH THE REPORTS FROM THE DEALERS WERE AWAITED . IN VIEW OF THE ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE FROM THE EARLIER YEARS, THE ASSESSEE HAS BEEN DEBITING SUCH PROVISIONS. IT WAS ALSO SUBMITTED THAT THE CLOSING BALANCE OF THIS PROVISION RELATES NO T ONLY TO THE MONTH OF MARC H 2005, BUT ALSO INCLUDE PROVISIONS MADE IN EARLIER MONTHS FOR WHICH REPORTS WERE STILL AWAITED. FURTHER, THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE DIFFERENTIAL PROVISION OF ` 7.02 LAKHS PERTAINED TO PROVISIONS MADE FOR THE MONTHS PRIOR TO MARCH 2005 AND IS OF THE SAME NATURE AS THAT OF MARCH 2005, WHICH HA S BEEN ALLOWED BY HIM AS DEDUCTION. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN BHARAT EARTH MOVERS V/ S CIT, [2000] 245 ITR 428 (SC). THE LEARNED COMMISSIONER WORLDWIDE MEDIA PVT. LTD. 15 (APPEALS) ACCEPTED THE ASSESSEE'S CONTENTION A ND DELETED THE ADDITION AFTER OBSERVING AND HOLDING AS UNDER: - I HAVE CAREFULLY CONSIDERED THE ISSUE. THE FACT OF T HE MATTER IS THAT THERE IS NO REASON FOR THE A . O. TO CONSIDER A PO RTION OR PROVISION TO BE ELIGIBLE FOR ADDITION. THIS HAS HAPPENED MERELY BECAUSE OF LACK OF APPRECIATION OF THE NATURE OF PROVISION. THE L D. A . O. WAS OF THE OPINION THAT THE ENTIRE PROVISION OF ` 35.12 LACS PERTAIN TO THE MONTH OF MARCH, 2005 AND HE DISAL LOWED THE DIFFERENCE OF RS. 7.12 LACS BEING THE DIFFERENCE BETWEEN THE DOSING BALANCE OF THE PROVISION AND THE PROVISION PERTAINING TO THE MONTH OF MARCH, 2005. THE ID. A . O. DID NOT APPRECIATE THAT THE DIFFERENTIAL PROVISION OF RS. 7 .02 LACS PERTAIN TO THE PROVISION MADE FOR THE MONTHS PRIOR TO MARCH AND IS OF THE SAME NATURE AS THAT OF PROVISION FOR MARCH, 2005. IF THE PROVISION [OR THE MONTH OF MARCH, 2005 WAS CONSIDERED AS ELIGIBLE FOR DEDUCTION, THERE CAN BE NO REASON FOR NOT ALLOWING THE REMAINING PORT ION WHICH PERTAINS TO THE PERIOD EARLIER TO MARCH, 2005. THERE IS ALSO FORCE IN THE ARGUMENT OF THE ID. AR. THAT SINCE THE PROVISION IS MADE ON A SCIENTIFIC BASIS AND BASED ON PAST EXPERIENCE, THE SAME IS AN ACCRUED/ASCERTAINED LIABILITY ELIGIBLE FOR DEDUC TION. IT IS ALSO CORRECT THAT THE AMOUNT OF RS. 7.02 LACS EVEN IF CONSIDERED AS MERE PROVISION CANNOT BE ADDED BACK TO THE BOOK PROFIT U/S. 115J8 OF THE ACT. THE LD. A . O. IS NOT EMPOWERED TO RE - COMPUTE THE PROFITS FOR THIS PURPOSE, EXCEPT IN ACCORDANCE THE EXPLICIT PROVISION IN THIS REGARD. 6.3.1. IN THE RESULT, IT IS HELD THAT THE ENTIRE PROVISION OF ` 35.12 LACS IS ELIGIBLE FOR DEDUCTION AND, ACCORDINGLY, THE ADDITION OF ` 7.02 LACS, IN THIS REGARD, IS DIRECTED TO THE DELETED, BOTH FROM THE COMPUTATION OF INCOME AND THE COMPUTATION OF BOOK PROFITS U/S 115J B OF THE ACT. GROUND NO.5 OF APPEAL IS, THUS, ALLOWED . 16 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE PROVISIONS AR E IN THE NATURE OF UNCERTAIN LIABILITY AND THEREFORE, IT HAS RIGHTLY BEEN DISALLOWED. 17 . ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN MAKING SUCH KIND OF PROVISIONS ON A SCIENTIFIC BASIS WHICH HAS BEEN ACCEPT ED NOT ONLY IN THE EAR LIER YEARS BUT ALSO IN THE SUBSEQUENT YEAR WHICH IS EVIDENT FROM THE ORDERS OF THE SUBSEQUENT YEAR, WHICH ARE ALSO UNDER APPEAL, WHEREIN NO SUCH ADDITION HAS BEEN MADE. WORLDWIDE MEDIA PVT. LTD. 16 18 . AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS CONSIDERED THE PROVISION OF THE MONTH OF MARCH 2005 AS ELIGIBLE FOR DEDUCTION , THEN THERE IS NO REASON FOR NOT ALLOWIN G THE REMAINING PORTION WHICH PERTAINS TO THE PRIOR PERIOD TO MARCH 2005 ONCE SUCH SCIENTIFIC BASIS HAS BEEN AD OPTED FOR MAKING THE PROVISIONS IN THE EARLIER YEARS, AS WELL AS IN THE SUBSEQUENT YEARS, WE DO NOT FIN D ANY REASON TO UPHOLD THE REASONING GIVEN BY THE ASSESSING OFFICER. THUS, THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) ARE HEREBY AFFIRMED. GROUND S NO.3 AND 4 RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 19 . 2005 06 1 9 . IN THE RESULT, REVENUE'S APPEAL FOR ASSESSMENT YEAR 2005 - 06 IS TREATED AS DISMISSED. 20 . WE NOW TAKE UP ASSESSEE'S CROSS OBJECTION NO. 76/MUM./ 2010, WHICH IS ARISING OUT OF THE REVENUES APPEAL IN ITA NO.4573/ MUM./2009, FOR THE ASSESSMENT YEAR 2005 06. 21 . THE SOLE ISSUE RAISED BY THE ASSESSEE RELATES TO DISALLOWANCE OF DEDUCTION OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND OF ` 5 , 06 , 5 0 0 UNDER SECTION 36(1)(VA). 22 . THE ASSESSING OFFICER HAS DISALLOWED THE SAID DEDUCTION ON THE GROUND THAT THE ASSESSEE HAS MADE THE PAYMENT AFTER THE DUE DATE. THE RELEVANT AMOUNT AND THE DUE DATE O F THE PAYMENT S ARE AS UNDER: WORLDWIDE MEDIA PVT. LTD. 17 SR.NO. MONTH AMOU NT DUE DATE DATE OF PAYMENT 1. DECEMBER 2004 1,73,277 15.01.2005 21.03.2005 2. JANUARY 2005 1,74,477 15.02.2005 21.03.2005 3. FEBRUARY 2005 1,58,746 15.03.2005 21.03.2005 23 . ONCE IT HAS BEEN NOT BEEN DISPUTED THAT THE SAID AMOUNT HAS BEEN PAID WITHIN THE DUE DATE OF FILING OF THE RETURN OF INCOME, THEN SUCH A PAYMENT ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND IS TO BE ALLOWED. 24 . BOTH THE PARTIES HAVE ADMITTED BEFORE US THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN CIT V/S ALOM EXTRUSIONS LTD. [2009], 319 ITR 306 (SC) AND HOST OF OTHER DECISIONS ON THIS POINT , WHEREIN IT HAS BEEN HELD THAT IF THE EMPLOYEES P.F. CONTRIBUTION IS PAID WITHIN THE DUE DATE OF FILING OF THE RETURN OF INCOME, TH E SAME IS AN ALLOWABLE EXPENDITURE. RESPECTFULLY FOLLOWING THE SAID JUDGMENT OF THE HON'BLE SUPREME COURT, WE ALLOW THE GROUND RAISED BY THE ASSESSEE. 25 . 2 5 . IN THE RESULT, ASSESSEES CROSS OBJECTION IS TREATED AS ALLOWED. 26 . WE NOW TAKE UP REVENUES APPEAL IN ITA NO.5757/MUM./ 2009, FOR THE ASSESSMENT YEAR 2006 07, VIDE WHICH, THE SOLE GROUND RAISED BY THE REVENUE RELATES TO DISALLOWANCE OF DEPRECIATION ON THE ASSETS COVERED IN THE DEED OF ASSIGNMENT BETWEEN THE ASSESSEE AND BENNETT, COLEMAN & CO. LTD. 27 . BOTH THE PARTIES ADMITTED BEFORE US THAT THE FACTS AND CIRCUMSTANCES OF THIS ISSUE ARE IDENTICAL TO THE ISSUE DECIDED BY US IN THE REVENUES APPEAL IN ITA NO.4523/MUM./2009, FOR THE WORLDWIDE MEDIA PVT. LTD. 18 ASSESSMENT YEAR 2005 06, WHICH HAS BEEN DECIDED BY US WHEREIN WE HAVE DISMISSED THE GROUND RAISED BY THE REVENUE FOR THE REASONS STATED THEREIN. ACCORDINGLY, IN THE PRESENT APPEAL ALSO, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 28 . 2006 07 2 8 . IN THE RESULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2006 07 IS TREATED AS DISMISSED. 29 . WE NOW TAKE UP AS SESSEES APPEAL IN ITA NO.5973/MUM./ 2009, FOR THE ASSESSMENT YEAR 2006 07. 30 . GROUND NO.1 RELATES TO DISALLOWANCE UNDER SECTION 14 A . 31 . THE ASSESSEE, DURING THE YEAR UNDER ASSESSMENT HAS EARNED DIVIDEND INCOME OF ` 26,24,297 0, WHICH HAS BEEN CLAIMED AS EXEMPT . THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS NOT ADDED BACK ANY AMOUNT AS EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOME AND THE CONTENTION OF THE ASSESSEE IS NOT SATISFACTORY. HE, ACCORDINGLY, MADE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D . 32 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY, BUT WITHOUT ANY SUCCESS. THE COMMISSIONER (APPEALS) CONFIRMED THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER FOLLOWING THE DECISION OF MUMBAI SPECIAL BENCH DECISION OF T HE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. [2008] 119 TTJ (MUM.) 289 (SB). BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 33 . RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE MATERIAL AVAILABLE BEFORE US , WE FIND THAT THE COMMISSIONER (APPEALS), WHILE WORLDWIDE MEDIA PVT. LTD. 19 DISPOSING OFF THIS ISSUE, FOLLOWED MUMBAI SPECIAL BENCH DECISION OF THE TRIBUNAL RENDERED IN ITO V/S DAGA CAPITAL MANAGEMENT P. LTD. (SUP R A). THE HON'BLE JURISDI CTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.), HAS PARTLY REVERSED THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT P. LTD. (SUPRA) AND HAS HELD THAT RULE 8D IS NOT APPLICABLE PRIOR T O THE ASSESSMENT YEAR 2008 09 . UNDER THESE CIRCUMSTANCES, WE DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION IN LINE WITH THE PROPOSITIO NS LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) AND TO WORK OUT SOME REASONABLE BASIS AFTER EXAMINING THE ACCOUNTS AND GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE . THE ASSESSING OFFICER IS DIR ECTED NOT TO APPLY THE PROVISIONS OF RULE - 8D, FOR THE IMPUGNED ASSESSMENT YEAR. CONSEQUENTLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 34 . GROUND NO.2 RELATES TO DISALLOWANCE MADE UNDER SECTION 14A IN COMPUTING BOOK PROFIT UNDER SECTION 115JB. 35 . BOTH T HE PARTIES AGREED BEFORE US THAT THIS GROUND WILL BECOME CONSEQUENTIAL IN VIEW OF THE DETERMINATION OF DISALLOWANCE UNDER SECTION 14A AS WOULD BE ARRIVED AT BY THE ASSESSING OFFICER CONSEQUENT UPON THE DIRECTION GIVEN IN GROUND NO.1. 36 . 2006 07 3 6 . IN THE RESULT, ASSESSEES APPEAL FOR THE A.Y. 2006 07 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. WORLDWIDE MEDIA PVT. LTD. 20 37 . WE NOW TAKE UP REVENUES APPEAL IN ITA NO.3572/MUM./2011 FOR THE ASSESSMENT YEAR 2007 08. 38 . GROUND NO.1 AND 2 RELATE TO DISALLOWANCE OF DEPRECIATION ON THE ASSETS COVERED IN THE DEED OF ASSIGNMENT BETWEEN THE ASSESSEE AND BENNETT, COLEMAN & CO. LTD. 39 . BOTH THE PARTIES ADMITTED BEFORE US T HAT THE FACTS AND CIRCUMSTANCES OF THIS ISSUE ARE IDENTICAL TO THE ISSUE DECIDED BY US IN THE REVENUES APPEAL IN ITA NO.4523/MUM./2009, FOR THE ASSESSMENT YEAR 2005 06, WHICH HAS BEEN DECIDED BY US , WHEREIN WE HAVE DISMISSED THE GROUND RAISED BY THE REVEN UE FOR THE REASONS STATED THEREIN. ACCORDINGLY, IN THE PRESENT APPEAL ALSO, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 40 . 2007 08 40. IN THE RESULT, REVENUES APPEAL FOR THE ASSE SSMENT YEAR 2007 08 IS TREATED AS DISMISSED. 41 . WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.4126/MUM./2011 FOR THE ASSESSMENT YEAR 2007 08. 42 . GROUND NO.1 RELATES TO DISALLOWANCE OF ` 55,25,150 UNDER SECTION 14A OF THE ACT FOLLOWING THE PROVISIONS OF RULE 8D. 43 . RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE RECORD AVAILABLE BEFORE US, WE FIND THAT THE COMMISSIONER (APPEALS), THIS ISSUE IS IDENTICAL TO THE ISSUE RAISED BY THE ASSESSEE IN ITS A PPEAL FOR THE ASSESSMENT YEAR 2006 07 , WHEREIN WE HAVE RESTORED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & WORLDWIDE MEDIA PVT. LTD. 21 BOYCE MFG. CO. LTD. THAT RULE 8D WILL NOT BE APPLICABLE PRIOR TO THE ASSESSMENT YEAR 2008 09 AND SOME REASONABLE BASIS HAS TO BE ADOPTED AFTER LOOKING TO THE ACCOUNTS OF THE ASSESSEE AND GIVING PROPER OPPORTUNITY OF THE ASSESSEE TO EXPLAIN ITS CASE. CONSEQUENTLY, IN THE PRESENT ISSUE ALS O, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION AFTER PROVIDING DUE AND EFFECTIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THIS GROUND IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 44 . GROUND NO.2, RELATES TO DISALLOWANCE OF DEDUCTION OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND OF ` 2,80,473 UNDER SECTION 36(1)(VA) OF THE ACT. 45 . BOTH THE PARTIES ADMITTED BEFORE US THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE SUPREME COURT IN CIT V/S ALOM EXTRUSIONS LTD. [2009], 319 ITR 306 (SC), WHEREIN IT HAS BEEN HELD THAT IF THE P.F. CONTRIBUTION IS PAID WITHIN THE DUE DATE OF FILING OF THE RETURN OF I NCOME, THE SAME IS AN ALLOWABLE EXPENDITURE. RESPECTFULLY FOLLOWING THE SAID JUDGMENT OF THE HON'BLE SUPREME COURT, GROUND NO.2, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 46 . GROUND NO.3 RELATES TO LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. 47 . BOTH THE PARTIES ADMITTED BEFORE US THAT THIS ISSUE IS CONSEQUENTIAL IN NATURE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT IN ACCORDANCE WITH LAW AFTER GIVING EFFECT OF OUR AFORESAID DIRECTIONS. WORLDWIDE MEDIA PVT. LTD. 22 48 . 2006 07 48. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007 08 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 31 ST JANUARY 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY 2014 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 31 ST JANUARY 2014 / COPY OF THE ORDER FORWAR DED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / T RUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI