RICOH INDIA LTD, MUMBAI V. ASST CIT CIR 3(3), MUMBAI

ITA 3576/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2673 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 18-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUR ESH MALIK
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BE NCH, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER / I .TA NO. 3576/MUM/2013 ( / ASSESSMENT YEAR:2008-09 M/S. RICOH INDIA LTD., 801, 8 TH FLOOR, AKRUTI STAR, MIDC CENTRAL ROAD, NEAR MAROL TELEPHONE EXCHANGE, MIDC, ANDHERI (E), MUMBAI-400 093 / VS. THE ACIT, CIRCLE-3(3), MUMBAI ./ ./ PAN/GIR NO. : AAACR 4151J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI SURESH MALIK / RESPONDENT BY: SHRI SANJEEV KASHYAP / DATE OF HEARING :28.10.2015 !' / DATE OF PRONOUNCEMENT :04 .11.2015 #$ / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-7, MUMBAI DATED 11.2.2013 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRESSING GROUND NO. 1 AS THE IMPUGNED GRIEVANCE HAV E BEEN ITA. NO. 3576/M/2013 2 CONSIDERED BY THE AO WHILE PASSING THE RECTIFICATIO N ORDER. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 3. GROUND NO. 2 RELATES TO THE DENIAL OF DEPRECIATI ON ON GOODWILL. THIS ISSUE HAS BEEN CONSIDERED BY THE AO AT PARA-6 OF THE ASSESSMENT ORDER WHEREIN HE HAS MENTIONED THAT THE ASSESSEE HA S CLAIMED AN EXPENDITURE ON ACCOUNT OF AMORTIZATION OF GOODWILL OF RS. 3,58,16,000/-. THE AO FURTHER NOTED THAT THIS IS T HE THIRD YEAR OF THE CLAIM. THE AO DECLINED TO ENTERTAIN THE CLAIM FOR THE REASONS THAT ASSESSEE HAS NOT PAID ANY CONSIDERATION FOR THE ACQ UISITION OF GOODWILL AND SECONDLY SIMILAR CLAIMS MADE BY THE AS SESSEE IN ASSESSMENT YEARS 2006-07 AND 2007-08 HAVE BEEN EXAM INED BY THE AO AND ACCORDINGLY REJECTED THE CLAIM. FOLLOWING THE ORDERS OF HIS PREDECESSORS, THE AO ONCE AGAIN DECLINED THE CLAIM AND ADDED THE AMORTIZATION OF GOODWILL. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED ITS CLAIM. IT WAS EXPLAINED THAT AS PER THE SCHEME OF ARRANGEMENT FOR MERGER OF M/S. GIL WITH M/S. RICOH INDIA LTD (ASSESSEE) APPROVED BY THE HONBLE CALCUTTA HIGH CO URT AND BOMBAY HIGH COURT, RIL HAS TO RECORD THE ASSETS AND LIABIL ITIES OF GIL VESTED IN IT PURSUANT TO THE SCHEME BECOMING EFFECTIVE AT THE RESPECTIVE BOOK VALUES AS APPEARING IN THE BOOKS OF GIL AT THE CLOS E OF BUSINESS OF THE DAY IMMEDIATELY PRECEDING THE APPOINTED DATE. EXPL AINING THE ACCOUNTING STATEMENT OF THE SCHEME OF ARRANGEMENT, IT WAS SPECIFIED THAT THE FOLLOWING TREATMENT SHALL BE GIVEN FOR GOO DWILL: THE DEFICIT, IF ANY, IN THE VALUE OF THE ASSETS OV ER THE VALUE OF THE LIABILITIES OF THE TRANSFEROR COMPANY VESTED IN THE TRANSFEREE COMPANY, PURSUANT TO THIS SCHEME, AS RE CORDED IN THE BOOKS OF ACCOUNT OF THE TRANSFEREE COMPANY SHALL, A FTER ITA. NO. 3576/M/2013 3 ADJUSTING THE AGGREGATE FACE VALUE OF THE NEW EQUI TY SHARES ISSUED BY THE TRANSFEREE COMPANY TO THE MEMBERS OF THE TRANSFEROR COMPANY PURSUANT TO THIS SCHEME AND THE AMOUNTS RECORDED IN TERMS OF CLAUSE 13.3 ABOVE, BE TREATED AS GOODWILL IN THE BOOKS OF THE TRANSFEREE COMPANY. THE AFORESAID GOODWILL SHALL BE DULY REFLECTED IN THE PROFIT AND LOSS ACCO UNT OF THE TRANSFEREE COMPANY ONLY AS AN AMORTIZATION OVER A P ERIOD OF 5 YEARS. 5. IT WAS STRONGLY CONTENDED THAT PURSUANT TO THIS ARRANGEMENT, THE ASSESSEE HAS AMORTISED THE CLAIM ON ACCOUNT OF GOODWILL. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. 348 ITR 302. AFTE R CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT IN ASSESSEES OWN CASE FOR A.Y. 2006-07, HE HAS DECIDED THE CLAIM AGAINST THE ASSESSEE. ACCORDINGLY, FOLLOWING THE RULE OF CONSI STENCY, THIS YEAR ALSO ASSESSEES CLAIM WAS DENIED. 6. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE FIRST APPELLATE AUTHORITY. ONCE AGAIN, STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD (SUPRA). THE LD. COUNSEL FURTHER BROUGHT TO OUR NOTICE THE DECISION OF THE FIRST APP ELLATE AUTHORITY FOR A.Y. 2009-10 WHEREIN THE CLAIM OF AMORTIZATION OF G OODWILL HAS BEEN ALLOWED IN LINE WITH THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES (SUPRA). 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY STATED THAT THE CLAIM OF DEPRECIATION IN THE INITIA L YEARS I.E. 2006-07 AND 2007-08 HAS NOT BEEN ENTERTAINED BY THE REVENUE AUTHORITIES THEREFORE THE CLAIM CANNOT BE ENTERTAINED IN SUBSEQ UENT YEARS UNLESS ITA. NO. 3576/M/2013 4 THE INITIAL YEARS ARE DECIDED. THE DR CONTINUED TO STATE THAT EVEN THE CREATION OF GOODWILL HAS NOT BEEN PROPERLY EXPLAINE D BEFORE THE LOWER AUTHORITIES. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE CREATION OF GO ODWILL HAS NOT BEEN PROPERLY APPRECIATED BY THE AO WHO SEEMS TO BE CAR RIED AWAY BY THE SWAP RATIO OF SHARES BETWEEN THE SHAREHOLDERS OF GI L AND RIL. ACCORDING TO THE AO, THE DIFFERENCE BETWEEN MARKET VALUE OF THE ONE SHARE OF GIL AND 6 SHARES OF ASSESSEE IS TREATED AS GOODWILL WHEREAS IT IS THE SAY OF THE LD. COUNSEL THAT THIS IS NOT T HE CASE THE GOODWILL HAS BEEN CREATED AFTER TAKING OVER THE ASSETS AND T HE LIABILITIES AT THEIR BOOK VALUE QUA THE MARKET VALUES. 9.1. IN OUR CONSIDERED OPINION, THIS NEEDS TO BE VE RIFIED BY THE LD. CIT(A). WE, THEREFORE, SET ASIDE AND RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A). THE ASSESSEE IS DIRECTED TO FILE NECESSARY DETAILS IN RESPECT OF THE VALUATION OF GOODWILL AND THE LD. CI T(A) IS DIRECTED TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITI ES (SUPRA). GROUND NO. 2 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER, 2015. SD/- SD/- (AMARJIT SINGH ) (N.K. BILLAIYA) %& # /JUDICIAL MEMBER # / ACCOUNTANT MEMBER ' ( MUMBAI; )# DATED : 4 TH NOVEMBER, 2015 . & . ./ RJ , SR. PS ITA. NO. 3576/M/2013 5 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. +,- &&./ , ./' , ' ( / DR, ITAT, MUMBAI 6. -01 2 / GUARD FILE. % / BY ORDER, + & //TRUE COPY// & / %' ( (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI