ADITYA BIRLA INSURANCE BROKERS LTD, MUMBAI V. ASST CIT 2(1)(1), MUMBAI

ITA 3639/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7838 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S MICHAEL JERALDLD
• Keywords: Depreciation; Valuation report; Revenue expenditure
• Section: 143(3); 32

Judgement Text

1 ITA NO.3639/MUM/2017 ADITYA BIRLA INSURANCE BROKERS.LTD. ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.3639/MUM/2017 ( / ASSESSMENT YEAR:2012-13 ) ADITYA BIRLA INSURANCE BROKERS LTD. ONE INDIABULLS CENTRE, TOWER-1 18 TH FLOOR, JUPITER MILL COMPOUND 841, SENAPATI BAPAT MARG ELPHINSTONE ROAD, MUMBAI-400 013. / VS. ACIT - 2(1) (1) AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. %& ./ ./PAN/GIR NO. AABCB- 8091- L ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) &(+ / APPELLANT BY : NONE )*&(+ / RESPONDENT BY : SHRI S. MICHAEL JERALD-LD.SR.DR / DATE OF HEARING : 14/10/2019 / DATE OF PRONOUNCEMENT : 14/10/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-3, MUMBAI, 2 ITA NO.3639/MUM/2017 ADITYA BIRLA INSURANCE BROKERS.LTD. ASSESSMENT YEAR-2012-13 [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-3/IT/37/TR-83/ACIT 2(1)(1)/2016-17 DATED 28/02/2017 ON FOLLOWING GROUNDS OF APPEAL:- DEPRECIATION ON OVERSTATEMENT OF GOODWILL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CTT(A) HAS ERRED IN TREATING RS.7,40,000 (RS.6,00,000 TOWARDS IRRECOVERABLE BROKERAGE COMMISSION PLUS RS. 1,40,000 TOWARDS PROVISION FOR GRATUITY) A S OVERSTATEMENT OF GOODWILL AND CONSEQUENTLY, DISALLOWED THE TAX DEPRECIATION OF RS .1,85,000. 2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C1T(A) HAS ERRED IN NOT CONSIDERIN G THE SUM OF RS.7,40,000 ALLOWABLE AS REVENUE EXPENDITURE. NON-COMPETE FEES 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C1T(A) HAS ERRED IN NOT ALLOWING EXPENDITURE OF RS 32,94,388 T OWARDS NON-COMPETE FEE AS A REVENUE EXPENDITURE U/S 37. 4. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING A LTERNATE CLAIM OF THE APPELLANT TREATING NON-COMPETE FEE AS AN INTANGIBLE ASSETS AND CONSEQU ENTLY, ALLOWING DEPRECIATION ON THE SAME U/S 32 OF THE IT ACT. 5. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW, THE APPELLANT SUBMITS THAT THE AMOUNT OF THE NON-CO MPETE FEE SHOULD BE ALLOWED AS DEDUCTION OVER A PERIOD OF 36 MONTHS I.E. 3 YEARS ( OVER A TENURE OF NON CARRYING OF SIMILAR BUSINESS). 6.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ACCEPTING THE ADDITIONAL GROUNDS OF AP PEAL OF THE APPELLANT WITHOUT ANY COGENT REASON. 2. NONE HAS APPEARED FOR THE ASSESSEE AND NO VALID ADJOURNMENT APPLICATION IS ON RECORD. THE PERUSAL OF ORDER SHEE T ENTRIES REVEAL THAT THE ASSESSEE HAS REMAINED NEGLIGENT TO ATTEND HEARING O N SEVERAL OCCASIONS. LEFT WITH NO OPTION, WE PROCEED TO ADJUDICATE THE S AME AFTER CONSIDERING MATERIAL ON RECORD AND AFTER HEARING LD. DR. 3.1 FACTS ON RECORD REVEAL THAT ASSESSEE BEING RESI DENT CORPORATE ASSESSEE, STATED TO BE ENGAGED IN THE BUSINESS OF G ENERAL INSURANCE BROKING AND PROVIDING ADVISORY SERVICES, WAS ASSESS ED FOR YEAR UNDER CONSIDERATION U/S. 143(3) ON 06/02/2015 WHEREIN THE INCOME OF THE 3 ITA NO.3639/MUM/2017 ADITYA BIRLA INSURANCE BROKERS.LTD. ASSESSMENT YEAR-2012-13 ASSESSEE WAS DETERMINED AT RS.954.77 LACS AFTER CER TAIN ADDITIONS AS AGAINST RETURNED INCOME OF RS.952.92 LACS E-FILED B Y THE ASSESSEE ON 27/09/2012. 3.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE PURCHASED INSURANCE BUSINESS FROM M/S. ENAM INSURAN CE BROKING LIMITED UNDER SLUMP SALE CONSIDERATION AGREEMENT DATED 25/0 4/2011 FOR A TOTAL CONSIDERATION OF RS.2 CRORES. THE ASSESSEE SUBMITTE D SLUMP SALE AGREEMENT AND VALUATION REPORT FOR THE PURPOSE OF C OMPUTATION OF GOODWILL ON ACQUISITION OF THE BUSINESS. THE ASSESSEE CLAIME D DEPRECIATION ON GOODWILL SO VALUED. HOWEVER, ON PERUSAL OF AGREEMEN T AND AS PER VALUATION REPORT, IT TRANSPIRED THAT THE GOODWILL WAS OVER VA LUED BY RS.10.86 LACS. ALTHOUGH THE ASSESSEE DEFENDED THE ACCOUNTING IN TE RMS OF ACCOUNTING STANDARDS-10 AND 26 ISSUED BY, THE INSTITUTE OF C HARTERED ACCOUNTANTS OF INDIA [ICAI], HOWEVER, NOT CONVINCED, THE VALUATION OF GOODWILL WAS REDUCED BY RS.7.40 LACS AND EXCESS DEPRECIATION CLAIMED THE REON @ 25% AMOUNTING TO RS.1.85 LACS WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE . 4.1 AGGRIEVED, THE ASSESSEE CONTESTED THE STAND OF LD. AO BEFORE THE LD. CIT(A) VIDE IMPUGNED ORDER DATED 28/02/2017. HOWEVE R, LD. CIT(A) VIDE PARA 6.5 OF THE IMPUGNED ORDER CAME TO THE CONCLUSI ON THAT VALUATION OF ASSETS RECORDED IN THE BOOKS OF ACCOUNT MUST BE AS PER SLUMP SALE AGREEMENT AND NOT AS PER VALUATION REPORT AND THER EFORE, CONFIRMED THE STAND OF THE LD. AO . 4 ITA NO.3639/MUM/2017 ADITYA BIRLA INSURANCE BROKERS.LTD. ASSESSMENT YEAR-2012-13 4.2. THE ASSESSEE RAISED ANOTHER GROUND OF APPEAL N OS. 2 AND 3 BEFORE LD. CIT(A) TO SUBMIT THAT THE AMOUNT OF RS.32.94 LA CS PAID TO M/S. ENAM INSURANCE BROKERS PVT. LTD. AS NON-COMPETE FEE WAS ALLOWABLE AS REVENUE EXPENDITURE, AND THEREFORE, THE SAME SHOULD BE ALLO WED. IN THE ALTERNATIVE, IT WAS PLEADED THAT, DEPRECIATION ON THE SAME MAY B E ALLOWED TO THE ASSESSEE. THIS ISSUE WAS NOT EXAMINED BY LD. ASSESS ING OFFICER AT ASSESSMENT STAGE. HOWEVER, THE LD. CIT(A) NOTED THA T THERE WAS NO MENTION OF THIS AMOUNT IN THE SLUMP SALE AGREEMENT AND THE VALUE OF RS.32.94 LACS ARRIVED AT BY THE ASSESSEE WAS NOT EX PLAINED EITHER DURING ASSESSMENT PROCEEDINGS OR DURING APPELLATE PROCEEDI NGS. THEREFORE, THE CLAIM WAS REJECTED. AGGRIEVED, THE ASSESSEE IS IN F URTHER APPEAL BEFORE US. 5. UPON DUE CONSIDERATION, WE FIND THAT THE FACTUAL MATRIX BEFORE US REMAINS THE SAME AS IT WAS BEFORE FIRST APPELLATE A UTHORITY AND NOTHING NEW HAS BEEN BROUGHT ON RECORD WHICH WOULD WARRANT US T O TAKE A DIFFERENT VIEW IN THE MATTER. THEREFORE, BY CONFIRMING THE STAND O F THE LD. CIT(A) ON BOTH THE ISSUES, WE DISMISS THE APPEAL. 6. THE APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2019 . SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14/10/2019 SR.PS:-JAISY VARGHESE 5 ITA NO.3639/MUM/2017 ADITYA BIRLA INSURANCE BROKERS.LTD. ASSESSMENT YEAR-2012-13 78 98 / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. 7 8 ) 9 , 9 , / DR, ITAT, MUMBAI 6. 8 :;< / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.