Sunij Pharma Pvt.Ltd., Ahmedabad V. The Dy.CIT., Circle-8, Ahmedabad

ITA 3884/AHD/2007

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6940 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 18-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Difference of opinion; Valuation report; Change of opinion

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.3884/AHD/2007 [ASSTT.YEAR : 2004-2005] SUNIJ PHARMA P. LTD. T-1/B, NATIONAL PARK GULBHAI TEKRA, AHMEDABAD. /VS. DCIT, CIR.8 AHMEDABAD. ITA NO.870, 871, 872 AND 873/AHD/2010 [ASSTT.YEAR : 2002-2003, 2003-04, 2005-06, 2006-07] SUNIJ PHARMA P. LTD. T-1/B, NATIONAL PARK GULBHAI TEKRA, AHMEDABAD. PAN : AAFCS 2899 M /VS. ACIT(OSD), CIR.8 AHMEDABAD. ITA NO.1846/AHD/2010 [ASSTT.YEAR : 2004-05] DCIT(OSD), CIR.8 AHMEDABAD. /VS. SUNIJ PHARMA P. LTD. T-1/B, NATIONAL PARK GULBHAI TEKRA, AHMEDABAD. ITA NO.1600/AHD/2010 [ASSTT.YEAR : 2006-07] DCIT(OSD), CIR.8 AHMEDABAD. /VS. SUNIJ PHARMA P. LTD. T-1/B, NATIONAL PARK GULBHAI TEKRA, AHMEDABAD. ITA NO.3288/AHD/2011 [ASSTT.YEAR : 2007-08] SUNIJ PHARMA P. LTD. T-1/B, NATIONAL PARK GULBHAI TEKRA, AHMEDABAD. /VS. ITO, WARD-8(2) AHMEDABAD. ( (( ( -. -. -. -. / APPELLANT) ( (( ( /0-. /0-. /0-. /0-. / RESPONDENT) ITA NO.3884/AHD/2007 7 OTHERS -2- 1& 2 3 ) / ASSESSEE BY : SHRI S.N. SOPARKAR WITH SHRI J.M. SHAH + 2 3 ) / REVENUE BY : SHRI V.K. SINGH, SR.DR 5 2 &(* / DATE OF HEARING : 17 TH NOVEMBER, 2014 678 2 &(* / DATE OF PRONOUNCEMENT : 19/12/2014 )9 / O R D E R PER BENCH: THESE APPEALS BY THE ASSESSEE AND THE REVENUE FOR T HE DIFFERENT ASSESSMENT YEARS, ARE DIRECTED AGAINST TH E ORDER OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.3884/AHD/2007 - ASSTT.YEAR 2004-2005 (ASSESS EES APPEAL) 2. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING EDUCATIONAL EXPENSE S AMOUNTING TO RS.6,56,765/- OF THE TRAINEE OF THE APPELLANT WHO H APPENED TO BE THE GRAND DAUGHTER OF THE MANAGING DIRECTOR OF THE APPE LLANT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE EDUCATION EXPENSE OF THE TRAINEE OF THE ASSESSEE-COMPANY WAS DISALLOWED FOR THE REASON THAT SHE HAPPENS TO BE GRAND-DAUGHTER OF THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY. HE SUBMITTED THAT THE EXPEND ITURE WAS INCURRED TOWARDS REIMBURSEMENT OF EXPENDITURE INCURRED BY HE R FOR HER EDUCATION. HE REFERRED TO THE MEMORANDUM OF UNDERSTANDING DATE D 9.8.2003 BETWEEN THE TRAINEE, PAYAL N. PARIKH AND THE ASSESSEE-COMPA NY, WHEREIN SHE HAS GIVEN AN UNDERTAKING TO THE COMPANY THAT AFTER OBTA INING THE QUALIFICATION ON BEING SPONSORED BY THE COMPANY, SHE WILL BE IN E MPLOYMENT OF THE COMPANY FOR A PERIOD OF TWO YEARS AFTER COMPLETING M.B.A. COURSE ON THE ITA NO.3884/AHD/2007 7 OTHERS -3- REMUNERATION TO BE FIXED HEREINAFTER AND WILL NOT L EAVE THE SAID JOB WITHOUT PRIOR PERMISSION OF THE COMPANY AND WITHOUT DISCHAR GING ALL THE OBLIGATION. HE SUBMITTED THAT THE ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF HONBLE KARNATAKA HIG H COURT IN RAS INFORMATION TECHNOLOGIES P. LTD., 238 CTR 76, ITAT , AHMEDABADS DECISIONS IN THE CASE OF MAZDA LTD., ITA NO.3190/AH D/2008, AND IN THE CASE OF GUJARAT CARBON INDUSTRIES LTD. ITA NO.3231/ AHD/2010. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT TRA INEE NOT ONLY HAS GIVEN AN UNDERTAKING, BUT ALSO HAVE COMPLIED WITH THE SAM E BY DOING JOB AFTER COMPLETION OF HER HIGHER STUDIES WITH THE ASSESSEE- COMPANY. 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT JUDGMENTS CITE D BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS, AS T RAINEE, HERSELF WAS NOT A DIRECTOR IN THE ASSESSEE-COMPANY. MOREOVER, THER E IS NO RESOLUTION TO THIS EFFECT BY THE BOARD OF DIRECTORS AND THAT THIS IS A N ISOLATED CASE OF INCURRING EXPENDITURE ON HIGHER EDUCATION OF THE TR AINEE, AND THE ASSESSEE HAS NOT SPONSORED ANY SUCH EXPENDITURE IN RESPECT O F ANY OF ITS EMPLOYEES, IN THIS YEAR OR IN THE PRECEDING AS WELL AS SUBSEQU ENT ASSESSMENT YEARS. HE SUBMITTED THAT NO DETAILS OR EVIDENCE IN SUPPORT OF THE CASE OF THE ASSESSEE WAS FILED INSPITE OF HAVING ASKED BY THE AO. HE SU BMITTED THAT THERE WAS NO PENALTY CLAUSE IN THE MOU BETWEEN THE TRAINEE AN D THE ASSESSEE- COMPANY THAT IN CASE OF FAILURE OF THE TRAINEE, WHA T WOULD BE THE PENALTY PAYABLE BY THE TRAINEE TO THE ASSESSEE-COMPANY. HE RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A), AND ALSO CONTENTS OF THE MOU BETWEEN THE ASSESSEE-COMPANY AND PAYAL N. PARIKH (TRAINEE) DATE D 9.8.2003, AND ALSO ITA NO.3884/AHD/2007 7 OTHERS -4- VARIOUS DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE FIND THAT THE DECISIONS CITED AT BAR ON BEHALF OF THE AS SESSEE ARE DISTINGUISHABLE ON FACTS. THE LEARNED COUNSEL FOR THE ASSESSEE COU LD NOT CONTROVERT THE SUBMISSIONS OF THE LEARNED DR THAT IT WAS AN ISOLAT ED CASE OF SPONSORSHIP ON HIGHER EDUCATION STUDY GIVEN TO A VERY CLOSE REL ATIVE OF THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY, AND THERE IS NO S UCH EXAMPLE DURING THE RELEVANT YEAR OR IN THE PRECEDING OR SUBSEQUENT ASS ESSMENT YEARS. WE FIND THAT THE AO HAS GIVEN AMBLE OPPORTUNITY TO THE ASSE SSEE TO LEAD EVIDENCE TO JUSTIFY THE CLAIM OF THE ASSESSEE, BUT THE ASSES SEE HAS FAILED TO AVAIL THE SAME. THE REVENUE HAS CLAIMED THAT THERE WAS NO R ESOLUTION TO THIS EFFECT BY THE BOARD OF DIRECTORS OF THE ASSESSEE-COMPANY. WE FIND THAT THERE IS NO PENALTY CLAUSE WHATSOEVER IN THE MOU ENTERED INT O BETWEEN THE ASSESSEE-COMPANY AND THE TRAINEE, PAYAL PARIKH THAT IN CASE OF FAILURE ON THE PART OF THE TRAINEE TO COMPLY WITH THE TERMS AN D CONDITIONS OF THE MOU HOW THE TRAINEE SHALL COMPENSATE THE ASSESSEE-COMPA NY FOR THE HEAVY EXPENDITURE INCURRED ON HER HIGHER EDUCATION. IN O UR CONSIDERED OPINION, THE MOU ENTERED INTO BY THE TRAINEE WITH THE ASSESS EE-COMPANY IS MERELY A SELF-SERVING DOCUMENT. THERE IS NO EVIDENCE BRO UGHT ON RECORD ON BEHALF OF THE ASSESSEE TO SHOW THAT HER SELECTION F OR HIGHER EDUCATION WAS ON MERITS AND NOT DUE TO THE FACT THAT SHE WAS CLOS ELY RELATED TO THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY. THERE I S NO SCHEME LAID DOWN BY THE ASSESSEE-COMPANY TO SEND EMPLOYEES ABRO AD FOR TRAINING AND EMPLOYMENT THEREAFTER WITH THE ASSESSEE-COMPANY. I N THESE FACTS OF THE CASE, WE HAVE NO HESITATION IN HOLDING THAT THE EXP ENDITURE CLAIMED BY THE ASSESSEE ON HIGHER EDUCATION OF THE GRAND-DAUGHTER OF THE MANAGING DIRECTOR OF THE ASSESSEE WAS NOT WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, AND ACCORDINGLY, WE CONFI RM THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND NO.1 OF THE ASS ESSEE IS DISMISSED. ITA NO.3884/AHD/2007 7 OTHERS -5- 6. THE GROUND NO.2 AND 3 OF THE ASSESSEE ARE AS UND ER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING DEPRECIATION ON INTANGI BLE ASSETS AMOUNTING TO RS.10,54,688/- 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT GRANTING DEPRECIATION ON ALL THE INTANGIBLE ASSETS BY TREATI NG THE SAME WAS GOODWILL WITHOUT APPRECIATING THAT THE TERM GOODWIL L ALSO INCLUDES TRADE NAME, TRADE MARKET AND KNOWHOW OF THE BUSINES S OF THE APPELLANT AS EVIDENT FROM THE BUSINESS TRANSFER AGR EEMENT PLACED ON RECORD BEFORE HIM. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE OF GRANT OF DEPRECIATION ON INTANGIBLE ASSET I.E. GOODWILL I S COVERED IN ITS FAVOUR WITH THE DECISION OF THE ITAT, AHMEDABAD BENCH IN D CIT VS. TALENT INDIA IN ITA NO.1013 AND 1014/AHD/2009 FOR A.Y.2004 -05 AND 2006-07 DATED DECEMBER, 2011 WHEREIN HELD THAT DENIAL OF DE PRECIATION ON GOODWILL WAS NOT JUSTIFIED. HE SUBMITTED THAT NOW WITH THE DECISION OF THE HONBLE APEX COURT IN COMMISSIONER OF INCOME-TAX V. SMIFS SECURITIES LTD., 348 ITR 302 THE ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE. HE REFERRED TO THE MEMORANDUM OF TRANSFER OF BUSINESS, A COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BEFORE US IN SUPPORT OF HIS PLEA THAT THE PAYMENT OF GOODWILL FOR TRANSFER OF TRADE NAME, TRA DEMARK, PERMITS, LICENSES, GOODWILL AND KNOWHOW ATTACHED TO THE BUSI NESS CARRIED ON IN INDIA OR OTHERWISE WAS JUSTIFIED. HE RELIED ON THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF PATEL PRINTING PRESS PVT. LTD. VS. ITO IN ITA NO.770 AND 771/AHD/2010 DATED 8.3.2013 IN SUPPO RT OF HIS ARGUMENTS. HE RELIED ON THE DECISIONS IN ASHWIN VA NASPATI INDUSTRIES V. COMMISSIONER OF INCOME-TAX, 255 ITR 26 (GUJ), KOTAK FOREX BROKERAGE LTD. V. ASSISTANT COMMISSIONER OF INCOME-TAX, 33 SO T 237 (MUM) AND ITA NO.3884/AHD/2007 7 OTHERS -6- ITAT, AHMEDABADS THIRD MEMBER DECISION IN CHITRA P UBLICITY CO. PVT. LTD., 127 TTJ 1 (AHD)(TM) IN SUPPORT OF THE CASE OF THE ASSESSEE. 8. THE LEARNED DR HAS OPPOSED THE SUBMISSION OF THE ASSESSEE. HE SUBMITTED THAT THE CIT(A) HAS PASSED A WELL REASONE D ORDER ON THIS ISSUE. HE REFERRED TO PARA 4.1 ONWARDS OF THE CIT(A)S ORD ER AND SUBMITTED THAT WHOLE SCHEME OF AFFAIRS OF CAPITALIZATION OF GOODWI LL JUST PRIOR TO SUCCESSION AS STRUCTURED SERIES OF TRANSACTIONS DES IGNED TO EVADE TAXES. HE SUBMITTED THAT THE ASSESSEE FAILED TO SUBSTANTIA TE THAT THE FAIR VALUATION OF GOODWILL OF M/S.SUNJI PHARMACEUTICALS AS ON 1.4. 2001 WAS RS.75 LAKHS. HE RELIED ON THE DECISIONS IN THE CASE OF CIT VS. T ECHNO SHARES & STOCKS LTD. & ORS., (2009) 184 TAXMAN 103, CIT VS. BHARATB HAI VYAS, 97 ITD 248 (ITAT, AHD), BROKER PACKAGING P. LTD. VS. ACIT, 131 TTJ 99 (PANAJI) (TRIB.), MADULAR INFOTECH P. LTD. VS. DCIT , (2010) 131 TTJ 243 (PUNE) AND KEC INTERNATIONAL LTD. VS. ACIT, (2010) 41 SOT 43 (MUM.) 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A), AND ALSO VARIOUS CASE LAWS RELIE D ON BY THE PARTIES. WE FIND THAT THE ISSUE OF ALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSET IN THE FORM OF GOODWILL IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE VARIOUS DECISIONS INCLUDING THAT OF THE HONBLE APE X COURT IN COMMISSIONER OF INCOME-TAX V. SMIFS SECURITIES LTD. (SUPRA), AND THE DECISION OF ITAT, AHMEDABAD IN DCIT VS. TALENT INDI A (SUPRA). WE HAVE GONE THROUGH THE MEMORANDUM OF TRANSFER OF BUSINESS , A COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BEFORE US, WHICH IS DATED 1.4.2001 WHEREIN IT IS SPECIFICALLY PROVIDED THAT ALL THE TR ADE NAMES, TRADE-MARKS, PERMITS AND LICENSES, GOODWILL AND KNOWHOW ATTACHED TO THE BUSINESS CARRIED ON IN INDIA OR ELSEWHERE WERE TRANSFERRED T O THE ASSIGNEES I.E. THE ASSESSEE-COMPANY. IT IS NOW WELL SETTLED THAT THE GOODWILL IS AN INTANGIBLE ITA NO.3884/AHD/2007 7 OTHERS -7- ASSET ENTITLED TO DEPRECIATION. THE QUANTIFICATION OF GOODWILL AT RS.75 LAKHS IN THIS CASE SEEMS TO BE REASONABLE. THE ASS ESSEE HAS FILED A COPY OF WORKING OF THE VALUATION OF THE GOODWILL AS GIVEN B Y M/S.ANMOL SEKHRI & ASSOCIATES, MUMBAI, VALUER, AND A COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BEFORE THE TRIBUNAL. A PERUSAL OF THE SAID VALUATION REPORT JUSTIFIES THE REASONABLENESS OF THE VALUATION OF TH E GOODWILL AS CLAIMED BY THE ASSESSEE. IN THESE FACTS OF THE CASE, WE HOLD THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON GOODWILL WAS JUSTIFIED , AND ACCORDINGLY, THE GROUND NO.2 AND 3 OF THE ASSESSEE ARE ALLOWED. 10. OTHER GROUNDS OF THE APPEAL OF THE ASSESSEE ARE NOT SIGNIFICANT, AND THEREFORE NOT ADJUDICATED. ITA NO.870/AHD/2010 A.Y.2002-2003 (ASSESSEES APP EAL) 11. THE GROUND NO.1 OF THE ASSESSEE IS AS UNDER: 1. INVALID & BAD ORDER: THE CIT(A) ERRED IN NOT DEALING WITH THE GROUNDS RA ISED BEFORE HIM REGARDING INVALID & BAD ORDER. THE ORDER PASSED BY CIT(A) IS NOT DEALING WITH ALL THE OBJECTIONS MAKES THE ORDER IN VALID AND BAD IN LAW. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DI SMISSED. 13. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: II. DISALLOWANCE OF DEPRECIATION ON GOODWILL RS.16, 75,000/- 14. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE OF DEPRECIATION ON GOODWILL IN THIS APPEAL IS IDENTICAL WITH THE ISSUE IN THE GROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE FOR A.Y.2004-05. WE HAV E CONSIDERED RIVAL ITA NO.3884/AHD/2007 7 OTHERS -8- SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSI NG OF THE GROUND NO.2 AND 3 IN THE ASSESSEES APPEAL FOR A.Y.2004-05 IN T HE FOREGOING PARAS OF THIS ORDER, WE ALLOW THE GROUND NO.2 OF THE ASSESSE E. ITA NO.871/AHD/2010 A.Y.2003-2004 (ASSESSEES APP EAL) 15. THE GROUND NO.1 OF THE ASSESSEE IS AS UNDER: 1. INVALID & BAD ORDER: THE CIT(A) ERRED IN NOT DEALING WITH THE GROUNDS RA ISED BEFORE HIM REGARDING INVALID & BAD ORDER. THE ORDER PASSED BY CIT(A) IS NOT DEALING WITH ALL THE OBJECTIONS MAKES THE ORDER IN VALID AND BAD IN LAW. 16. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DI SMISSED. 17. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: II. DISALLOWANCE OF DEPRECIATION ON GOODWILL RS.12, 56,250/- 18. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE OF DEPRECIATION ON GOODWILL IN THIS APPEAL IS IDENTICAL WITH THE ISSUE IN THE GROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE FOR A.Y.2004-05. WE HAV E CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSI NG OF THE GROUND NO.2 AND 3 IN THE ASSESSEES APPEAL FOR A.Y.2004-05 IN T HE FOREGOING PARAS OF THIS ORDER, WE ALLOW THE GROUND NO.2 OF THE ASSESSE E. ITA NO.872/AHD/2010 A.Y.2005-2006 (ASSESSEES APP EAL) 19. THE GROUND NO.1 OF THE ASSESSEE IS AS UNDER: 1. INVALID & BAD ORDER: ITA NO.3884/AHD/2007 7 OTHERS -9- THE CIT(A) ERRED IN NOT DEALING WITH THE GROUNDS RA ISED BEFORE HIM REGARDING INVALID & BAD ORDER. THE ORDER PASSED BY CIT(A) IS NOT DEALING WITH ALL THE OBJECTIONS MAKES THE ORDER IN VALID AND BAD IN LAW. 20. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DI SMISSED. 21. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: II. DISALLOWANCE OF DEPRECIATION ON GOODWILL RS.7,0 6,640/- 22. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE OF DEPRECIATION ON GOODWILL IN THIS APPEAL IS IDENTICAL WITH THE ISSUE IN THE GROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE FOR A.Y.2004-05. WE HAV E CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSI NG OF THE GROUND NO.2 AND 3 IN THE ASSESSEES APPEAL FOR A.Y.2004-05 IN T HE FOREGOING PARAS OF THIS ORDER, WE ALLOW THE GROUND NO.2 OF THE ASSESSE E. ITA NO.873/AHD/2010 A.Y.2006-2007 (ASSESSEES APP EAL) 23. THE GROUND NO.1 OF THE ASSESSEE IS AS UNDER: 1. INVALID & BAD ORDER: THE CIT(A) ERRED IN NOT DEALING WITH THE GROUNDS RA ISED BEFORE HIM REGARDING INVALID & BAD ORDER. THE ORDER PASSED BY CIT(A) IS NOT DEALING WITH ALL THE OBJECTIONS MAKES THE ORDER IN VALID AND BAD IN LAW. 24. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DI SMISSED. 25. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: ITA NO.3884/AHD/2007 7 OTHERS -10- II. DISALLOWANCE OF DEPRECIATION ON GOODWILL RS.5,2 9,981/- 26. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE OF DEPRECIATION ON GOODWILL IN THIS APPEAL IS IDENTICAL WITH THE ISSUE IN THE GROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE FOR A.Y.2004-05. WE HAV E CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSI NG OF THE GROUND NO.2 AND 3 IN THE ASSESSEES APPEAL FOR A.Y.2004-05 IN T HE FOREGOING PARAS OF THIS ORDER, WE ALLOW THE GROUND NO.2 OF THE ASSESSE E. ITA NO.3288/AHD/2011 A.Y.2007-2008 (ASSESSEES AP PEAL) 27. THE GROUND NO.1 OF THE ASSESSEE IS AS UNDER: 1. INVALID & BAD ORDER: I) THE CIT(A) ERRED IN NOT ACCEPTING THE CONTENTIONS T HAT THE ORDER IS INVALID & BAD: (A) AS IT IS CHANGE OF OPINION ONLY (B) AS NO NOTICE U/S.143(2) WAS ISSUED WHEN TIME WAS AV AILABLE FOR ISSUE OF NOTICE. (C) AS NO ORDER IS PASSED AN ACCORDANCE WITH THE DIRECT IONS OF THE SUPREME COURT IN GKN DRIVE SHAFT (INDIA) LTD. II)THE ORDER PASSED BY CIT(A) IS UNJUSTIFIED AND B AD ON FACTS & LAW. 28. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DI SMISSED. 29. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: II. DISALLOWANCE OF DEPRECIATION ON GOODWILL RS.4, 33,710/-; I) THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF DEPR ECIATION ON GOODWILL OF RS.3,97,486/- INSTEAD OF RS.3,02,563 /- CLAIMED. ITA NO.3884/AHD/2007 7 OTHERS -11- THE CIT(A) ERRED IN NOT CONSIDERING THE CONTENTION THAT DEPRECIATION ACTUALLY CLAIMED BY THE APPELLANT IS R S.3,02,563/- AND NOT RS.3,97,486/-, II) THE CIT(A) ERRED IN NOT DEALING WITH ALTERNATIVE AR GUMENT THAT DEPRECIATION IS ALLOWABLE ON ALL THE INTANGIBLE ASS ETS, AS GOODWILL ALSO INCLUDES TRADE NAME, TRADEMARK & KNOW HOW OF THE BUSINESS. III) THE ACTION OF CIT(A) TO REJECT THE CLAIM OF DEPRECI ATION ON GOODWILL, WITHOUT APPRECIATING SUBMISSION IN ITS PR OPER PERSPECTIVE IS UNJUSTIFIED & BAD ON FACTS & LAW. 30. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE OF DEPRECIATION ON GOODWILL IN THIS APPEAL IS IDENTICAL WITH THE ISSUE IN THE GROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE FOR A.Y.2004-05. WE HAV E CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSI NG OF THE GROUND NO.2 AND 3 IN THE ASSESSEES APPEAL FOR A.Y.2004-05 IN T HE FOREGOING PARAS OF THIS ORDER, WE ALLOW THE GROUND NO.2 OF THE ASSESSE E. ITA NO.1600/AHD/2010 A.Y.2006-2007 (REVENUES APP EAL) 31. THE GROUND NO.1 OF THE REVENUES APPEAL IS AS U NDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.9,05,000/- MADE BY THE AO ON ACC OUNT OF COMMISSION. 32. THE LEARNED DR REFERRED TO PARA 12 ONWARDS OF T HE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE T HE PAYEES OF THE COMMISSION PAYMENT BEFORE THE AO INSPITE OF AMBLE O PPORTUNITY PROVIDED TO THE ASSESSEE. HE SUBMITTED THAT PANS OF THE PAY EES OF THE COMMISSION PAYMENTS ARE ALSO NOT MATCHING, AND THERE ARE DISCR EPANCIES THEREIN. HE SUBMITTED THAT ONUS WAS ON THE ASSESSEE TO PROVE TH AT THE PAYMENTS WERE MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS. HE REFERRED TO ITA NO.3884/AHD/2007 7 OTHERS -12- VARIOUS DECISIONS OF THE HONBLE HIGH COURTS AS REL IED UPON BY THE AO IN THE ASSESSMENT ORDER. HE RELIED ON THE ORDER OF TH E AO. 33. THE LEARNED COUNSEL FOR THE ASSESSEE OPPOSED TH E SUBMISSION OF THE LEARNED DR. HE SUBMITTED THAT THERE WAS NO DISCREP ANCY IN THE PANS OF THE PAYEES OF THE COMMISSION PAYMENT. HE SUBMITTED THAT THE ASSESSEE HAS FILED EVIDENCES IN THE FORM OF AFFIDAVITS OF THE PA YEES OF THE COMMISSION PAYMENT, AND COPY THEREOF HAS BEEN FILED IN THE COM PILATION BEFORE US. HE SUBMITTED THAT THE ASSESSEE HAS ESTABLISHED THE SER VICES RENDERED BY THE PAYEES OF THE COMMISSION AS THEY HAVE EFFECTED SALE S ON BEHALF OF THE ASSESSEE-COMPANY, AND THE ASSESSEE COMPANY HAS PAID COMMISSION AT THE RATE OF 1% OF THE SALE AMOUNT, AND NECESSARY TDS WA S ALSO MADE ON THE COMMISSION PAYMENTS TO VARIOUS PAYEES. HE REFERRED TO THE COPY OF THE LEDGER ACCOUNT OF THE PAYEES FILED IN THE COMPILATI ON BY THE ASSESSEE. 34. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A), AND ALSO COPY OF VARIOUS EVIDENCES FILED BY THE ASSESSEE IN ITS COMPILATION BEFORE THE TRIBUNAL. W E FIND THAT THE PAYMENTS WERE MADE TO OUT-STATION PARTIES PER CHEQUE. THE C OMMISSION WAS PAID AT THE RATE OF 1% ON THE SALE EFFECTED BY THESE PARTIE S. THE TDS AS APPLICABLE WAS MADE AT THE TIME OF MAKING THE PAYMENT OF COMMI SSION TO THE PAYEES. COMPLETE DETAILS OF THE PAYMENT OF COMMISSION WERE MAINTAINED IN THE ACCOUNT BOOKS OF THE ASSESSEE. THE ASSESSEE HAS AL SO FILED AFFIDAVITS OF THE PAYEES OF THE COMMISSION PAYMENT, COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BEFORE US. THE CIT(A) HAS RECORDED TH AT THE ASSESSEE HAS MADE A REQUEST TO THE AO TO CALL FOR THE CONCERNED PARTIES BY ISSUING SUMMONS, BUT HE HAS NOT CONSIDERED THIS REQUEST. WE FIND THAT THE CIT(A) HAS RECORDED THAT ALL IMPORTANT EVIDENCES IN THE FO RM OF PAN, ADDRESSES, CONTRA ACCOUNT AND CONFIRMATION INCLUDING AFFIDAVIT S FROM ALL SUCH ITA NO.3884/AHD/2007 7 OTHERS -13- COMMISSION AGENTS WERE SUBMITTED BY THE ASSESSEE. IN THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THERE WERE NO MISTAKE IN THE ORDER OF THE CIT(A) IN HOLDING THAT ALL THESE EVIDENCES WERE SUF FICIENT TO DISCHARGE THE ONUS OF THE ASSESSEE FOR CLAIMING SUCH EXPENDITURE, AND ACCORDINGLY, THE GROUND NO.1 OF THE REVENUE IS DISMISSED. ITA NO.1846/AHD/2010 A.Y.2004-2005 (REVENUES APP EAL) PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 35. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.6,13,984/- LEVIED U/S.271(1)(C) OF TH E ACT. 36. THE LEARNED DR SUBMITTED THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED ON THE ASSESSEE ON TWO COUNT S I.E. DISALLOWANCE OF EDUCATION EXPENSES OF GRAND-DAUGHTER OF THE MD OF T HE ASSESSEE-COMPANY AND SECOND DEPRECIATION ON GOODWILL. 37. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT A S REGARDING FIRST ISSUE OF VALIDITY OF PENALTY IMPOSED FOR DISALLOWANCE OF EXPENSES INCURRED FOR HIGHER EDUCATION OF GRAND-DAUGHTER OF THE MD OF THE ASSESSEE-COMPANY, WE FIND THAT THE ASSESSEE HAS MADE FULL DISCLOSURE ALL THE MATERIAL FACTS IN ITS ACCOUNT STATEMENT, AND ALSO IN THE AUDITED REPO RT OF ITS ACCOUNTS FOR THE RELEVANT PERIOD. THERE COULD ALWAYS BE AN HONEST D IFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE REVENUE REGARDING ALLO WABILITY OR OTHERWISE OF A PARTICULAR EXPENDITURE INCURRED BY THE ASSESSE E. THE FACT THAT THE ASSESSEE HAS INCURRED EXPENDITURE ON HIGHER EDUCATI ON OF THE TRAINEE AND ALL THESE FACTS WERE DISCLOSED IN THE ACCOUNT STATE MENTS OF THE ASSESSEE IS NOT IN DISPUTE. IN THESE FACTS, WE HOLD THAT NO PE NALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSABLE ON THE ASSESSEE ON ACCOUNT OF ITA NO.3884/AHD/2007 7 OTHERS -14- DISALLOWANCE OF EXPENDITURE FOR HIGHER EDUCATION OF GRAND-DAUGHTER OF THE MD, AND ACCORDINGLY ORDER OF THE CIT(A) ON THIS ISS UE IS CONFIRMED. WITH REGARD TO SECOND ISSUE OF PENALTY ON DISALLOW ANCE OF DEPRECIATION ON GOODWILL, WE FIND THAT THE DISALLOW ANCE ITSELF HAS BEEN DELETED BY US WHILE DECIDING THE QUANTUM APPEAL OF THE ASSESSEE FOR THE RELEVANT ASSTT.YEAR 2004-05 IN THE FOREGOING PARAS OF THIS ORDER, AND ACCORDINGLY, THERE REMAINS NO BASIS FOR IMPOSITION OF PENALTY ON THE ASSESSEE. EVEN ON MERITS, SINCE THE ASSESSEE HAS D ISCLOSED ALL THE FACTS AT THE TIME OF FILING OF THE RETURN ITSELF, AND CLAIM OF THE ASSESSEE FOR DEPRECIATION ON GOODWILL WAS BONA FIDE , THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD NOT BE LEVIED ON THE ASS ESSEE. IN THIS VIEW OF THE MATTER, WE CONFIRM THE ORDER OF THE CIT(A) ON T HIS ISSUE, AND THE GROUND OF THE REVENUE IS DISMISSED. 38. IN THE RESULT, THE QUANTUM APPEAL OF THE ASSESS EE FOR THE ASSTT.YEARS 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 AND 200 7-08 ARE PARTLY ALLOWED. THE REVENUES QUANTUM APPEAL FOR A.Y.2006 -07 IS DISMISSED AND APPEAL FOR A.Y.2004-05 REGARDING PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT