DSST CIT CIR 3(3)(1), MUMBAI V. RICOH INDIA LTD, MUMBAI

ITA 4150/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1778 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUR ESH MALIK
• Assessee Lawyers: R M MADHAVI
• Keywords: Depreciation; Scheme of amalgamation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGARWAL, ACCOUNTANT MEMBER ITA NO.4150/M/2016 ASSESSMENT YEAR: 2005-06 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-3(3)(1), ROOM NO.609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. RICOH INDIA LTD., 801, 8 TH FLOOR, ACKRUTI STAR, MIDC CENTRAL ROAD, NEAR MAROL TELEPHONE EXCHANGE, MIDC, ANDHERI (EAST), MUMBAI 400 093 PAN: AAACR 4151J (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : MS. R.M. MADHAVI, A.R. REVENUE BY : SHRI SURESH MALIK, D.R. DATE OF HEARING : 29.11.2016 DATE OF PRONOUNCEMENT : 29.11.2016 O R D E R PER C.N. PRASAD, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI [(HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 21.03.2016 FOR THE ASSESSMENT YEA R 2005-06. 2. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO CLAIM OF AMORTIZATION OF DEPRECIATION ON GOODWILL WITHOUT APPRECIATING THE F ACT THAT THE GOODWILL IS DEPRECIABLE UNDER SECTION 32 OF THE ACT ONLY IF ANY CONSIDERATION IS PAID FOR ITS ACQUISITION AND THE ASSESSEE HAS NOT EARMARKED ANY SPECIFIC AMOUNT TOWARDS SUCH GOODWILL AT THE TIME OF AMALGAMATION. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITS THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN ASSESSEES FAVOUR BY THE CO-ORDINATE BENCH IN ITA NO.4150/M/2016 M/S. RICOH INDIA LTD. 2 ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.4700 OF 2015 VIDE ORDER DATED 17.08.16 WHEREIN THE REVENUES APP EAL HAS BEEN DISMISSED. THE COPY OF THE ORDER IS PLACED ON RECORD. 4. THE LD. D.R. FAIRLY SUBMITS THAT IDENTICAL ISSUE HAS BEEN DECIDED FOR THE ASSESSMENT YEAR 2009-10 BY THE TRIBUNAL. 5. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND THE CO-ORDINATE BENCH DECISION FOR THE ASSESSMENT YEAR 2009-10 IN I TA NO.4700 OF 2015. IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2009-1 0 AN IDENTICAL GROUNDS HAVE BEEN RAISED AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A)-8, MUMBAI, WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF AMORTIZATION/DEPRECIATION ON GOODWILL OF RS.3,58 ,16,000/- WITHOUT APPRECIATING THE FACT THAT GOODWILL IS DEPRECIABLE U/S 32 OF THE ACT ONLY IF ANY CONSIDERATION IS PAID FOR ITS ACQUISITION AND THE ASSESSEE HAS NOT E ARMARKED ANY SPECIFIC AMOUNT TOWARDS SUCH GOODWILL AT THE TIME OF AMALGAMATION. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 6. THE GROUND BEFORE US IN THIS APPEAL IS EXACTLY T HE GROUND WHICH WAS DECIDED IN ASSESSMENT YEAR 2009-10 AND THE CO-ORDIN ATE BENCH DISMISSED THE REVENUES APPEAL HOLDING AS UNDER: 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE RELEVANT FACTS ARE THAT IN TERMS OF SCHEME OF ARRANGEMENT FOR MERGER OF GIL WITH THE ASSESSEE APPROVED BY THE HON'BLE HIGH COURTS OF CALCUTTA AND MUMBAI, ASSESSEE ACQUIRED THE ASSETS AND LIABILITIES OF GIL. BEFORE THE CIT(A), ASSESSEE REFERRED TO PARA 13.4 OF THE SCHEME OF ARRANGEMENT WHEREBY 'THE DEFICIT, IF ANY, IN THE VALUE OF THE ASSETS OVER THE VALUE OF THE LIABILITIES OF THE TRANSFEROR COMP ANY VESTED IN THE TRANSFEREE COMPANY, PURSUANT TO THIS SCHEME, AS RECORDED IN TH E BOOKS OF ACCOUNTS OF THE TRANSFEREE COMPANY SHALL, AFTER ADJUSTING THE AGGRE GATE FACE VALUE OF THE NEW EQUITY SHARES ISSUED BY THE TRANSFEREE COMPANY TO T HE MEMBERS OF THE TRANSFEROR COMPANY PURSUANT TO THIS SCHEME AND THE AMOUNTS REC ORDED 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 P ROFIT & LOSS ACCOUNT OF THE TRANSFEREE COMPANY ONLY AS AN AMORTIZATION OVER A P ERIOD OF 5 YEARS.' ON THE BASIS OF THE AFORESAID, ASSESSEE POINTED OUT THAT IT DETE RMINED THE VALUE OF GOODWILL AT RS.17,90,82,000/- WHICH WAS IN ACCORDANCE WITH THE SCHEME OF ARRANGEMENT APPROVED BY THE HON'BLE HIGH COURTS. ACCORDINGLY, 2 0% THEREOF, I.E., RS.3,58,16,400/- WAS AMORTIZED IN EACH OF THE 5 YEA RS STARTING FROM ASSESSMENT ITA NO.4150/M/2016 M/S. RICOH INDIA LTD. 3 YEAR 2005-06 BY WAY OF DEBIT IN THE PROFIT & LOSS A CCOUNT. THUS, IN THE INSTANT YEAR ASSESSEE CLAIMED AMORTIZATION OF RS.3,58,16,400/- B Y CONTENDING THAT THE CLAIM WAS IN TERMS OF THE DIRECTIONS OF HON'BLE HIGH COURT PA SSED WHILE APPROVING THE SCHEME OF ARRANGEMENT. THE SAID CLAIM HAS BEEN DENIED BY T HE ASSESSING OFFICER AND ALSO BY THE CIT(A) AND IT IS NOT THE SUBJECT MATTER OF C ONSIDERATION BEFORE US. THE CIT(A), IN THE ALTERNATE, ALLOWED ASSESSEE'S CLAIM FOR DEPR ECIATION ON THE ELEMENT OF 'GOODWILL' WITH REFERENCE TO THE FIGURE OF WDV WHIC H WAS TO BE REWORKED FOR EACH YEAR STARTING FROM ASSESSMENT YEAR 2005-06. AGAINST SUCH A DECISION, REVENUE IS IN APPEAL BEFORE US. 9. QUITE CLEARLY, IN TERMS OF SCHEME OF AMALGAMATIO N, THE ASSETS AND LIABILITIES OF GIL STOOD TRANSFERRED TO THE ASSESSEE. FURTHER, THE DEFICIT IN THE VALUE OF ASSETS OVER THE VALUE OF LIABILITIES OF GIL TAKEN OVER AFTER AD JUSTING THE AGGREGATE VALUE OF THE EQUITY SHARES ISSUED TO THE MEMBERS OF GIL, WAS TRE ATED AS GOODWILL IN THE BOOKS OF THE ASSESSEE-COMPANY. IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA), IT CANNOT BE DENIED THAT 'GOODWILL' IS AN ASSET QUALIFYING FOR DEPRECIATION U/S 32(1)(II) OF THE ACT. THE PLEA OF THE REVENUE THAT NO AMOUNT HAS BEEN PAID FOR ITS AC QUISITION DOES NOT DEFEAT THE CLAIM OF DEPRECIATION ALLOWED BY CIT(A). NOTABLY, ' GOODWILL' HAS ARISEN IN THE PRESENT CASE CONSEQUENT TO A SCHEME OF AMALGAMATION APPROVED BY THE HON'BLE HIGH COURT AND SO WAS THE SITUATION IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA) ALSO. APART THEREFROM, THE CIT(A) HAS ALSO RELIED UPON TH E JUDGMENTS OF (I) HON'BLE KERALA HIGH COURT IN THE CASE OF R. RAVEENDRAN PILLAI, 332 ITR 531; (II) HON'BLE DELHI HIGH COURT IN THE CASE OF AREVA T&D INDIA LTD., 345 ITR 421; (III) HON'BLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. L TD., 331 ITR 192; AND (IV) HON'BLE BOMBAY HIGH COURT IN THE CASE OF TAJ SATS AIR CATER ING LTD. (SUPRA) IN HOLDING THAT GOODWILL IS AN INTANGIBLE ASSET QUALIFYING FOR DEPR ECIATION U/S 32 OF THE ACT. WE FIND NO REASON TO INTERFERE WITH THE AFORESAID ACTION OF CIT(A), WHICH IS HEREBY AFFIRMED. AS A CONSEQUENCE, WE AFFIRM THE ULTIMATE DIRECTION OF THE CIT(A) TO ALLOW DEPRECIATION ON GOODWILL AS PER THE INCOME TAX RULE S, 1962 BY WORKING OUT THE FIGURE OF WDV OF GOODWILL FOR THE YEAR UNDER CONSID ERATION. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED, AS ABOVE. 7. RESPECTFULLY FOLLOWING THE SAID DECISION WE AFFI RM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 8. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.2016. SD/- SD/- (MANOJ KUMAR AGARWAL) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.11.2016. * KISHORE, SR. P.S. ITA NO.4150/M/2016 M/S. RICOH INDIA LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.