ITO 6(1)(3), MUMBAI V. INDOKEM LTD, MUMBAI

ITA 4428/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8161 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 25-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIR NEIL PHILIPDR
• Assessee Lawyers: NATWAR THAKRAR; UJWAL THAKRAR
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Principle of natural justice; Retrospective amendment
• Section: 133A; 194C; 201(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.4422/MUM/2014 ASSESSMENT YEAR: 2006-07 M/S INDOKEM LIMITED, 410/411, KHATAU HOUSE, MOGUL LANE, MAHIM (WEST), MUMBAI-400016 / VS. INCOME TAX OFFICER(OSD)TDS -2(2), ROOM NO.704, 7 TH FLOOR, K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002 ( #$% & /ASSESSEE) ( / REVENUE) PAN. NO . AAACI2959M ITA NO.4428/MUM/2014 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER(OSD)TDS - 2(2), ROOM NO.704, 7 TH FLOOR, K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002 / VS. M/S INDOKEM LIMITED, 410/411, KHATAU HOUSE, MOGUL LANE, MAHIM (WEST), MUMBAI-400016 ( / REVENUE) ( #$% & /ASSESSEE) PAN. NO . AAACI2959M ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 2 ' & ( / DATE OF HEARING : 12/12/2017 ' & ( / DATE OF ORDER: 12/12/2017 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) THE ASSESSEE AS WELL AS REVENUE IS IN APPEAL AGAIN ST THE IMPUGNED ORDER DATED 17/04/2014 OF THE LD. FIRS T APPELLATE AUTHORITY, MUMBAI. FIRST, WE SHALL TAKE U P THE APPEAL OF THE ASSESSEE (ITA NO.4422/MUM/2014) ON TH E GROUND THAT THE TWO GROUNDS, WHICH WERE RAISED AS A DDITIONAL GROUNDS BEFORE THE LD. COMMISSIONER OF INCOME TAX ( APPEAL) WITH RESPECT TO INITIATION OF PROCEEDING U/S 201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER TH E ACT) WITHOUT DEMONSTRATING THAT THERE WERE TAXES DUE FRO M THE DEDUCTEE ASSESSEE, WHICH HAVE REMAINED UNPAID AND ALTERNATIVE HAS ALSO BEEN RAISED TO THE EFFECT THAT OUT OF INTEREST OF RS.5,75,921/-, ORIGINALLY PROVIDED U/S 194A OF THE ACT, ONLY A SUM OF RS.81,921/- WAS ACTUALLY PAID TO M/S BHARUCH ECO AQUA INFRASTRUCTURE LTD. AND BALANCE PR OVISION OF RS.4,94,000/- WAS REVERSED AS THE SAME WAS NO LO NGER #$% & ! / ASSESSEE BY SHRI NATWAR THAKRAR & MR. UJWAL THAKRAR ! / REVENUE BY SHIR NEIL PHILIP-DR ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 3 PAYABLE IN VIEW OF CANCELATION OF LICENSE AND HENCE THE DEFAULT, IF ANY, WOULD BE LIMITED TO RS.18,383/- BE ING TDS AT THE RATE OF 22.44% ON ACTUAL PAYMENT OF INTEREST OF RS.81,921/-. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI NATWAR THAKRAR ALONG WITH MR. UJWAL THAKRAR, A DVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED. THE CRUX OF ARGUMENT IS THAT THE ADDITIONAL GROUND RAISED BE FORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WERE DISMIS SED, WHICH GOES TO THE ROOT OF THE MATTER AND THE SAME S HOULD HAVE BEEN CONSIDERED. ON THE OTHER HAND, SHRI NEIL PHILIP, LD. DR, DEFENDED THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEAL). 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT SURVEY ACTION U/S 133A OF THE ACT WAS CARR IED AT THE PREMISES OF THE ASSESSEE ON 29/12/2005. NOTICE U/S 201(1) AND 201(1A) OF THE ACT WERE ISSUED TO THE ASSESSEE CALLING FOR NECESSARY DETAILS. THE ASSESSEE ATTENDED THE PROCEE DINGS AND FILED THE DETAILS AND SUBSEQUENTLY THE ASSESSEE CHA LLENGED THE INITIATION OF PROCEEDINGS. HOWEVER, THE LD. AS SESSING ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 4 OFFICER HELD THE ASSESSEE IN DEFAULT. ON APPEAL BEF ORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE ASSESSEE R AISED ADDITIONAL GROUNDS, WHICH WERE DISMISSED AND THE SA ME WERE NOT CONSIDERED. THIS ACTION OF THE LD. COMMISSIONE R OF INCOME TAX (APPEAL) HAS BEEN CHALLENGED BEFORE US. WITHOUT GOING INTO MUCH DELIBERATION AND CONSIDERING THE AR GUMENT FROM BOTH SIDES, WE ARE OF THE VIEW THAT NO PERSON SHOULD BE CONDEMNED UNHEARD. EVEN OTHERWISE, AS PER ARTICLE-2 65 OF CONSTITUTION OF INDIA, ONLY DUE TAXES HAVE TO BE LE VIED AND COLLECTED. THUS, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS DIRECTED TO DECIDE THE ADDITIONAL GROUND RAISED BY THE ASSESSEE AFRESH IN ACCORDANCE WITH LAW, FOR WHICH D UE OPPORTUNITY OF BEING HEARD BE PROVIDED TO THE ASSES SEE. THE ASSESSEE IS ALSO AT LIBERTY TO FURNISH NECESSARY EV IDENCE, IF ANY, TO SUBSTANTIATE ITS CLAIM, THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE (ITA NO.4428/MUM/2014), WHEREIN, ALLOWING THE RELIE F ON ACCOUNT OF EXPENDITURE CLAIMED THROUGH REVISED COMP UTATION HAS BEEN CHALLENGED, AMOUNTING TO RS.3,62,08,679/- (DISALLOWED IN FINANCIAL YEAR 2005-06) DISREGARDING THE ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 5 DECISION OF HON'BLE APEX COURT IN THE CASE OF GEOT ZE INDIA LTD. 284 ITR 323 (SC). THE CRUX OF THE ARGUMENT IS THAT NO OPPORTUNITY WAS PROVIDED TO THE LD. ASSESSING OFFIC ER. 3.1. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE CLAIMED THAT THE MATTER WAS CARRIED TO THE TRIBUNAL , WHEREIN, CERTAIN DIRECTIONS WERE GIVEN TO THE LD. COMMISSION ER OF INCOME TAX (APPEAL) AND PURSUANT TO SUCH DIRECTIONS , THE LD. ASSESSING OFFICER WAS DIRECTED TO EXAMINE THE FACTU AL MATRIX AND THEN DECIDE AFRESH. IT WAS EXPLAINED THAT THE L D. ASSESSING OFFICER DECIDED AFRESH AND THE SAME HAS B EEN ACCEPTED BY THE ASSESSEE AND NO FURTHER APPEAL WAS FILED BY THE ASSESSEE OR BY THE REVENUE. THIS CLAIM OF THE A SSESSEE WAS NOT CONTROVERTED BY LD. DR. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE AD VERTING FURTHER, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE ORDER OF THE TRIBUNAL DATED 20/02/2013 FO R READY REFERENCE AND ANALYSIS:- THE CROSS APPEALS EMANATE FROM THE ORDER OF CIT(A)1 4, MUMBAI, DATED 01.02.2011. SINCE BOTH THE APPEALS ARISE OUT OF THE SAME ORDER, WE, FOR THE SAKE OF BREVITY AND CONVENIENCE, ARE DISPOSING BOTH THE APPEALS THROUGH THIS COMMON ORDE R. ITA NO. 3807/MUM/2011: ASSESSEES APPEAL: ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 6 2. THE FOLLOWING GROUNDS HAVE BEEN AGITATED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE DISALL OWANCE OF RS. 12,66,254/- U/S 40(A)(IA) OF THE INCOME-TAX ACT, 19 61 IN RESPECT OF CAR HIRE CHARGES AMOUNTING TO RS. 15,82,818/- PAID BY THE APPELLANT COMPANY TO THE EMPLOYEES OF THE COMPANY O R THEIR RELATIVES ON THE GROUND THAT THE APPELLANT COMPANY HAD FAILED TO DEDUCT AND PAY TAX AT SOURCE FROM THE SAID AMOUNT U NDER SECTION 194C OF THE ACT. 2. THE APPELLANT COMPANY RESPECTFULLY SUBMITS THAT THE PROVISIONS OF SEC.194C OF THE ACT ARE NOT APPLICABLE TO THE CAR H IRE CHARGES PAID BY THE APPELLANT COMPANY TO ITS EMPLOYEES / THEIR R ELATIVES. ACCORDINGLY, THE DISALLOWANCE OF RS. 12,66,254/- U/ S. 40(A)(IA) OF THE ACT IS NOT PROPER AND IT SHOULD BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN NOT ADJUDICATING THE GROUND OF APPEAL RAISED BY THE APPELLANT COMPANY BEFORE HIM T HAT THE ASSESSMENT OF THE COMPANY SHOULD BE MADE ON THE BAS IS OF THE REVISED COMPUTATION OF INCOME FILED BY THE COMPANY WITH THE A.O. ON 26TH DECEMBER, 2008 DURING THE COURSE OF THE ASS ESSMENT PROCEEDINGS. 4. THE APPELLANT COMPANY RESPECTFULLY SUBMITS THAT SINCE THE SAID REVISED COMPUTATION OF INCOME HAS BE EN FILED IN VIEW OF THE RETROSPECTIVE AMENDMENT OF SECTION 40(A)(IA) OF THE ACT MADE BY THE FINANCE ACT, 2008, THE ASSESSMENT OF THE COM PANY SHOULD BE MADE ON THE BASIS OF THE SAID REVISED COMPUTATION O F INCOME AND NOT ON THE BASIS OF THE ORIGINAL RETURN OF INCOME. 3. GROUNDS NO. 1 & 2 IS AGAINST THE CONFIRMING OF D ISALLOWANCE OF RS. 12,66,254 U/S 40(A)(IA). 4. THE FACTS AS BROUGHT ABOUT IN THE ORDERS OF THE REVENUE AUTHORITIES ARE THAT THE ASSESSEE TAKES ON HIRE VEH ICLES, I.E. MOTOR CARS AND JEEP ETC. FROM THE EMPLOYEES OR THEIR RELA TIVES, AND THE VEHICLES ARE PROVIDED BACK TO THE EMPLOYEES FOR THE IR USE. ON THE BASIS OF THESE FACTS, THE AO INVOKED THE PROVISIONS OF SECTION 194C HOLDING THAT THE VEHICLES ARE HIRED ON CONTRAC TUAL BASIS, THEREFORE, 194C SHALL APPLY AND THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE. 5. THE ASSESSEE APPROACHED THE CIT(A), BEFORE WHOM, THE ASSESSEE PLEADED THAT THE CASE NEITHER FALLS WITHIN THE AMBIT OF 194C NOR IT FALLS IN THE AMBIT OF SECTION 194-I, BE CAUSE, NEITHER THE ASSESSEE IS MAKING ANY PAYMENT TO ITS EMPLOYEES FROM WHOM THE VEHICLE IS TAKEN, FOR GETTING ANY WORK DONE THR OUGH A CONTRACT, NOR, THE ASSESSEE IS PAYING ANY RENT TO I TS EMPLOYEES TO ATTRACT THE PROVISIONS U/S 194-I, PARTICULARLY IN T HE CURRENT YEAR, ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 7 WHEN THE DEFINITION OF RENT DID NOT INCLUDE THE WOR DS, PLANT OR EQUIPMENT, IF AT ALL THE CARS OR JEEPS ARE TO BE CONSIDERED AS PLANT OR EQUIPMENT, WHICH UNDER NO CIRCUMSTANCE CAN BE HELD TO BE PLANT OR EQUIPMENT. 6. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) APPLYING THE LAW AS IT STOOD PRIOR TO 20 08, HELD THAT EXPLANATION III TO SECTION 194C(2) DEFINED THE WORD WORK TO INCLUDE CARRIAGE OF GOODS AND PASSENGERS BY ANY MOD E OF TRANSPORT OTHER THEN RAILWAYS. HE, THEREFORE, REJEC TED THE ARGUMENTS OF THE ASSESSEE AND SUSTAINED THE DISALLO WANCE MADE BY THE AO. 7. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 8. BEFORE US, THE AR POINTED OUT THAT THIS IS A PEC ULIAR CASE, WHERE THERE IS NEITHER AN INVOLVEMENT OF A CONTRACT NOR IS THERE AN INVOLVEMENT OF RENT, AS IT THEN STOOD. THE AR EXPLA INED THAT THE ASSESSEE ONLY TOOK ON HIRE THE VEHICLE AND WAS NOT PROVIDING FOR THEIR DRIVERS, WHICH COULD HAVE GOT INCLUDED IN THE DEFINITION OF CONTRACT, BUT ONLY TAKING ON HIRE THE VEHICLE, CANN OT BY ITSELF, ATTRACT THE PROVISIONS OF SECTION 194C. HE FURTHER ARGUED THAT THIS MODUS OPERANDI WOULD NOT ATTRACT THE PROVISION OF 1 94I, AS IT WAS A CASE OF TAKING AN ASSET ON HIRE (AS IT THEN PROVI DED). THE AR, THEREFORE, SUBMITTED THAT DISALLOWANCE ON ACCOUNT O F NON DEDUCTION OF TAX AT SOURCE AS PER THE PROVISIONS U/ S 40(A)(IA) IS NOT CALLED FOR. 9. THE DR RELIED ON THE OBSERVATIONS MADE BY THE RE VENUE AUTHORITIES AND PLEADED THAT THE DISALLOWANCE WAS M ADE IN ACCORDANCE WITH LAW. 10. WE HAVE HEARD THE ARGUMENTS OF THE CONTESTING P ARTIES AND HAVE PERUSED THE DOCUMENTS AND CITATIONS PLACED ON RECORD. THE AR PLACED RELIANCE ON THE DECISION OF CIT VS POOMPU HAR SHIPPING CORP. LTD. REPORTED IN 282 ITR 3 (MAD), WH EREIN THE HONBLE MADRAS HIGH COURT HAD CONCLUDED THAT HIRING OF SHIPS BY ASSESSEE AND USING THEM IN ITS BUSINESS IS NOT A CONTRACT AND HIRE CHARGES DO NOT ATTRACT SECTION 194C. 11. THE ASSESSEE HAD ALSO PLACED RELIANCE ON THE DE CISION OF DCIT VS SATISH AGGARWAL & CO., REPORTED IN 122 ITD 35, WHEREIN THE COORDINATE BENCH AT AMRISTAR CONCLUDED THAT, HIRING OF TRUCKS BY THE ASSESSEE FOR THE PURPOSE OF USING THEM IN ITS BUSINESS WITH THE HELP OF ITS OWN PERSONNEL DID NOT AMOUNT TO CONTRACT FOR CARRYING OUT ANY WORK AS CONTEMPLATED IN SECTION 194C AND, THEREFORE, PROVISIONS OF SECTION 194C WER E NOT ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 8 APPLICABLE TO THE HIRING CHARGE PAID BY THE ASSESSE E FOR THE TRUCKS AND THE SAME COULD NOT BE ALLOWED BY INVOKING SECTI ON 40(A)(IA). 12. THE AR HAD ALSO RELIED ON THE DECISION OF ACIT VS SANJAY KUMAR, REPORTED IN 48 SOT 615 (DEL), WHEREIN THE CO ORDINATE BENCH AT DELHI HELD, A PLAIN READING OF S. 194C(1) WILL REVEAL THAT IF ANY PERSON HAS PAID TO ANY RESIDENT ANY AMOUNT IN RESPECT OF CARRYING OUT ANY WORK WHICH INCLUDES SUPPLY OF LABOUR OR FOR CARRYING OUT ANY WORK HE HA S TO DEDUCT TAX @ 2 PER CENT FROM THE SAID PAYMENT. THE WORK HAS BEEN DEFIN ED IN EXPLN. (III) WHICH, INTER ALIA, INCLUDES UNDER CL. (C) THEREOF AS 'CARR IES ON GOODS AND PASSENGERS' BY ANY MODE ETC. OTHER THAN BY WAY OF R AILWAYS. THE DESCRIPTION IN CLS. (A), (B) AND (D) IS NOT APPLICA BLE TO THE FACTS OF THE PRESENT CASE. THUS, IT CAN BE SEEN THAT THE DEFINITION AS G IVEN IN EXPLN. (III) IS INCLUSIVE DEFINITION AND IN THE MAIN SUB-S. (1) OF S. 194C IT IS MENTIONED 'ANY WORK' WHICH INCLUDES SUPPLY OF LABOUR OR IN CA RRYING OUT ANY WORK. THERE BEING INCLUSIVE DEFINITION GIVEN UNDER THE AC T AND NO RESTRICTION PUT BY THE MAIN PROVISIONS OF THE STATUTE, THERE MAY BE CERTAIN DOUBT THAT WHAT WILL CONSTITUTE 'WORK' OR WHAT WILL EXCLUDE WORK. T HEREFORE, A DOUBT WAS RAISED BEFORE THE CBDT WHICH HAS CLARIFIED THAT WHA T WILL CONSTITUTE 'WORK' AND WHAT WILL NOT CONSTITUTE 'WORK'. IN CIRCULAR NO . 681 OF 8TH MARCH, 1994 CBDT HAS OPINED, INTER ALIA, THAT THE PROVISIONS OF S. 194C WOULD NOT APPLY IN RELATION TO PAYMENTS MADE FOR HIRING OR RENTING OF EQUIPMENTS, ETC. IF THE INTERPRETATION ADOPTED BY THE CBDT IS CONSIDERED TH EN IN THE CASE OF THE ASSESSEE THE LEASE AMOUNT PAID FOR THE CRANES CANNO T CONSTITUTE PAYMENT WITH REGARD TO WORK AS DEFINED IN S. 194C. A FINDIN G HAS BEEN RECORDED BY THE CIT(A) THAT PAYMENT MADE TO THE CRANE OWNERS WA S NOT AT ALL RELATED TO THE WORK/OUTPUT MADE BY THE CRANES AND IT WAS WITH REFERENCE TO THE PERIOD OF LEASE. THE RUNNING COST WAS TO BE BORNE BY THE A SSESSEE. SUCH PAYMENT CANNOT BE SAID TO BE MADE FOR THE 'WORKS CONTRACT' AS COVERED BY S. 194C. WHEN WE LOOK AT THE CRUX OF THE DECISIONS ARRIVED A T IN THESE CASES, IS THAT THERE IS NEITHER ANY INVOLVEMENT OF A CONTRACT NOR WAS THERE ANY INVOLVEMENT OF ANY WORK DONE, WHAT IN REALITY, THE ASSESSEE WAS PAYING TO ITS EMPLOYEES WAS ONLY THE RUNNING COST T HROUGH THE NOMENCLATURE OF LEASE OR HIRE CHARGES, WHICH IN OUR CONSIDERED OPINION CANNOT FALL WITHIN THE PRECINCT OF SECTION 194C. IN OUR CONSIDERED OPINION, THE CASE OF THE ASSESSEE WOULD ALSO NOT FALL WITHIN THE PREVIEW OF SECTION 194I, CONSEQUENTIALLY , THE DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE. 13. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AN D DIRECT THE ASSESSING OFFICER TO ALL THE EXPENSE OF RS. 12,66,2 54/-. 14. GROUNDS NO. 1 & 2 ARE THUS ALLOWED. 15. GROUNDS NO. 3 & 4 IS AGAINST THE NON-ADJUDICATI ON OF GROUND TAKEN BEFORE THE CIT(A), WHEREIN IT WAS PRAYED THAT THE ASSESSMENT ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 9 SHOULD BE MADE ON THE BASIS OF REVISED COMPUTATION FILED BY THE ASSESSEE. 16. SINCE THE CIT(A) DID NOT GIVE ANY FINDING ON TH E GROUND AGITATED BEFORE HIM, WITH REGARD TO THE ADJUDICATION ON THE BASIS OF REVISED COMPUTATION, BOTH THE GROUNDS BEFORE US SUFFER FOR THIS GRIEVANCE OF VIOLATION OF NATURAL JUSTICE. IN THESE CIRCUMSTANCE S, WE RESTORE THE ISSUES COVERED IN GROUNDS NO. 3 & 4 TO THE FILE OF THE CIT(A), WHO SHALL GIVE A DEFINITE FINDING OVER THE ISSUES BEING AGITATED, THEREIN. 17. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT HIM TO ADDRESS THE ISSUES RAISED IN GROUND NO. VI IN FORM NO. 35. 18. THE GROUNDS ARE THUS ALLOWED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.3242/MUM/2011: REVENUES APPEAL: 20. THE FOLLOWING GROUNDS ARE RAISED BEFORE THE ITA T: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT T HE GAINS ARISING FROM THE SALE OF TRADE MARK AS LONG TERM CAPITAL GAIN WITHOUT APPREC IATING THE FACT THAT IN VIEW OF EXPLANATIONS 3 & 5 BELOW SECTION 32(1), TRA DE MARKS ARE TO BE CATEGORIZED AS A DEPRECIABLE ASSET AND THE FACT THA T THE ASSESSEE HAS NOT CLAIMED DEPRECIATION WILL NOT ALTER THE CHARACTER OF THE AS SET. 21. THE SOLITARY ISSUE INVOLVED HEREIN IS WITH REGA RD TO TREATMENT OF SALE OF TRADE MARK AS LONG TERM CAPITAL GAIN. 22. THE BRIEF FACTS ARE THAT THE ASSESSEE TRANSFERR ED THE BRAND NAME KHATAU CAPACITOR ALONG WITH ITS LOGO TO ITS ASS OCIATE KHATAU CAPACITOR PVT. LTD. FOR A TOTAL CONSIDERATION OF R S. 100 LACS, OUT OF WHICH, IT OFFERED RS. 25 LACS AS BUSINESS INCOME AN D RS. 75 LACS AS LONG TERM CAPITAL GAINS (LTCG), WHICH THE ASSESSEE ADJUSTED TOWARDS EARLIER YEARS LOSSES AND THEREBY DECLARED NIL INCO ME UNDER THE HEAD. 23. THE AO, AFTER CONSIDERING THE REPLY OF THE ASSE SSEE, DENIED THE CLAIM OF LTCG BUT TREATED THE TRANSFER A STCG AND B ROUGHT TO TAX RS. 75 LACS TO THE ASSESSEES TOTAL INCOME. 24. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), BEFORE WHOM, IT WAS REITERATED THAT SO FAR AS RS. 75 LACS IS CONCER NED, THE ENTIRE AMOUNT WILL HAVE TO BE TAKEN AS SUCH, BECAUSE THE I NTANGIBLE ASSET DID NOT HAVE ANY COST ATTACHED TO IT, IT BEING SELF GENERATED. IT WAS ALSO REITERATED THAT PROVISIONS OF SECTION 50 WOULD ALSO NOT BE ATTRACTED TOWARDS THIS TRANSACTION. ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 10 25. THE CIT(A), ACCEPTED THE SUBMISSIONS MADE BY TH E ASSESSEE THAT SINCE IT WAS A SELF GENERATED ASSET, THERE WAS NO C OST ATTACHED TO IT. THE CIT(A) ALSO ACCEPTED THE CLAIM OF THE ASSESSEE THAT AS PER THE HISTORY OF THE ASSESSEE, DEPRECIATION WAS NEVER CLA IMED ON THIS ASSET AND AS PER THIS, CONSEQUENTIALLY, IT REMAINED OUTSI DE THE PURVIEW OF SECTION 50. 26. APPLYING, ALL THE ABOVE TESTS, THE CIT(A) ALLOW ED THE CLAIM OF THE ASSESSEE, THAT LTCG HAS TO BE ALLOWED TO IT ON THE TRANSFER OF ITS TRADEMARK AND LOGO ON RS. 75 LACS. 27. AGGRIEVED, THE DEPARTMENT HAS FILED THE INSTANT APPEAL. 28. BEFORE US, THE DR PLACED HIS RELIANCE ON THE OR DER OF THE AO AND ALSO PLACED RELIANCE ON THE THIRD MEMBER DECISION I N THE CASE OF SHRI ISMAIL ABDUL KARIM BALWA VS DCIT IN ITA NO. 2680/MU M/2008, WHEREIN THE ASSET INVOLVED WAS AN IMMOVABLE PROPERT Y. 29. THE AR REPLYING TO THE CONTENTIONS OF THE AO AN D THE DR, POINTED OUT THAT THE ASSESSEE HAD BEEN USING THE TR ADEMARK AND LOGO FOR OVER TEN YEARS AND THIS ITSELF WOULD MAKE THE T RANSFER OF ASSET AS LTCG. THE AR SUBMITTED THAT THOUGH THE THIRD MEMBER DECISION IN THE CASE OF SHRI ISMAIL ABDUL KARIM BALWA IS AGAINS T THE ASSESSEE, BUT THE FACTS OF THE CASE WERE DIFFERENT FROM THE F ACTS IN THE INSTANT CASE AND HENCE COULD NOT BE APPLIED AGAINST THE ASS ESSEE. 30. THE FACTS, AS NOTED IN THE INSTANT CASE ARE THA T THE AO ACCEPTS THE INTANGIBLE AS A CAPITAL ASSET AND WHAT HE DISPUTES IS THAT WHETHER TRANSFER IS LONG TERM OR SHORT TERM, AND CONSEQUENT LY WHETHER THE BROUGHT FORWARD LOSSES COULD BE ADJUSTED AGAINST TH E LTCG. THIS ISSUE HAS BEEN A QUESTION OF REFERENCE IN THE CASE BEFORE THE SPECIAL BENCH OF THE ITAT IN THE CASE OF KOTAK MAHINDRA CAP ITAL CO. LTD. VS ACIT, IN ITA NO. 521/MUM/2007. IN THIS CASE, THE SPECIAL BENCH DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE THAT TH E SET OFF OF BROUGHT FORWARD LONG TERM CAPITAL LOSS WAS NOT RESTRICTED O NLY AGAINST LONG TERM CAPITAL GAINS, BUT ALSO AGAINST SHORT TERM CAP ITAL GAINS. 31. ON GOING THROUGH THE FACTS THAT THERE IS AN UND ISPUTED FACT THAT THE ASSESSEE TRANSFERRED THE TRADEMARK AND LOGO WHI CH WAS IN EXISTENCE AND USED BY THE ASSESSEE FOR OVER TEN YEA RS AND WAS DEVELOPED AS A SELF GENERATED ASSETS, BEARING NO CO ST AS SUCH, WILL HAVE TO BE ACCEPTED AS AN ASSET IN POSSESSION OF TH E ASSESSEE FOR OVER THE YEARS AND BE ELIGIBLE TO BE CALLED AS LTCG AND SINCE THERE IS NO COST ATTACHED TO IT, ITS COST SHALL BE TAKEN AT NIL . THIS, CONSEQUENTIALLY WOULD MEAN THAT THE LTCG COMPUTED S HALL BE ITS TRANSFER VALUE, I.E. RS. 75 LACS, AS CLAIMED. ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 11 32. ON THE ABOVE OBSERVATIONS, WE SUSTAIN THE ORDER OF CIT(A) ON THIS ISSUE AND REJECT THE VIEWS TAKEN BY THE AO, TH EREBY, REJECTING THE APPEAL SO FILED BY THE DEPARTMENT. 33. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. 34. TO SUM UP: APPEAL FILED BY THE ASSESSEE IS ALLOWED APPEAL FILE D BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH FEBRUARY , 2013. 3.3. WE FIND THAT THE TRIBUNAL VIDE AFORESAID ORDE R DATED 20/02/2013, CONSIDERED THE SUBMISSIONS FROM B OTH SIDES AND SINCE THERE WAS NO FINDING IN THE ORDER O F THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THEREFORE, THE ISSUES WERE REMANDED BACK TO GIVE A DEFINITE FINDING OVER THE ISSUES. PURSUANT TO THESE DIRECTIONS, THE LD. COMMISSIONER OF INCOME TAX (APPEAL), DIRECTED THE LD. ASSESSING OFF ICER TO GIVE CREDIT OF SUCH PAYMENTS AFTER DUE VERIFICATION. AS CLAIMED BY THE LD. COUNSEL FOR THE ASSESSEE (AND NOT CONTROVER TED BY THE REVENUE), DUE VERIFICATION WAS MADE AND NECESSARY O RDERS WERE PASSED. THE ASSESSEE ACCEPTED THE ORDER AND NO APPEAL WAS FILED. EVEN THE REVENUE DID NOT CHALLENGE THE F RESH ASSESSMENT ORDER. IT IS ALSO NOTEWORTHY THAT THE DI RECTION OF THE TRIBUNAL WAS ALSO NOT CHALLENGED BEFORE THE HON 'BLE HIGH COURT. IN VIEW OF THIS FACTUAL MATRIX, WE FIND NO INFIRMITY IN ITA NO.4422 & 4428/MUM/2014 M/S INDOKEM LTD. 12 THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEAL), RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED . FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES, WHEREAS, THE APPEAL OF THE RE VENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF HEARING ON 12/12/2017. SD/- (MANOJ KUMAR AGGARWAL) SD/- (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER MUMBAI; * DATED : 12/12 /2017 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE RESPONDENT. 3. 1& ( , ) / THE CIT, MUMBAI. 4. 1& / CIT(A)- , MUMBAI, 5. 34 /&# , ,( # 5 , / DR, ITAT, MUMBAI 6. 6$ 7 / GUARD FILE. ! / BY ORDER, 03,& /& //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI