Appeal Details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 77815 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 9 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-07-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
G
Next Hearing Date
19-11-2013
Assessment Year
2007-2008
Appeal Filed On
10-10-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICI AL MEMBER I.T.A. NO. 5239/DEL/2012 ASSESSMENT YEAR : 2007-08 SAIPEM TRIUNE ENGINEERING PVT. LTD. VS. DCIT B-1/H-4A, MOHAN CO-OPERATIVE INDL. ESTATE CIRCLE 7(1), MATHURA ROAD, NEW DELHI 110 044. NEW DELHI. (PAN AAKCS1045E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY VOHRA, ADVOCATE, MS. SH IKHA SHARMA, CA RESPONDENT BY : SHRI RAMESH CHANDRA, CIT(DR) O R D E R PER SHAMIM YAHYA ,AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) DATED 17.8.2012 AND PERTAINS TO ASSTT. YEAR 2007-08 . THE GROUNDS OF APPEAL READ AS UNDER :- 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [' CIT(A)'] ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICE R IN NOT EXCLUDING THE SUM OF RS 18,07,786, WHICH HAD ACCRUED TO THE APPELLANT DURIN G THE YEAR, BUT HAD NOT BECOME DUE, FROM THE TAXABLE INCOME OF THE APPELLANT FOR THE RE LEVANT ASSESSMENT YEAR. 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN DIS ALLOWING DEPRECIATION OF RS 10,14,46,882 CLAIMED BY THE APPELLANT UNDER SECTION 32 OF THE ACT IN RESPECT OF INTANGIBLE ASSETS FORMING PART OF THE BUSINESS ACQU IRED BY THE APPELLANT DURING THE YEAR ON SLUMP SALE BASIS. 2.1 THAT THE CIT(A) FAILED TO APPRECIATE THAT INT ANGIBLE ASSETS, VIZ. TECHNICAL KNOW- HOW, BRAND NAME AND NON-COMPETE RIGHTS ACQUIRED BY THE APPELLANT DURING T4E YEAR FELL ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 2 SQUARELY WITHIN THE DESCRIPTION OF 'OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IN TERMS OF EXPLANATION 3(B) TO SECTION 32( 1) OF THE ACT AND ACCORDINGLY, THE AMOUNT PAID FOR ACQUISITION THEREOF WAS ELIGIBLE FO R DEPRECIATION UNDER SECTION 32 OF THE ACT: 2.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT NO KNOW-HOW WAS TRANSFERRED BY THE SELLER TO THE APPELLANT AS PART OF THE SLUMP SALE. 2.3 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN ALLEGING THAT ASSIGNMENT OF SPECIFIC VALUES TO ASSETS ACQUIRED BY THE APPELLANT ON SLUMP SALE OF BUSINESS, WITH REFERENCE TO THE VALUATION REPORT ISSUED BY INDEPENDENT VALUER, WAS A COLORABLE DEVICE, NOT APPRECIATING THAT THE BUYER IS REQUIRED TO RECORD T HE VALUES OF EACH OF THE ASSETS SEPARATELY IN ITS BOOKS OF ACCOUNT FOR STATUTORY PU RPOSES. 2.4 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN DISREGARDING THE VALUATION REPORT ISSUED BY INDEPENDENT VALUER, BASED ON CONJECTURES, WITHOUT BRINGING ON RECORD, ANY MATERIAL TO ESTABLISH THAT THE VALUATION REPORT WAS NOT CORRECT. 2.5 THAT THE CIT(A) ERRED IN SUMMARILY DISREGARDI NG THE 'DISCOUNTED CASH FLOW' METHOD EMPLOYED BY THE VALUER WITHOUT PROVIDING ANY REASON, NOT APPRECIATING THAT THE SAID METHOD HAS BEEN PRESCRIBED BY THE RESERVE BANK OF INDIA UNDER ITS FOREIGN INVESTMENT POLICY. 2.6 WITHOUT PREJUDICE, THE CIT(A) ERRED IN NOT A PPRECIATING THAT EVEN IF IT WERE TO BE HELD THAT THE APPELLANT DID NOT ACQUIRE ANY TECHNIC AL KNOW-HOW DURING THE YEAR, THE AMOUNT OF RS 40.58 CRORES PAID BY THE APPELLANT WAS LIABLE TO BE CONSIDERED AS 'GOODWILL' AND ACCORDINGLY, DEPRECIATION THEREON WA S ADMISSIBLE UNDER SECTION 32 OF THE ACT. 2.7 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN ALLEGING WITHOUT BASIS/EVIDENCE, THAT THE TRANSACTION OF PURCHASE OF BUSINESS FROM THE SE LLER, WAS A COLORABLE DEVICE MERELY BECAUSE MR. BINOY JACOB WAS A SHAREHOLDER IN BOTH T HE SELLER AND THE APPELLANT COMPANIES. 2.8 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE APPELLANT HAS SOUGHT TO CLAIM UNDUE TAX BENEFIT BY ACQUIRING THE BUSINES S ON A SLUMP SALE BASIS, NOT APPRECIATING THAT THE AFORESAID TRANSACTION WAS GOV ERNED BY BUSINESS CONSIDERATIONS AND THE SELLER HAD PAID DUE TAXES ON SALE OF BUSINE SS AS PER LAW. 3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN DISREGARDING THE TRANSACTION OF PURCHASE OF BUSINESS AND IN TREATING THE ENTIRE PUR CHASE CONSIDERATION OF RS 45.68 CRORE PAID BY THE APPELLANT FOR PURCHASE OF BUSINES S ON SLUMP SALE BASIS, AS INCOME OF THE APPELLANT BY INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT, AND THEREBY ENHANCING THE INCOME ASSESSED BY THE ASSESSING OFFI CER BY RS 30.44 CRORES. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 3 3.1 THAT THE CIT(A) ERRED ON FACTS AND IN L,A W IN NOT APPRECIATING THAT THE PROVISIONS OF SECTION 40A(2) OF THE ACT, WHICH SEEK S TO DISALLOW EXPENDITURE INCURRED BY AN ASSESSEE, WHICH AS PER THE ASSESSING OFFICER IS EXCESSIVE OR UNREASONABLE, HAD NO APPLICATION ON THE FACTS OF THE PRESENT CASE, AS TH E APPELLANT HAD NOT CLAIMED DEDUCTION IN RESPECT OF THE AFORESAID AMOUNT OF RS 45.68 CROR ES PAID TOWARDS PURCHASE OF BUSINESS. 3.2 WITHOUT PREJUDICE, THE CIT(A) ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE PAYMENT MADE BY THE APPELLANT FOR ACQUISITION OF BU SINESS WAS EXCESSIVE AND UNREASONABLE, WITHOUT BRINGING ON RECORD ANY EVIDEN CE TO ESTABLISH THE ALLEGED 'UNREASONABLENESS'. 4. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN DIS ALLOWING DEPRECIATION OF RS 16,86,487 CLAIMED BY THE APPELLANT ON FIXED ASSETS ACQUIRED BY THE APPELLANT FROM THE SELLER INVOKING THE PROVISIONS OF SECTION 170 OF TH E ACT. 5. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN ENH ANCING THE INCOME OF THE APPELLANT BY DISALLOWING DEPRECIATION TO THE TUNE O F RS 51,47,730, BY INVOKING THE PROVISIONS OF EXPLANATION 3 TO SECTION 43(1) OF THE ACT. 5.1. THAT THE CIT(A) ERRED ON FACTS IN AND IN LA W IN APPLYING THE PROVISIONS OF EXPLANATION 3 TO SECTION 43(1) OF THE ACT WITHOUT B RINGING ANY EVIDENCE ON RECORD TO DEMONSTRATE THAT THE MAIN PURPOSE OF ACQUIRING THE BUSINESS WAS TO REDUCE INCOME BY CLAIMING HIGHER DEPRECIATION ON ENHANCED VALUE OF A SSETS. 6. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN ENH ANCING THE INCOME OF THE APPELLANT BY RS 55,79,200 ON ACCOUNT OF DISALLOWANC E OF LEASE RENTALS PAID BY THE APPELLANT TO THE LESSOR, BY INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT. 6.1. WITHOUT PREJUDICE, THE CIT(A) ERRED ON FACT S AND IN LAW IN ADOPTING AN ARBITRARY AMOUNT OF RS 6/- PER SQ.FT. AS RENT FOR ASSETS TAKE N ON LEASE BY THE APPELLANT, WITHOUT BRINGING ON RECORD ANY EVIDENCE TO SUPPORT THE AFOR ESAID BASIS. 6.2. THAT THE CIT(A) ERRED IN INVOKING THE PROVI SIONS OF SECTION 40A(2) WITHOUT BRINGING ON RECORD, ANY EVIDENCE TO ESTABLISH THE A MOUNT PAID BY THE APPELLANT WAS 'UNREASONABLE' OR 'EXCESSIVE'. 2. DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE COMPANY WAS A DESIGN ENGINEERING AND CONSULTANCY COMPANY SERVICING THE OI L & GAS PRODUCTION AND PROCESSING (OFFSHORE AND ONSHORE), PETROLEUM REFINI NG, PETROLEUM STORAGE AND TRANSPORTATION, CHEMICALS AND PETROCHEMICALS. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 4 3. THE ASSESSEE COMPANY SAIPEM TRIUNE ENGINEERI NG PRIVATE LTD. (STEP) WAS INCORPORATED DURING F.Y. 2006-07 WHEREIN 50% OF THE HOLDING WAS WITH SAIPEM AND 50% IS HELD BY MR. BINOY JACOB. SAIPEM I S A GLOBAL EPCI CONTRACTOR IN THE BUSINESS OF OIL AND GAS SERVICES INCLUDING UPSTREAM AND DOWNSTREAM, OFFSHORE AND ONSHORE CONSTRUCTION AND D RILLING. 4. TRIUNE PROJECTS PRIVATE LTD. (TPPL) IS AN E NGINEERING AND DESIGN SERVICES COMPANY. VIDE AGREEMENT DATED 22.09.2006 MR. BINOY JACOB, THE MAIN PROMOTER OF TPPL HAD AGREED TO FORM A COMPANY SAIPE M TRIUNE ENGINEERING PRIVATE LTD. STEP ACQUIRED THE DESIGN ENGINEERING BU SINESS OF TPPL FOR A CONSIDERATION OF RS.45.85CRORES IN SLUMP SALE. 5. THE TRANSFER OF BUSINESS IN FORM OF SLUMP SALE INCLUDED FOLLOWING:- A. THE BUSINESS RELATED FIXED ASSETS AND NET CURREN T ASSETS OF RS.2.56 CRORES AND RS.2.71CRORES AS PER BALANCE SHEET AS ON 22.09.2006. B. ALL EMPLOYEES OF TPPL. C. ALL SALES LITERATURE BROCHURES, CATALOGUES OF TP PL. D. ALL CAPABILITIES KNOW HOW, DESIGN ETC. IN POSSES SION WITH TPPL. E. ALL ONGOING JOBS/CLIENTS. F. ALL EXISTING, INSURANCE POLICIES. G. ALL BANK GUARANTIES PROVIDED BY THE TPPL. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 5 3. THE CONSIDERATION OF RS.45.85 CRORES COMPRISES O F NET ASSET OF RS.5.27 CRORES AND FOR TECHNICAL KNOWHOW AND OTHER INTANGIBLE ASSE TS OF TPPL WORTH RS. 4O.58 CRORES. 6. THE ASSESSEE SUBMITTED VALUATION REPORT FOR INTANGIBLE ASSETS IN FORM OF TECHNICAL KNOW HOW TRADEMARKS AND NOT COMPETE F EE. THE VALUATION REPORT VALUES THE INTANGIBLE AS FOLLOWING A. TECHNICAL KNOW-HOW 26.18 CRORES B. VALUATION FOR THE BUSINESS ON HAND AS ON 22.9.2006 OF RS. 12.50 CRORES C. NON COMPETE FEE OF RS. 1.86 CRORES. 7. IN THIS REGARD AO ASKED THE ASSESSEE TO PROVIDE FOLLOWING DETAILS: (I) DETAILS OF DESIGNS TAKEN OVER FROM TPPL (II) WHETHER SUCH DESIGNS/TECHNICAL KNOW HOW W ERE EXCLUSIVE TO TPPL AND ALSO THAT TPPL WAS HAVING ANY R EGISTERED PATENT/TRADEMARKS IN RESPECT OF SUCH DESIGNS AND TECHNI CAL KNOW HOW (III) TO SUBSTANTIATE THE CLAIM THAT TPPL WAS HAVING EXCLUSIVE TECHNICAL KNOW HOW FOR FPSO OPERATIONS AS CLA IMED IN VALUATION REPORT. 8. AO WAS OF THE OPINION THAT IN THIS CASE A SSESSEE IS SUCCEEDING BUSINESS OF TPPL IN RESPECT OF DESIGN AND ENGINEERING DIVISI ON. THAT ASSESSEE COMPANY HAS NOT ONLY ACQUIRED THE DESIGNS KNOW HOW AND OTHE R PHYSICAL ASSETS OF THE PREDECESSOR BUT ALSO THE ONGOING BUSINESS RELATED TO FPSO OPERATION AS WELL AS MANPOWER AND OTHER LIVE ASSIGNMENTS/LEASE/DEEDS. T HAT ASSESEE COMPANY HAS ACQUIRED THESE ON GOING CONCERN BASIS. THAT THIS I S VERY MUCH IN NATURE OF ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 6 DEMERGER OR HIVING OF A PARTICULAR UNIT INTO A NEW ENTITY. AO WAS OF THE OPINION THAT SUCH SUCCESSION ARE SQUARELY COVERED UNDER 170 OF THE I.T. ACT. AO FURTHER OBSERVED THAT SECTION 170 AND FIFTH PROVISO TO THE SECTION 32 CLEARLY RESTRICT THE CLAIM OF THE ASSESSEE COMPANY FOR EXCESSIVE DEPRECI ATION WHICH IT IS CLAIMING ON SAME SET OF ASSETS IN SUCCESSION. SINCE AS PER S ECTION 2(42) IN THE CASE OF SLUMP SALE NO PARTICULAR VALUE CAN BE ASSIGNED TO A PARTICULAR ASSET FORMING PART OF AN UNDERTAKING AND SELLER CLAIMED BENEFIT O F SLUMP SALE THEREFORE, THE VALUATION ASSIGNED BY THE ASSESSEE TO ALL THE ASSET S ACQUIRED UNDER SLUMP SALE AS MENTIONED TO US CANNOT BE ACCEPTED. 9. THE AO FURTHER OBSERVED THAT THE FIFTH PR OVISO TO SECTION 32 STIPULATING THE PROVISIONS OF ALLOWING THE DEPRECIATION TO THE SUCCESSORS IN THE CASE INCLUDING SUCCESSION AS PROVIDED UNDER SECTION 170 RESTRICT THE QUANTUM OF DEPRECIATION TO BE ALLOWED. SINCE UNDER SLUMP SALE THE ACQUIRED ASSET IS AN UNDERTAKING / BUSINESS ACTIVITY AS DEFINED IN EXPLA NATION TO SECTION 2(19AA) THEREFORE BUYER BECOME SUCCESSOR OF UNDERTAKING OR BUSINESS ACTIVITY AND ONCE THE BUYER BECOMES SUCCESSOR THE CLAIM OF DEPRECIATI ON WILL BE RESTRICTED TO THE EXTENT ALLOWABLE TO SELLER AS PROVIDED IN FIFTH PRO VISO TO SECTION 32. IN VIEW OF THESE PROVISIONS, THE AMOUNT OF DEPRECIATION WILL R ESTRICT AS PROVIDED IN FIFTH PROVISO I.E. DEPRECIATION AS ALLOWABLE TO SELLER. T HE AO OBSERVED THAT ABOVE DISCUSSION MAKES THE THINGS CLEAR AS PER ACT THAT A SSESSEE IS NOT ENTITLED FOR THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 7 EXCESS DEPRECIATION AND ITS CLAIM OF DEPRECIATION I S RESTRICTED TO DEPRECIATION ON OPENING WDV FOR THAT YEAR BEFORE THE SLUMP SALE TOO K PLACE. 10. THE AO FURTHER OBSERVED THAT ASSESSEE HA S PURCHASED ASSETS OF NET ASSET VALUE OF 5.72 CRORES. THE DIFFERENCE OF 45.58 CRORES HAS BEEN ATTRIBUTED TOWARDS ACQUISITION OF INTANGIBLE ASSETS. THAT THE SLUMP SALE AGREEMENT WAS MADE ON 27.9.2006. THAT ON THAT DAY ITSELF ASSESSEE COMPANY HAS TAKEN OVER ALL THE ASSETS LIABILITIES IN RELATION TO DESIGN AN D ENGINEERING DIVISION OF TPPL. AO FURTHER OBSERVED THAT AS A MATTER OF FACT, IT H AS BEEN ACCEPTED BY ASSESSEE COMPANY VIDE ITS SUBMISSION DATED 15.12.2009 THAT I T WAS NOT HAVING ANY REGISTERED BRAND NAME OR TRADE MARK OR ANY COMMERCI AL RIGHT, LICENSE, TECHNICAL KNOW-HOW AND FRANCHISEE WHICH COULD HAVE BEEN SOLD. IT HAS BEEN GATHERED THAT TPPL WAS ALSO NOT HAVING ANY PATENT, TRADEMARK , TECHNICAL KNOW-HOW ETC. PATENTED AT NATIONAL AND INTERNATIONAL LEVEL. THAT THE MAIN STAY OF TPPL WAS CONSULTANCY AND EXECUTION OF FPSO PROJECTS THROUGH ITS SKILLED EMPLOYEE WHO ARE VERY MUCH A PART OF ASSESSEE COMPANY NOW. THAT IT CAN BE SAFELY HELD THAT THE SAME BUSINESS IS BEING DONE NOW BY ASSESSEE COM PANY ONLY NAME HAS BEEN CHANGED TO SAIPEM TRIUNE INSTEAD OF TRIUNE PRO JECTS PRIVATE LIMITED. 11. THE AO FURTHER OBSERVED THAT THE VALUATI ON REPORT ALONGWITH THE RETURN OF INCOME IS PURPOSELY UNDATED. THAT PROVISO FOR TH E SLUMP SALE WAS USED AS COLOURFUL DEVICE BY THE ASSESSEE WHICH ALSO INCLUDE D THE PROCESS OF VALUATION IN ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 8 ORDER TO MINIMIZE THE TAX LIABILITY IN THE HANDS OF TPPL AND TO MAXIMIZE THE CLAIM OF DEPRECATION IN THE HANDS OF ASSESSEE. THE AO IN THIS REGARD REFEREED TO THE DECISION OF HONBLE APEX COUT IN THE CASE OF MC DOWELL AND CO. LTD. 12. THE AO FURTHER DOUBTED THAT VERACITY OF TH E VALUATION REPORT HE MENTIONED THAT VALUATION REPORT ITSELF IS FULL OF D EFICIENCIES. THE AO FURTHER REJECTED THAT ASSESEES VALUE OF TECHNICAL KNOW-HOW BY APPLYING A METHOD OF CASH FLOWS. HE HELD THAT IT WAS NOTHING BUT A SHAM EXERCISE. THE AO FURTHER OBSERVED THAT TPPL HAS SIMPLY HANDED OVER ITS LIABI LITY OF ONGOING PROJECTS TO THE ASSESEE COMPANY WITHOUT WHICH ASSESSEE COMPANY WOULD NOT EARN ANY PROFIT AND RATHER END UP IN PAYING HEAVY COMPENSAT ION / DEMERGE. HENCE THE VALUE OF BUSINESS IN HAND HAS TO BE COMPUTED AT NIL . THAT SINCE THE VALUATION IS DONE ONLY TO MEET THE FIGURE OF 40.58 CRORE TO CLAIM DEPRECATION ON IT, THEREFORE, IT HAS BEEN TREATED AS ENDURING ASSETS W HICH CANNOT BE ALLOWED. 13. AO FURTHER OBSERVED THAT THE RESIDUAL V ALUE OF 1.8 CRORE ASSIGNED TO NON-COMPETE FEE WAS OF NO SIGNIFICANCE. AO OPINED T HAT NON-COMPETE FEE IS NOT ELIGIBLE FOR DEPRECIATION AS IT IS NOT IN THE NATUR E OF COMMERCIAL ASSETS AS PROVIDED IN SECTION 32 (1)(II) OF THE I.T. ACT. 14. ON THE BASIS OF ABOVE DISCUSSION AO CONCL UDED THAT EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE ON ACCOUNT OF EXCESS AMOUNT PAID FOR ACQUISITION OF ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 9 BUSINESS IN SLUMP SALE WAS NOT ADMISSIBLE, ACCORDI NGLY THE DEPRECIATION CLAIMED FOR ASSTT. YEAR 2007-08 OF RS. 10,14,68,88 2/- WAS DISALLOWED AS DEDUCTION AND ADDED BACK TO THE INCOME OF THE ASSES SEE. 15. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFO RE THE LEARNED CIT(A). AT THE OUTSET, LEARNED CIT(A) CONSIDERED THE REASON ABLENESS OF THE PURCHASE CONSIDERATION OF RS. 45.68 CRORES AND ALSO WHETHER THE VALUATION REPORT SUBMITTED BY THE ASSESSEE INSPIRES CONFIDENCE. LEA RNED CIT(A) OBSERVED THAT SHRI BINOY JACOB WAS THE MAIN PROMOTER OF TPPL, I.E . THE VENDOR COMPANY, IN WHICH HE HOLDS 74% EQUITY STAKE. SIMILARLY, IN THE APPELLANT COMPANY, WHICH BOUGHT THE ON-GOING BUSINESS FROM TPPL, SHRI BINOY JACOB HOLDS 50% SHARE. THE OTHER INVESTOR M/S SAIPEM, ITALY, HAD ACQUIRED THE BALANCE 50% SHARE AT A PREMIUM OF RS. 45,840/- PER SHARE OF RS. 10/- EACH. BUT SHRI BINOY JACOB DID NOT HAVE TO PAY A SINGLE RUPEE AS PREMIUM ON ACQUIS ITION OF THE 50% EQUITY FALLING IN HIS SHARE. THAT THERE IS NO PLAUSIBLE EX PLANATION AS TO WHY SAIPEM, ITALY SHOULD BE PAYING SUCH A HIGH PREMIUM FOR ACQU ISITION OF A START-UP COMPANY. THAT ANOTHER INTERESTING FACT WHICH FLIES ON THE FACE IS THAT ALMOST THE ENTIRE PREMIUM (RS. 45.84 CRORES) RECEIVED FROM M/S SAIPEM, ITALY WAS GIVEN AWAY AS PURCHASE CONSIDERATION FOR THE ON-GOI NG BUSINESS CONCERN TO TPPL. THAT IT IS A FACT THAT IN TPPL, SHRI BINOY JA COB HELD 74% OF THE EQUITY AND, THEREFORE, HE WOULD BE THE LARGEST BENEFICIARY OF THE SALE CONSIDERATION ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 10 RECEIVED BY TPPL FROM THE APPELLANT. THAT IN THESE CIRCUMSTANCES, THE PROVISIONS OF SECTION 40A(2) OF THE I.T. ACT COME I NTO PLAY. 16. THEREAFTER, LEARNED CIT(A) REFERRED TO THE PROV ISIONS OF SECTION 40A(2) AND 40A(2)(B). LEARNED CIT(A) WAS OF THE OPINION T HAT PURCHASE PRICE OF RS. 45.85 CRORES PAID BY THE ASSESSEE COMPANY TO M/S TP PL FOR PURCHASE OF ON- GOING BUSINESS IS HIT BY THE SAID SECTION AND IS FO UND EXCESSIVE OR UNREASONABLE. IN THIS REGARD, THE ASSESSEES OBJE CTIONS WITH REGARD TO THE APPLICATION OF SECTION 40A(2) WERE TWO-FOLD (I) P AYMENT OF LUMP SUM AMOUNT FOR ACQUISITION OF BUSINESS BY WAY OF SLUMP SALE WA S NOT AN EXPENDITURE SINCE NO DEDUCTION HAS BEEN CLAIMED IN COMPUTING THE BUSI NESS INCOME OF THE ASSESSEE; (II) SECTION 40A(2) RELATES TO EXPENDITUR E OF REVENUE NATURE ONLY AND NOT TO EXPENDITURE FOR ACQUISITION OF CAPITAL ASSET S, WHICH CONSTITUTES CAPITAL EXPENDITURE. 17. HOWEVER, LEARNED CIT(A) DID NOT FIND THESE CONT ENTIONS GOOD ENOUGH. HE OPINED THAT THE WORD EXPENDITURE APPEARING IN SECTION 40A(3) HAS NOT BEEN DEFINED IN THE ACT. HE REFERRED TO HONBLE AP EX COURTS DECISION IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO [1991] 191 ITR 667 WHEREIN HONBLE APEX COURT HAD HELD THAT THE WORD EXPENDIT URE IS A WORD OF WIDE IMPORT. SECTION 40A(3) REFERS TO THE EXPENSES INCU RRED BY THE ASSESSEE IN RESPECT OF WHICH PAYMENT IS MADE. THAT IT MEANS TH AT ALL THE OUTGOINGS ARE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 11 BROUGHT IN THE WORD EXPENDITURE FOR THE PURPOSE O F THIS SECTION. LEARNED CIT(A) OBSERVED THAT THE WORD EXPENDITURE HAS BEE N USED BOTH IN SECTION 40A(3) AS WELL AS SECTION 40A(2). HENCE, HE OPINED THAT THE RATIO OF ATTAR SINGH GURMUKH SINGHS CASE CITED ABOVE SHALL HAVE A PPLICATION IN THE CASE OF SECTION 40A(2) AS WELL. LEARNED CIT(A) FURTHER REF ERRED THAT EVEN OTHERWISE, THE HEADING OF SECTION 40A READS EXPENSES OR PAYMEN TS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES. HE OBSERVED THAT SINCE THE WORD PAYMENT IS MADE PART OF HEADING OF SECTION 40A, WHICH IS ANOTHER IN DICATION THAT LEGISLATURE INTENDED TO BRING ALL PAYMENTS WHETHER CAPITAL OR R EVENUE AND WHETHER DEBITED TO PROFIT & LOSS ACCOUNT OR NOT WITHIN THE AMBIT OF SECTION 40A(2) AND SECTION 40A(3). IN THESE CIRCUMSTANCES, LEARNED CIT(A) HEL D THAT SECTION 40A(2) IS CLEARLY ATTRACTED WITH REGARD TO SLUMP SALES TRANSA CTION BETWEEN TPPL AND THE ASSESSEE COMPANY. IN THIS REGARD, LEARNED CIT(A) C ONCLUDED AS UNDER:- HAVING REGARD TO THE TOTALITY OF FACTS & CIRCUMSTA NCES OF THIS CASE, THE FIRST TWO ISSUES FRAMED BY ME AT PARA 4.2 5 OF THIS ORDER ARE DECIDED AGAINST THE APPELLANT. HENCE, THE PRIC E PAID OVER AND ABOVE THE IDENTIFIABLE PHYSICAL ASSETS (RS.2.56 CRO RES) AND NET CURRENT ASSETS (RS.2.77 CRORES) IS HELD TO BE EXCE SSIVE AND UNREASONABLE PAYMENT LIABLE TO BE DISALLOWED U/S 40A(2) OF THE I.T. ACT. THUS, INDEPENDENT OF THE FINDING GIVEN B Y THE ASSESSING OFFICER TO DISALLOW THE DEPRECIATION OF RS.10,14,68 ,882/- CLAIMED ON THE INTANGIBLE ASSETS OF RS.40,58,75,529/-, THE A.O. IS DIRECTED TO DISALLOW THE ENTIRE SUM OF RS.40,58,75,529/- U/S 40A(2) OF THE I.T. ACT AS WELL. THIS RESULTS IN ENHANCEMENT OF I NCOME UNDER THIS HEAD BY RS.30,44,06,647/- (RS.40,58,75,529 RS.10, 14,68,882). ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 12 18. THEREAFTER, LEARNED CIT(A) CONSIDERED THE ISSUE AS TO WHETHER THE WHOLE SCHEME WAS A COLORABLE DEVICE TO CLAIM UNDUE TAX BE NEFIT. LEARNED CIT(A) REFERRED TO CATENA OF CASE LAWS IN THIS REGARD INCL UDING THAT OF HONBLE APEX COURT IN THE RECENT JUDGMENT IN THE CASE OF VODAFON E INTERNATIONAL HOLDINGS B. V. VS. UNION OF INDIA [2012] 341 ITR 1. HE OPINE D THAT THIS IS A CLASSIC CASE OF OBTAINING UNDUE ADVANTAGE THROUGH A SUBTERFUGE. LEARNED CIT(A) MENTIONED FOLLOWING REASONS FOR THIS CONCLUSION :- (I) THE GROUP HAS ATTEMPTED TO OBTAIN A TAX ADVANT AGE BY SHOWING IT AS SLUMP SALE WITHOUT SPECIFIC VALUES FOR ANY ASSET IN ONE OF THE GROUP COMPANYS (TPPL) HAND, BUT ATTRIBU TING IMAGINARY VALUES IN ANOTHER GROUP COMPANYS (THE AP PELLANT) HAND & CLAIMING DEPRECIATION THEREON. (II) WHILE M/S SAIPEM, WHICH HOLDS 50% SHARES, HAS PAID PREMIUM OF RS.45,840/- FOR EACH SHARE OF RS.10/- EA CH, THE OTHER SHAREHOLDER, NAMELY, SH. BINOY JACOB, WHO INVESTED 50% IN THE SAME COMPANY AROUND THE SAME TIME, DIVIDEND INCOME DID NOT HAVE TO PAY ANY PREMIUM AT ALL. (III) THE ENTIRE SHARE PREMIUM OF RS.45.84 CR. PAID BY M/S SAIPEM HAS BEEN TRANSFERRED TO TPPL, A COMPANY IN W HICH SH. BINOY JACOB, HOLDS 74% SHARES. THUS, SH. BINOY BEN EFITED TWICE ONCE BY NOT PAYING ANY PREMIUM ON ACQUISITION OF SHARES IN THE APPELLANT-COMPANY & SECONDLY, BY RECEIVING HUGE AMO UNT OF RS.45.85 CR. AS SALE CONSIDERATION IN THE HANDS OF TPPL, WHEN ITS PHYSICAL ASSETS STOOD ONLY AT RS.2.58 CR. (IV) SH. BINOY JACOB UNDERTOOK NON-COMPETE OBLIGA TIONS AS PER ARTICLE 11 OF THE SHAREHOLDERS AGREEMENT. BU T HE DID NOT CHARGE ANY CONSIDERATION FOR UNDERTAKING SUCH HUGE OBLIGATIONS. OBVIOUSLY, HE DID NOT FIND IT NECESSARY SINCE HE WA S BEING SUITABLY COMPENSATED BY WAY OF INFLATED CONSIDERATION TO TPP L. 4.43.1. HENCE, THE FINDING GIVEN BY THE A.O. THAT T HE WHOLE SCHEME WAS A COLOURABLE DEVICE TO OBTAIN UNDUE TAX BENEFIT, IS UPHELD. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 13 19. THEREAFTER, LEARNED CIT(A) CONSIDERED THE ISSUE OF ASSESSEES CLAIM OF DEPRECIATION. LEARNED CIT(A) NOTED THAT INITIALLY, THE ASSESSEE HAD PASSED AN ENTRY IN ITS BOOKS TREATING THE IMPUGNED AMOUNT OF `40.58 CRORES AS GOODWILL. LATER, ON THE BASIS OF A VALUATION REPORT OBTAINED FROM HIS CHARTERED ACCOUNTANT, THE ASSESSEE BIFURCATED THE GOODWILL IN TO THREE DIFFERENT COMPONENTS AND TREATED THEM AS INTANGIBLE ASSETS. IN THIS REGARD, LEARNED CIT(A) REFERRED TO VARIOUS SERIOUS FLAWS NOTICED IN THE VALUATION REPORT ON THE BASIS OF WHICH VALUATION OF VARIOUS INTANGIBLES HAD BEEN ARRIVED AT. LEARNED CIT(A) REFERRED TO THE ACCOUNTING STANDARDS AND COM PANIES ACT, 1956 AND OBSERVED THAT THE VALUATION EXERCISE SHOULD HAVE BE EN CONDUCTED ON A FAIR BASIS BY COMPETENT VALUERS. LEARNED CIT(A) OPINED THAT IN THE PRESENT CASE, A CONSOLIDATED PRICE OF RS. 45.86 CRORES HAD BEEN PAI D BUT NO EXPERT/COMPETENT VALUER HAD BEEN ENGAGED TO MAKE A FAIR APPORTIONMEN T. LEARNED CIT(A) FURTHER OBSERVED THAT EVEN WHEN VALUATION HAS BEEN DONE ON THE RECOMMENDATION OF THE EXPERT VALUER, THE AUDITOR SH OULD HAVE EXAMINED WHETHER THE SAME APPEARS REASONABLE AND BASED ON AD EQUATE FACTS. LEARNED CIT(A) OBSERVED THAT AUDITORS HAD FAILED IN THEIR D UTY AND HAVE BLINDLY AGREED TO THE VALUATION MADE BY SHRI S. SAMPAT. LEARNED C IT(A) THEREAFTER REFERRED TO SOME EXTRACTS FROM THE UNDATED VALUATION REPORT. H E OBSERVED THAT IT IS CLEAR THAT IT WAS A DESIGN TO APPORTION A MAJOR PART OF S ALE CONSIDERATION TOWARDS ACQUISITION OF INTANGIBLE ASSETS AND THEN CLAIM DEP RECIATION THEREON. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 14 20. LEARNED CIT(A) EXAMINED THE CLAIM OF KNOW-HOW O F RS. 26.19 CRORES. HE REFERRED TO THE DEFINITION OF KNOW-HOW IN SECT ION 32. HE OBSERVED THAT THE SELLER COMPANY TPPL WAS NEVER ENGAGED IN MANUFACTUR ING OR PROCESSING OF GOODS. HENCE, THE FIRST PART OF THE DEFINITION OF KNOW-HOW SHALL NOT BE APPLICABLE TO IT. IT WAS UNDERTAKING ENGINEERING A ND DESIGN CONTRACT IN ALL ENERGY SECTORS BOTH ON-SHORE AND OFF-SHORE. AS FAR AS OFF-SHORE PROJECT WAS CONCERNED, IT UNDERTOOK CONTRACTS FOR CONSTRUCTING FLOATING, PRODUCTION, STORAGE AND OFF-LOADING SYSTEMS (FPSO). 21. LEARNED CIT(A) OBSERVED THAT THE SELLER COMPANY OF THE SAID KNOW-HOW HAS NEVER ENGAGED IN ANY R&D ACTIVITY FOR DEVELOPME NT OF ANY INDUSTRIAL INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE WO RKING OF AN OIL WELL. ALL THESE EXPENSES WERE CLAIMED AS REVENUE EXPENDITURE AGAINS T CONTRACT RECEIPTS. HENCE, LEARNED CIT(A) REJECTED THE CLAIM THAT ASSES SEE COMPANY HAS ACQUIRED ANY KNOW-HOW. HE OBSERVED THAT THE ASSESSEE COMPAN Y ONLY BOUGHT ON-GOING BUSINESS OF TPPL. LEARNED CIT(A) FURTHER REFERRED TO THE SLUMP SALE AGREEMENT IN THIS REGARD AND OBSERVED THAT A READING OF DEFIN ITIONS CONTAINED IN THE SLUMP SALE AGREEMENT SHOWS THAT IT IS THE BUSINESS OF TPP L WHICH HAS GOT TRANSFERRED AND THE INFORMATION, DATA, SPECIFICATIONS, RECORDS AND MATERIAL ETC. MOSTLY RELATE TO THE BUSINESS OF THE SELLER. IT HAS GOT NOTHING TO DO WITH ANY INDUSTRIAL INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE FI ELD OF OIL WELL. LEARNED CIT(A) HELD THAT EVEN ASSUMING BUT NOT ADMITTING THAT KNOW -HOW WAS AVAILABLE WITH ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 15 TPPL, ITS VALUATION AT RS.26.20 CRORES WAS EXAGGERA TED. HE OBSERVED THAT THE SO-CALLED KNOW-HOW HAS BEEN VALUED PURELY ON FUTURE PROFITABILITY WHICH IN ANY CASE WAS TO BE A UNREALISTIC GUESS WORK. 22. THEREAFTER, LEARNED CIT(A) CONSIDERED THE VALUA TION FOR THE BUSINESS ON HAND AT RS.11.50 CRORES. IN THIS REGARD, LEARNED C IT(A) OBSERVED THAT THE ONLY CATEGORY OF RIGHTS WHICH COULD HAVE GOT ENTITLED TH E ASSESSEE TO DEPRECIATION IN THIS REGARD WERE BUSINESS OR COMMERCIAL RIGHTS OF S IMILAR NATURE. LEARNED CIT(A) OBSERVED THAT THE CATEGORIES OF RIGHTS CLAIM ED TO HAVE BEEN ACQUIRED UNDER THE SLUMP SALE AGREEMENT SUCH AS CONTRACTS, E MPLOYEES, GOODWILL DID NOT SATISFY THE REQUIREMENT OF BUSINESS OR COMMERCIAL R IGHT OF SIMILAR NATURE AS MENTIONED IN SECTION 32(1)(II). LEARNED CIT(A) CON CLUDED THAT THE ASSESSEES CLAIM OF ACQUISITION OF COMMERCIAL OR BUSINESS RIGH TS OF SIMILAR NATURE UNDER THE BROAD HEAD BUSINESS ON HAND DOES NOT MERIT ACCEPTAN CE. 23. THEREAFTER, LEARNED CIT(A) CONSIDERED THE NON-C OMPETE RIGHTS (`1.88 CRORES). LEARNED CIT(A) OBSERVED THAT THE VALUER H AS APPORTIONED SUMS TOWARDS NON-COMPETE FEE BY MENTIONING THAT THERE IS A NON-COMPETE CLAUSE FOR A PERIOD OF FOUR YEARS. HOWEVER, LEARNED CIT(A) NO TED THAT THE SLUMP SALES AGREEMENT WAS AN OPEN-ENDED AND PERPETUAL NON-COMPE TE GUARANTEE. THEREFORE, THE VALUERS ASSUMPTION THAT SUCH OBLIGA TION WAS UNDERTAKEN ONLY FOR FOUR YEARS WAS ABSOLUTELY WRONG AND THEREFORE, THE SAID INCORRECT ASSUMPTION ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 16 HAS VITIATED THE VALUATION. HE ALSO REFERRED TO SO ME TRIBUNALS DECISIONS THAT NO DEPRECIATION UNDER SECTION 32 WOULD BE ALLOWED ON N ON-COMPETE FEES. LEARNED CIT(A) CONCLUDED THAT NO DEPRECIATION IS ALLOWABLE ON THE SAID NON-COMPETE OBLIGATION UNDERTAKEN BY THE VALUER. 24. THEREAFTER, LEARNED CIT(A) CONSIDERED THE ALTER NATIVE CLAIM OF THE ASSESSEE THAT DEPRECIATION ON GOODWILL SHOULD BE AL LOWED. LEARNED CIT(A) DID NOT ACCEPT THE ABOVE ALTERNATIVE SUBMISSION OF THE ASSESSEE. HE OBSERVED THAT THE DIFFERENCE BETWEEN THE ACTUAL PURCHASE CONSIDER ATION AND THE BOOK VALUE OF THE TANGIBLE ASSETS WAS INITIALLY DEBITED AS GOODWI LL IN THE BOOKS BUT AFTER OBTAINING THE VALUATION REPORT, THE VALUE OF THE GO ODWILL WAS REDUCED TO ZERO AND ASSESSEE BIFURCATED THE SAME INTO THREE COMPONE NTS. LEARNED CIT(A) OBSERVED THAT EXACTLY IN SIMILAR FACT SITUATION, HO NBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANGALORE GANESH BEEDI WORKS [2003] 264 ITR 142 HAD DENIED THE DEPRECIATION ON GOODWILL. 25. LEARNED CIT(A) OBSERVED THAT IF TPPL ENJOYED GO ODWILL IN THE MARKET PLACE, SO DID SAIPEM, WHICH IS AN MNC AND HAS A TUR NOVER SEVERAL TIMES BEFORE TAKING OVER OF ON-GOING BUSINESS. SAIPEM HAD ALSO LENT ITS NAME TO THE ASSESSEE COMPANY WITHOUT CHARGING ANYTHING TOWARDS GOODWILL. THEREFORE, TO SAY THAT ONLY GOODWILL PASSED FROM TPPL TO THE ASSE SSEE COMPANY WOULD BE INCORRECT. THEREAFTER, LEARNED CIT(A) DISTINGUISHE D THE CASE LAW CITED BY THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 17 ASSESSEE IN THIS REGARD. HE FURTHER OBSERVED THAT THESE DECISIONS WOULD NOT HELP IN A CASE WHERE THE ENTIRE TRANSACTION HAS BEE N HELD TO BE COLORABLE DEVICE ADOPTED TO EVADE DUE REVENUE TO THE GOVERNMENT. LE ARNED CIT(A) FURTHER REFERRED THAT IN SEVERAL CASES, ITAT HAS HELD THAT DEPRECIATION IS NOT ALLOWABLE ON GOODWILL. ACCORDINGLY, LEARNED CIT(A) HELD THAT DEPRECIATION CANNOT BE ALLOWED EVEN ON THE ALTERNATIVE CLAIM OF THE ASSESS EE COMPANY THAT THE AMOUNT OF RS. 40.58 CRORES MAY BE TREATED AS HAVING BEEN P AID TOWARDS ACQUISITION OF GOODWILL. 26. THEREAFTER LD. CIT(A) CONSIDERED THE APPL ICABILITY OF PROVISIONS OF SECTION 170 OF THE ACT. IN THIS REGARD LD. CIT(A) O BSERVED THAT IF ON APPRECIATION OF FACTS IT IS FOUND TO BE A CASE OF S UCCESSION THEN THE 5 TH PROVISION TO SECTION 32(1) SHALL COME INTO OPERATION AND NO D EPRECIATION ON INTANGIBLE ASSETS WOULD BE ADMISSIBLE BY VIRTUE OF OPERATION O F THE SAID PROVISION AND THE ALLOWABLE DEPRECATION WOULD BE OPERATED IN THE RATI O OF THE NUMBER OF DAYS FOR WHICH THE ASSETS WERE BEING USED BY THE PREDECESSOR AND SUCCESSOR COMPANY. LD. CIT(A) REFERRED TO THE PROVISION OF SECTION 170 AND SECTION 32(1) 5 TH PROVISO. LD. CIT(A) OBSERVED THAT A COMBINED READIN G OF BOTH THE PROVISIONS WOULD SHOW THAT IN CASE OF SUCCESSION IN BUSINESS, DEPRECIATION WOULD NOT BE SEPARATELY COMPUTED UNDER THE ACT FOR BOTH THE PART IES. RATHER THE FULL YEARS DEPRECIATION WOULD BE COMPUTED AND THE SAME WOULD B E APPORTIONED ACCORDING TO THE NUMBER OF DAYS SUCH ASSETS WERE USED BY THE PREDECESSOR AND SUCCESSOR ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 18 RESPECTIVELY. THEREAFTER LD. CIT(A) EXAMINED THAT S ALIENT FACTS IN THIS REGARD. HE OBSERVED THAT THE ASSESSEE COMPANY HAS TAKEN OV ER THE ENTIRE ONGOING ENGINEERING & DESIGN BUSINESS OF TPPL ALONG WITH MO ST OF THE ASSETS & LIABILITIES. IT HAS BEEN FOUND THAT ALL FIXED ASSET S OF TPPL AS ON 22.9.2006 HAVING BOOK VALUE OF RS. 2.56 CR. WERE TRANSFERRED TO THE APPELLANT COMPANY EXCEPT AIR-CONDITIONING PLANTS WITH A BOOK VALUE OF RS. 0.53 CRORE, THE INVESTMENTS AND SURPLUS CASH AVAILABLE WITH THE TP PL. SIMILARLY, ALL LIABILITIES OF THE SELLER COMPANY WERE ALSO TAKEN OVER EXCEPT A CO UPLE OF UNREALIZABLE AND LONG-PENDING CUSTOMER BILLS. 27. LD. CIT(A) FURTHER OBSERVED THAT AFTER T RANSFER OF THIS BUSINESS, NO INCOME UNDER THE HEAD BUSINESS HAS BEEN EARNED BY T HE SELLER COMPANY TPPL. THERE WAS NO POSSIBILITY OF UNDERTAKING SIM ILAR TYPE OF BUSINESS BY THE TRANSFERER SINCE IT WAS BOUND BY A NON-COMPLETE CL AUSE. IN THIS REGARD LD. CIT(A) REJECTED THE SUBMISSION OF THE ASSESSEE THAT TPPL CARRIED OUT PROJECT CONSULTANCY BUSINESS SUBSEQUENTLY. HE OBSERVED THAT THIS IS A WRONG SUBMISSION WITHOUT ANY SUPPORTING EVIDENCE. IN THIS REGARD LD. CIT(A) REFERRED TO DECISION OF HONBLE APEX COURT IN THE CASE OF CI T VS. K.H. CHAMBERS 55 ITR 674. HE OBSERVED THAT IN VIEW OF THE RATIO OF THE A BOVE JUDGMENT THERE IS NO MERIT IN ASSESSEES CLAIM THAT IN ORDER TO ATTRACT S. 170 AND CONSEQUENTLY 5 TH PROVISION TO SECTION 32 IN CASE OF SUCCESSION UNDER THE I.T. ACT THE EARLIER IDENTITY OF THE PERSON CARRYING ON BUSINESS NEED TO BE SUBSUMED BY THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 19 SUCCESSOR. RATHER WHAT THE COURT HAS HELD IS THAT I F ONE OF THE BUSINESS HAS BEEN SUBSTANTIALLY TRANSFERRED, WITHOUT TRANSFER OF ALL ASSETS AND LIABILITIES EVEN THEN IT WOULD BE CASE OF SUCCESSION UNDER I.T. ACT. LD. CIT(A) OPINED THAT IN VIEW OF THESE THE RATIO OF APEX COURT DECISION APPL Y TO THE FACTS OF THE PRESENT CASE AND IT IS A CASE OF SUCCESSION U/S 170 OF THE I.T. ACT AND THE 5 TH PROVISO TO SECTION 32 WOULD BE APPLICABLE. LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS REFERRED TO S. 47 (XIII) OF THE I.T. ACT WHERE, ACCORDING TO IT, THE WORD SUCCESSION HAS BEEN USED. BUT THERE THE WORD SUC CESSION HAS BEEN USED IN THE SPECIFIC CONTEXT OF SUCCESSION OF THE FIRM BY A COMPANY IN ORDER TO DESCRIBE TRANSACTIONS NOT REGARDED AS TRANSFER. THEREFORE, THE WORD SUCCESSION APPEARING IN THE SAID SECTION WOULD NOT IMPINGE ON THE MEANING OF THE SAME WORD APPEARING IN S. 170 AND THE 5 TH PROVISO TO S.32. 28. ON THE BASIS OF THE ABOVE DISCUSSION, LD . CIT(A) HELD THAT THE A.O. HAS RIGHTLY INVOKED S. 170 AND 5 TH PROVISO TO S. 132 OF THE ACT IN THE FACTS & CIRCUMSTANCES OF THIS CASE. THAT AS A RESULT, NO DE PRECIATION WOULD BE ALLOWED ON ANY INTANGIBLES BECAUSE NO SUCH INTANGIBLE ASSET S WERE APPEARING IN THE BOOKS OF THE PREDECESSOR COMPANY I.E. TPPL. MOREOVE R, DEPRECIATION WOULD BE ALLOWED IN PROPORTION TO THE NUMBER OF DAYS FOR WHI CH THE TANGIBLE ASSETS WERE IN USE BY BOTH THE COMPANIES - THE PREDECESSOR (TP PL) AND THE SUCCESSOR COMPANY (STEP). THE ASSETS WERE IN USE BY TPPL TILL 25.9.2006 (178 DAYS), THEY WERE TRANSFERRED TO STEP SINCE 26.9.2006 (187 D AYS). STEP, THE ASSESSEE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 20 COMPANY, HAS CLAIMED DEPRECIATION FOR THE WHOLE YEA R, ON THE GROUND THAT THE ASSETS WERE IN USE FOR MORE THAN 180 DAYS. THAT THE AO HAS INVOKED 5 TH PROVISO TO SECTION 32, BUT HAS INADVERTENTLY MISSED OUT TO RESTRICT THE DEPRECIATION PROPORTIONATELY. HE IS DIRECTED TO DO SO. AS A RESU LT, THE DEPRECIATION TO BE ALLOWED IS WORKED OUT AT RS. 17,71,759/- AS AGAINST RS. 34,58,247/- COMPUTED AT PARA 7.8 (PAGE 120-121) OF THIS ORDER. HENCE LD. CIT(A) CONCLUDED THAT THIS RESULT IN ENHANCEMENT OF RS. 16,86,487/- UNDER THE HEAD DEPRECIATION. LD. CIT(A) FURTHER OBSERVED THAT SINCE THE ASSESSEES O BJECTION TO THE INVOCATION OF PROVISO TO SECTION 32 HAS BEEN DULY CONSIDERED THE RE WAS NO NEED TO GIVE A SEPARATE OPPORTUNITY FOR THIS ENHANCEMENT. 29. THEREAFTER LD. CIT(A) CONSIDERED THE APPLICATION OF EXPLANATION 3 TO SECTION 43(1) OF THE I.T. ACT. IN THIS REGARD LD. C IT(A) OBSERVED THAT THE BOOK VALUE ON WHICH THE ASSETS WERE ACQUIRED BY THE ASSE SSEE COMPANY WHERE THE BOOK VALUE AS PER THE DEPRECIATION SCHEDULE PREPARE D UNDER THE COMPANIES ACT. THE ASSESSEE HAS CLAIMED DEPRECATION ON DEPREC IATION SCHEDULE PREPARED UNDER THE COMPANIES ACT. THE ASSESSEE HAS CLAIMED D EPRECATION ON THE AFORESAID ITEMS BY TAKING THESE AS A WRITTEN DOWN V ALUE . IN THIS REGARD LD. CIT(A) REFERRED TO SECTION 43(1) AND OBSERVED THAT EXPLANATION 3 THEREIN PROVIDED THAT IN CASE THE ASSET IN QUESTION HAS BEE N PREVIOUSLY USED BY ANY OTHER PERSON THEN UNDER SOME SPECIAL CIRCUMSTANCES THE ACTUAL COST THEREOF CAN BE RE-COMPUTED. LD. CIT(A) OBSERVED THAT SINCE ALL THE ASSETS HAS EARLIER ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 21 BEEN USED BY TPPL FOR ITS BUSINESS PURPOSE THE MAI N PURPOSE OF SUCH TRANSFER AT AN ENHANCED COST TO THE ASSESSEE WAS TO CLAIM HI GHER DEPRECIATION. IN THIS REGARD LD. CIT(A) REJECTED THE ASSESSEES SUBMISSIO N THAT ONLY AO COULD HAVE INVOKED THIS PROVISION WITH THE PRIOR APPROVAL OF J CIT / ADDL. CIT. HE HELD THAT THERE IS NO MERIT IN THIS OBJECTION SINCE TIME AND AGAIN IT HAS BEEN HELD BY THE SUPREME COURT THAT THE CIT(A)S POWER ARE CO-TERMIN US WITH THAT OF THE ASSESSING OFFICER AND HE HAS GOT ALL THE POWERS THA T AN AO ENJOYS UNDER I.T. ACT. LD. CIT(A) FURTHER REJECTED THE ASSESEES CONT ENTION THAT TPPL HAD ACQUIRED ONGOING BUSINESS OF SLUMP SALE BUSINESS AN D ITS MAIN PURPOSE WAS TO BUY THE BUSINESS AS AS WHOLE AND NOT ON PIECEMEAL B ASIS. LD. CIT(A) OBSERVED THAT SUCH ASSET HAS BEEN PREVIOUSLY USED BY ASSESSE E AND HENCE THERE IS REDUCTION OF A LIABILITY TO INCOME TAX BY CLAIMING DEPRECIATION AT ENHANCED COST. HE OBSERVED THAT THERE IS NO REQUIREMENT TO PROVE T HAT THE EVIDENCE OF FRAUD/COLLUSION AND FALSE TRANSACTION. EVEN OTHERWI SE HE OBSERVED THAT COLLUSION IN THIS CASE CANNOT BE DENIED BECAUSE THE PROMOTER SHRI BINOY JACOB IS THE SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN BOTH TH E COMPANIES. ACCORDINGLY LD. CIT(A) ENHANCED THE INCOME BY WORKING OF DEPRECIAT ION ALLOWABLE UNDER THE ACT AFTER TAKING WDV PREVIOUSLY USED AS THE ACTUAL COST IN HANDS OF THE ASSESSEE COMPANY. 30. THEREAFTER LD. CIT(A) CONSIDERED THE E NHANCEMENT ON ACCOUNT OF RENT FOR USE OF ASSETS. LD. CIT(A) OBSERVED THAT AS SESSEE COMPANY WAS DULY SET ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 22 UP AND ACQUIRED ON GOING BUSINESS OF TRIUNE PROJECT S PVT. LTD. THAT ASSESSEE COMPANY NOT ONLY DECIDED TO ACQUIRE THE ONGOING BUS INESS OF TPPL IT ALSO DECIDED TO OPERATE FROM THE SAME OFFICE PREMISES FR OM WHICH TPPL WAS EARLIER RUNNING ITS BUSINESS. THE PREMISES ARE TWO IN NUMBE R AND WHILE ONE OF THE OWNER OF THE PROPERTIES WAS A 100% OWNED SUBSIDIARY OF TPPL THE OTHER PARTY WAS AN UNRELATED PARTY. IN THIS REGARD LD. CIT(A) O BSERVED THAT THE LEASE RENT PAID FOR THE PROPERTY ACQUIRED FROM THE RELATED PAR TY WAS RS. 20.87 PER SQ. FT. AND ONE FROM UNRELATED PARTY WAS RS. 22/- PER SQ. FT.. THEREAFTER LD. CIT(A) REFEREED TO LEASE AGREEMENT BETWEEN TPPL AND THE A SSESSEE. HE FOUND THAT LEASE RENTAL AT RS. 30/- PER SQ. FT. PER MONTH HAS BEEN CHARGED FOR PROVIDING THESE FACILITIES. CLAUSE 6 OF THE AGREEMENT PROVIDE S THAT THE ASSESSEE HAS TO BEAR THE REPAIR AND MAINTENANCE OF THE PLANTS, DG S ETS, HT CONNECTIONS FROM BSES. THE AFORESAID ITEMS WERE USED FOR PROVIDING AI R-CONDITIONING FACILITIES THROUGH AC PLANTS AND ALSO POWER BACK-UP FACILITY T HROUGH DG SETS AT BOTH THE OFFICE PREMISES MENTIONED ABOVE. AS PER LEASE AGREE MENT BETWEEN TPPL AND ASSESSEE THE LEASE RENTAL OF RS. 30/- PER SQ. FT. P ER MONTH HAS BEEN CHARGED FOR PROVIDING THESE FACILITIES. 31. LD. CIT(A) FURTHER OBSERVED THAT AS PE R THE SAID AGREEMENT ASSESSEE HAS TO BEAR THE COST OF RUNNING AND FUEL COST OF T HE AIR CONDITIONING PLANTS AND DG SETS. IN THESE CIRCUMSTANCES LD. CIT(A) EXAMINE D WHETHER PAYMENT OF LEASE RENTAL OF RS. 30/- PER SQ. FT. PER MONTH FOR THE PROVISION OF AIR ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 23 CONDITIONING AND POWER BACK US SERVICES WAS A REASO NABLE PAYMENT. IN THIS REGARD LD. CIT(A) HELD THAT IT WAS A DUTY OF THE AS SESSEE TO PROVE AND DISCHARGE ITS BURDEN BY LEADING PROPER EVIDENCE THA T THE PRICE PAID WAS NOT EXCESSIVE OR UNREASONABLE. HE OBSERVED THAT NO SUCH EVIDENCE HAS BEEN SUBMITTED EITHER BEFORE THE AO OR BEFORE HIM. LD. CIT(A) FURTHER OBSERVED THAT AS IN ORDINARY CIRCUMSTANCES . THE LEASE RENTAL FOR SPACE IS ALWAYS HIGHER THAN THE PROVISION FOR AIR CONDITIONING AND POWER BACK U P SERVICES. HE OBSERVED THAT IT DOES NOT APPEAL TO REASON THAT THE ASSESSEE WOUL D BE PAYING RS. 20/- TO RS. 22/- PER SQ. FT. FOR RENT OF THE SPACE WHEREAS IT W OULD BE PAYING RS. 30 PER SQ. FT. FOR TAKING A FEW AIR CONDITIONING PLANTS AND DG SETS ON HIRE. THE ENTIRE RUNNING AND FUEL COST OF THE AIR CONDITIONING PLANT S AND DG SETS AND THEIR REPAIR EXPENSES WERE TO BE BORNE BY THE ASSESSEE ITSELF. T HE DEPRECIABLE VALUE OF THE ASSETS WERE ONLY RS. 78,70, 576/- WHEREAS THE LEASE RENTAL DURING THE YEAR WORKED OUT TO RS. 69,74,000/- FOR THE PERIOD 22.9.2 006 TO 31.3.2007. THUS MONTHLY LEASE RENTAL FOR ASSETS WORKS OUT TO RS. 11 ,07,000/- PER MONTH. IN THIS REGARD LD. CIT(A) REFERRED TO THE DECISION OF GUJAR AT HIGH COURT IN THE CASE OF CORONATION FLOUR MILLS VS. ACIT 314 ITR 1. LD. CIT( A) CONCLUDED THAT THE TRANSACTION IS CLEARLY HIT BY PROVISION 40A(2). HE HELD THAT RS. 6/- PER SQ. FT. WOULD BE A REASONABLE FIGURE CONSIDERING THE FACT T HE AIR CONDITIONERS ARE USED ON A REGULAR BASIS WHEREAS DG SETS WOULD BE PUT T O USE ONLY WHEN THERE IS A POWER FAILURE. LD. CIT(A) ADOPTED RS. 6/- PER SQ. F T. AND HELD THAT ALLOWABLE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 24 PORTION OF LEASE RENTAL WORKS OUT TO RS. 13,94,800/ - AND DISALLOWABLE PORTION WORKS OUT TO RS. 55,79,200/-. 32. AGAINST THE ABOVE ORDER ASSESSEE IS IN A PPEAL BEFORE US. 33. WE HAVE HEARD BOTH THE COUNSELS AND PERUS ED THE RECORD. LD. COUNSEL FOR THE ASSESSEE HAS AT THE OUTSET SUBMITTED THAT HE SHALL NOT BE PRESSING THE GROUND NO. 1 IN THE GROUNDS OF APPEAL. HENCE GROUN D NO. 1 RAISED BY THE ASSESSEE BEFORE US IS DISMISSED AS NOT PRESSED. 34. THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE IN THIS REGARD ARE AS UNDER :- RE: GROUND OF APPEAL NO. 1 NOT PRESSED. RE: GROUNDS OF APPEAL NO. 2 TO 2.8 AND 3 TO 3.2 THE APPELLANT IS HELD 50% BY SAIPEM, ITALY AND 50% BY ONE MR. BINOY JACOB. THE APPELLANT HAD DURING THE RELEVANT ASSESSMENT YE AR 2007-08 VIDE AGREEMENT DATED 22.09.2006, ACQUIRED THE BUSINESS OF ENGINEER ING AND DESIGN SERVICES RELATING TO THE OIL AND GAS INDUSTRY, CARRIED ON BY TRIUNE PROJECTS PVT. LTD. (TPPL), BY WAY OF SLUMP SALE. THE LUMPSUM CONSIDERATION PAID FOR THE AFORESAID BU SINESS WAS RS.45.85 CRORES. A SUM OF RS.40.58 CRORES OUT OF THE PURCHASE CONSID ERATION WAS ATTRIBUTED TO THE FOLLOWING INTANGIBLE ASSETS ACQUIRED BY THE APPELLA NT AS PART OF THE AFORESAID BUSINESS TRANSFERRED BY TPPL: PARTICULARS VALUE OF ASSET (RS.) DEPRECIATION (RS.) TECHNICAL KNOW-HOW 26,20,15,529 6,55,03,882 ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 25 EXECUTING BUSINESS IN BRAND NAME TPPL 12, 50,00,000 3,12,50,000 BRAND NAME /NON COMPETE 1,88,60,000 47,15,000 40,58,75,529 10,14,68,882 THE AFORESAID BREAK UP OF INTANGIBLE ASSETS OF RS. 40,58,75,529/- WAS ARRIVED AT ON THE BASIS OF VALUATION REPORT OBTAINED BY THE AP PELLANT TO ALLOCATE THE PURCHASE CONSIDERATION OVER VARIOUS ASSETS. THE APPELLANT CLAIMED DEPRECIATION AMOUNTING TO RS. 10,14,68,882/- @ 25% ON THE WRITTEN DOWN VALUE OF THE AFORESAID INTANGIBLE ASSETS AMOUNTING TO RS.40,58,75,529/-THE ASSESSING OFFICER DID NOT ALLO W DEPRECIATION ON THE AFORESAID INTANGIBLE ASSETS, DOUBTING THE EXISTENCE OF THE AFORESAID INTANGIBLE ASSETS AND THE BASIS OF ITS VALUATION. IT WAS HELD THAT THE AMOUNT PAID BY THE APPELLANT TO PURCHASE DESIGN AND ENGINEERING DIVISI ON OF TPPL IN EXCESS OF NET ASSET VALUE WAS NOT TOWARDS ACQUISITION OF ANY INTA NGIBLE ASSETS AND WAS NOT ELIGIBLE FOR DEPRECIATION. THE ASSESSING OFFICER ALLEGED THAT THE AFORESAID SU M OF RS. 40.58 CRORES REPRESENTED VALUE OF GOODWILL AND THAT FOR THE PURP OSE OF CLAIMING DEPRECIATION ON THE SAME, THE APPELLANT OBTAINED VALUATION REPOR T WHICH ATTRIBUTED THE SAID AMOUNT TOWARDS TECHNICAL KNOWHOW, BRAND VALUE, VALU ATION OF ONGOING BUSINESS, ETC. ON APPEAL, THE CIT(A) UPHELD THE ACTION OF THE ASSE SSING OFFICER AND HELD AS UNDER: A) THE APPELLANT OBTAINED UNFAIR TAX ADVANTAGE BY TERM ING THE TRANSACTION AS SLUMP SALE IN THE HANDS OF TPPL, WHILE ATTRIBUTIN G IMAGINARY VALUES AND CLAIMING DEPRECIATION IN THE HANDS OF SELLER; B) SH. BINOY JACOB WAS BENEFITTED TWICE; ONCE, BY NOT PAYING PREMIUM ON ACQUISITION OF SHARES IN THE APPELLANT AND SECONDLY BY RECEIVING HUGE AMOUNT OF RS. 45.85 CRORES AS SALE CONSIDERATION IN HANDS OF TPPL; C) SH. BINOY JACOB UNDERTOOK NON COMPETE OBLIGATIONS AS STIPULATED IN SHAREHOLDERS AGREEMENT BUT DID NOT CHARGE CONSIDE RATION FOR THE SAME. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 26 THE CIT(A) NOT ONLY UPHELD THE AFORESAID DISALLOWAN CE MADE BY THE ASSESSING OFFICER BUT ALSO ENHANCED THE INCOME OF THE APPELLA NT BY RS. 30,44,06,647 ADDING THE AMOUNT OF CONSIDERATION PAID BY THE APPE LLANT FOR ACQUIRING THE BUSINESS OF TPPL ON SLUMP BASIS TO THE EXTENT RELAT ABLE TO THE VARIOUS INTANGIBLE ASSETS (NET OF DEPRECIATION DISALLOWED BY THE ASSES SING OFFICER) HOLDING THE SLUMP SALE TO BE A SHAM TRANSACTION AND ALTERNATIVE LY INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT. RE: SLUMP SALE TRANSACTION NOT BOGUS THE CIT(A) HAS GROSSLY ERRED IN HOLDING THE AFORESA ID BUSINESS TRANSFER AS COLORABLE DEVICE WITHOUT APPRECIATING THE FACT S OF THE PRESENT CASE. IT NEEDS TO BE APPRECIATED THAT TPPL WAS ENGAGED IN BU SINESS OF DESIGN ENGINEERING AND PROJECT CONSULTANCY FOR VARIOUS OIL AND GAS PROJECTS INCLUDING FLOATING PRODUCTION, STORAGE AND OFF LOAD ING SYSTEM (FPSO), FOR THE PAST 10 YEARS. THE SERVICES INCLUDE CONCEPTUAL STUDIES, FEASIBILITY STUDIES, PROCESS DESIGN, DETAILED ENGINEERING, PROC UREMENT SERVICES, CONSTRUCTION SUPERVISION AND COMMISSIONING SERVICES . TPPL WAS A CERTIFIED ISO - 9001-2000 COMPANY AND HAD AT THE TI ME OF SALE OF BUSINESS, 350 SKILLED/TECHNICALLY QUALIFIED PEOPLE ON ITS ROLLS. SEVERAL INTERNATIONAL PLAYERS IN THE OIL AND GAS SE CTOR INCLUDING SAIPEM INTERNATIONAL BV, A FORTUNE 500 COMPANY, EVINCED IN TEREST IN ACQUIRING 50% STAKE IN THE DESIGN AND ENGINEERING BUSINESS CA RRIED ON BY TPPL. IT WAS, THEREFORE, DECIDED TO HIVE OFF THE DESIGN A ND ENGINEERING BUSINESS CARRIED ON BY TPPL INTO A SEPARATE LEGAL E NTITY (JOINT VENTURE COMPANY), BY WAY OF SLUMP SALE, WHEREIN THE FOREIGN PARTNER COULD TAKE UP 50% EQUITY. AMONGST SEVERAL INTERNATIONAL COMPANIES WHO HAD EVI NCED INTEREST, SAIPEM INTERNATIONAL BV WAS CHOSEN AS THE JOINT VEN TURE PARTNER FOR THE JOINT VENTURE COMPANY (THE APPELLANT). THE DESIGN AND ENGINEERING BUSINESS OF TPPL WAS TRANSFERRED AS A GOING CONCERN BY WAY OF SLUMP SALE TO THE APPELLANT COMPANY FOR LUMPSUM CONSIDER ATION OF RS.45.85 ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 27 CRORES. THE APPELLANT CARRIED ON THE SAID BUSINESS ACQUIRED LOCK, STOCK AND BARREL, WITHOUT ANY BREAK / INTERRUPTION. IN THE AFORESAID ADMITTED FACTUAL BACKGROUND, THE S LUMP SALE IS NOT SHAM / BOGUS IN VIEW OF THE FOLLOWING: A) TANGIBLE ASSETS AND LIABILITIES FORMING PART OF THE DESIGN AND ENGINEERING BUSINESS OF TPPL VESTED IN THE APPELLAN T COMPANY PURSUANT TO SLUMP SALE; B) THE APPELLANT TOOK OVER THE INTANGIBLE ASSETS OF TPPL IN THE FORM OF TECHNICAL KNOWHOW, CUSTOMER/VENDOR DATABASE, PEN DING CONTRACTS, LICENSES, LEASES AND PERMITS, ETC IN THE NAME OF TPPL; C) THE EMPLOYEES OF TPPL WERE TRANSFERRED AND TAKEN OVER BY THE APPELLANT COMPANY; D) ACTUAL CASH CONSIDERATION OF RS.45.85 CRORES WAS PAID BY THE APPELLANT COMPANY TO TPPL; E) TPPL HAD DULY ACCOUNTED FOR TRANSACTION OF SLUMP SALE IN ITS AUDITED BOOKS OF ACCOUNT AND PAID TAX ON CAPITAL GA INS ON SLUMP SALE OF THE BUSINESS; F) IN THE HANDS OF THE APPELLANT, THE AO/CIT(A) HAV E ACCEPTED THE FACTUM OF SLUMP SALE IN AS MUCH AS THE AO / CIT(A) HAVE: ALLOWED DEPRECIATION ON TANGIBLE ASSETS TAKEN OVER BY THE APPELLANT AS PART OF THE SLUMP SALE. ASSESSED THE APPELLANT ON THE PROFITS AND GAINS FRO M THE DESIGN AND ENGINEERING BUSINESS CARRIED ON BY THE APPELLANT DU RING THE RELEVANT PEVIOUS YEAR, ON ACQUISITION OF THE SAME FROM TPPL. IN VIEW OF THE AFORESAID ADMITTED / UNDISPUTED FACT S, THE CIT(A) CLEARLY ERRED IN HOLDING THAT THE SLUMP SALE AGREEMENT BET WEEN TPPL, ON THE ONE HAND, AND THE APPELLANT, ON THE OTHER, WAS SHAM / COLLUSIVE. WITH REGARD TO THE ALLEGATIONS MADE BY THE CIT(A), IT IS SUBMITTED THAT THE SAME HAVE NO MERIT AS DEMONSTRATED HEREINBELOW: ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 28 THE CIT(A) HAS ERRED IN HOLDING THAT MR. BINOY JACO B HAD ENJOYED UNFAIR TAX ADVANTAGE. ACCORDING TO CIT(A), SHRI JACOB BENEFI TED TWICE ONCE BY NOT PAYING ANY PREMIUM ON ACQUISITION OF SHARES IN THE APPELLANT-COMPANY & SECONDLY, BY RECEIVING HUGE AMOUNT OF RS.45.85 CROR ES AS SALE CONSIDERATION IN THE HANDS OF TPPL, WHEN ITS PHYSICAL ASSETS STOOD O NLY AT RS.2.58 CRORES, IN VIEW OF THE FACT THAT - A) TPPL SOLD THE DESIGN AND ENGINEERING BUSINESS TO TH E APPELLANT COMPANY FOR LUMPSUM CONSIDERATION OF RS.45.85 CRORES. B) TPPL PAID TAX ON CAPITAL GAINS ON SLUMP SALE OF THE BUSINESS CALCULATED IN TERMS OF SECTION 50B OF THE ACT. C) SAIPEM INTERNATIONAL BV INVESTED IN 50% EQUITY OF T HE APPELLANT COMPANY, INFUSING A SUM OF RS. 45.85 CRORES INCLUDING SHARE PREMIUM OF RS.45.84 CRORES. D) THE FUNDS INFUSED BY SAIPEM INTERNATIONAL BV IN THE APPELLANT COMPANY WERE USED TO PAY THE SLUMP CONSIDERATION TO TPPL FO R PURCHASE OF BUSINESS. IN THE AFORESAID ARRANGEMENT, THE SALE CONSIDERATIO N HAS BEEN PAID BY THE APPELLANT COMPANY TO TPPL. IT IS NOT UNDERSTOOD HOW THE RECEIPT OF SALE CONSIDERATION BY TPPL FOR SLUMP SALE OF ITS DESIGN AND ENGINEERING BUSINESS BENEFITTED SHRI BINOY JACOB, WHO WAS ONLY A SHAREHO LDER IN THE COMPANY. [REFER DECISION OF SUPREME COURT IN CASE OF VODAFONE INTERNATIONAL HOL DING B.V. V. UOI: 341 ITR 1]. FURTHER, SHRI JACOB HELD 50% EQUITY IN THE APPELLAN T COMPANY WHICH WAS SUBSCRIBED AT PAR. THE SUBSCRIPTION TO 50% OF THE EQUITY OF THE APPELLANT COMPANY BY SAIPEM INTERNATIONAL BV AT PREMIUM, RESU LTED IN INJECTION OF FUNDS INTO THE APPELLANT COMPANY. IT IS NOT COMPREHENDED AS TO HOW SHRI JACOB BENEFITTED AS A CONSEQUENCE OF SAIPEM INTERNATIONAL BV ACQUIRING EQUITY IN THE APPELLANT COMPANY AT PREMIUM, EXCEPT FOR NOTIONAL I NCREASE IN THE VALUE OF HIS HOLDING IN THE APPELLANT COMPANY. THE LAW DOES NOT TAKE COGNIZANCE OF ANY SUCH NOTIONAL INCREASE IN THE VALUATION. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 29 IT IS THUS SUBMITTED THAT THE CIT(A) HAS TREATED TH E SLUMP SALE TRANSACTION AS A COLOURABLE DEVICE WITHOUT BRINGING ON RECORD, ANY E VIDENCE TO SUBSTANTIATE ITS ALLEGATIONS, WHEN IT IS UNDISPUTED THAT THE DESIGN AND ENGINEERING BUSINESS WAS ACQUIRED BY THE APPELLANT DURING THE YEAR FROM TPPL AND FURTHER THAT THE APPELLANT HAS SINCE BEEN CARRYING ON THE BUSINESS S O ACQUIRED. WITHOUT PREJUDICE TO THE ABOVE, IT IS RESPECTFULLY SUBMITTED THAT EVEN IF IT WERE TO BE ASSUMED FOR THE SAKE OF ARGUMENTS THOUGH NOT ADM ITTING, THAT THE SLUMP SALE WAS BOGUS, NO PART OF THE CONSIDERATION PAID CAN, B Y ANY STRETCH OF IMAGINATION, BE TREATED AS THE INCOME OF THE PURCHASER. IT DEFI ES ANY LOGIC THAT AN AMOUNT PAID BY AN ASSESSEE (FOR ACQUISITION OF BUSINESS), EVEN IF, SUCH ACQUISITION IS TREATED AS SHAM / COLLUSIVE, IS, SOUGHT TO BE TAXED AS THE INCOME OF THE PURCHASER. THE AMOUNT THAT HAS GONE OUT OF THE COF FERS OF THE PURCHASER CAN, UNDER NO PROVISION OF THE ACT, BE REGARDED AS PART OF THE TAXABLE INCOME OF THE PURCHASER, EVEN IF, THE SLUMP SALE OF BUSINESS IS H ELD TO BE SHAM / BOGUS. RE: WITHOUT PREJUDICE, SECTION 40A(2) NOT APPLICABL E IT IS FURTHER SUBMITTED THAT THE PROVISIONS OF SECT ION 40A(2) OF THE ACT CAN BE INVOKED ONLY IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE, WHICH IS CLAIMED AS DEDUCTION. IN OTHER WORDS, THE SAID SEC TION IS APPLICABLE ONLY TO REVENUE EXPENDITURE CLAIMED AS BUSINESS DEDUCTION B Y AN ASSESSEE AND IS NOT APPLICABLE TO CAPITAL EXPENDITURE. FOR INVOKING SEC TION 40A(2) OF THE ACT THERE SHOULD, IN THE FIRST PLACE, BE CLAIM FOR DEDUCTION OF EXPENDITURE IN COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION. THE PURCHASE CONSIDERATION PAID BY THE APPELLANT HAS NO T BEEN CLAIMED DEDUCTION BY THE APPELLANT IN COMPUTING BUSINESS INCOME, AND THE REFORE, ENHANCEMENT OF INCOME TO THE EXTENT OF RS. 30.44 CRORE BY THE CIT( A), APPLYING PROVISIONS OF SECTION 40A(2) OF THE ACT IS WITHOUT ANY BASIS IN L AW. MERELY BECAUSE THE AMOUNT OF RS.40.58 CRORES (OUT O F THE LUMPSUM CONSIDERATION) HAS BEEN CAPITALIZED BY THE APPELLAN T TOWARDS INTANGIBLE ASSETS ACQUIRED BY WAY OF SLUMP SALE IN THE BOOKS OF ACCOU NTS AND DEPRECIATION CLAIMED THEREON, WOULD NOT TRIGGER THE MISCHIEF OF SECTION 40A(2) OF THE ACT. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 30 CLAIM OF DEPRECIATION ON THE CAPITALISED VALUE OF A SSETS DOES NOT ENJOIN THE REVENUE TO ADD THE VALUE OF ASSETS (ON WHICH DEPREC IATION IS CLAIMED) IN TERMS OF SECTION 40A(2) OF THE ACT. FURTHER, THE DEPRECIATION CLAIMED CANNOT ALSO BE DI SALLOWED IN TERMS OF THE SAID SECTION; IF DEPRECIATION CLAIMED IS, IN THE OPINION OF THE AO EXCESSIVE, BEING CLAIMED ON THE BASIS OF INFLATED VALUE OF ASSETS, T HE AO IN TERMS OF EXPLANATION 3 TO SECTION 43(1) OF THE ACT IS ENTITLED IN LAW TO R EDUCE THE ADMISSIBLE DEPRECIATION. RECENTLY IN THE CASE OF CIT V. MARK AUTO INDUSTRIES LTD.: 40 TAXMANN.COM 482 , THE PUNJAB AND HARYANA HIGH COURT HELD THAT THERE COULD BE NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF CAPITALISED VALUE OF ASSETS ON THE ALLEGATION BY THE REVENUE THAT THE AS SESSEE HAD DEFAULTED IN DEDUCTING TAX AT SOURCE ON THE AMOUNT INCURRED FOR ACQUISITION OF ASSETS. THE HIGH COURT FURTHER HELD THAT SECTION 40(A)(IA) OF T HE ACT COULD APPLY ONLY IN RESPECT OF DEDUCTION CLAIMED FOR REVENUE EXPENDITUR E; THE SAID SECTION HAD NO APPLICATION QUA AMOUNT SPENT FOR ACQUISITION OF ASS ETS CAPITALISED IN THE BOOKS OF ACCOUNTS FOR WHICH NO DEDUCTION WAS CLAIMED IN C OMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. ON A PARITY OF REASONING, SECTION 40A(2) OF THE ACT HAS BEEN WRONGLY INVOKED BY THE CIT(A) TO DENY DEDUCTION FOR PART OF SLUMP PRIC E PAID FOR ACQUISITION OF THE DESIGN AND ENGINEERING BUSINESS OF TPPL. REFERENCE MAY BE DRAWN TO THE PRIMA FACIE OBSERVATI ONS MADE BY THE HONBLE HIGH COURT WHILE STAYING THE DEMAND FOR THE CAPTION ED ASSESSMENT YEAR @PG 5 PARA-8 WHEREIN IT WAS HELD THAT EVEN IF SALE WAS TO BE CO NSTRUED AS SHAM OR NOT A SLUMP SALE AT ALL, THE AMOUNT OF CONSIDERATION CO ULD NOT BE ADDED UNDER SECTION 40A(2) OF THE ACT AS THE APPELLANT NEVER CL AIMED THE SAID AMOUNT AS AN EXPENDITURE. WITHOUT PREJUDICE, THE CIT(A) HAS ALSO FAILED TO DI SCHARGE THE ONUS CAST ON THE REVENUE UNDER SECTION 40A(2) OF THE ACT FOR ESTABLI SHING THAT THE AMOUNT OF EXPENDITURE WAS EXCESSIVE HAVING REGARD TO THE LEGI TIMATE NEEDS OF BUSINESS IN ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 31 THE ABSENCE OF ANY COMPARABLE TRANSACTIONS OR OTHER EVIDENCE BEING BROUGHT ON RECORD TO SUPPORT THE ABOVE ALLEGATION. RE: DEPRECIATION ON INTANGIBLE ASSETS UNDER THE SLUMP SALE AGREEMENT, THE APPELLANT HAS A CQUIRED THE BUSINESS OF TPPL AS A GOING CONCERN FOR LUMPSUM CONSIDERATION, WITHOUT VALUES BEING ASSIGNED TO INDIVIDUAL ASSETS. IT IS ONLY FOR THE PURPOSE OF RECORDING THE ASSETS ACQUIRED AS PART OF SLUMP SALE IN THE BOOKS OF ACCO UNTS OF THE SELLER THAT THE COMPOSITE CONSIDERATION WAS BROKEN DOWN AND VALUES WERE ASSIGNED TO TANGIBLE AND INTANGIBLE ASSETS. IN R.C COOPER V. UNION OF INDIA: AIR 1970 SC 564, THE SUPREME COURT HELD THAT AGGREGATE VALUE OF COMPONENTS IS NOT NECESSAR ILY THE VALUE OF THE ENTIRETY OF A UNIT OR PROPERTY ACQUIRED, ESPECIALLY WHEN THE PROPERTY IS A GOING CONCERN WITH AN ORGANISED BUSINESS. IN PNB FINANCE LTD. V. CIT: 307 ITR 75 (SC), THE COURT NOTED THAT WHEN UNDERTAKING IS SOLD AS AN GOING CONCERN WHAT IS SOL D IS NOT AN INDIVIDUAL ITEM OF PROPERTY FORMING PART OF THE AGGREGATE; THE BUSINES S OR UNDERTAKING TRANSFERRED CONSTITUTED A CAPITAL ASSET, DISTINCT AND SEPARATE FROM THE ASSETS COMPRISED IN THE UNDERTAKING. THE INTANGIBLE ASSETS ACQUIRED BY THE APPELLANT AS PART OF SLUMP SALE OF THE DESIGN AND ENGINEERING BUSINESS OF TPPL WERE IN THE FORM OF TECHNICAL KNOWHOW, BUSINESS INFORMATION, BUSINESS RECORDS, PE NDING / ONGOING CONTRACTS, CUSTOMER AND VENDOR DATA BASE, HUMAN CAPITAL IN THE FORM OF SKILLED AND TRAINED MANPOWER, NON-COMPETE OBLIGATIONS, ETC. SUCH VALUA BLE ASSETS / RIGHTS FALL WITHIN THE CATEGORY OF BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE SPECIFIED IN SECTION 32(1)(II) OF THE ACT. [ RE: SUPREME COURT DECISION IN CIT V. TECHNO SHARES AND STOCKS LTD. V. CIT: 327 ITR 323 A ND DELHI HIGH COURT IN AREVA T & D INDIA LTD.: 345 ITR 421]. SUCH INTANGIBLE ASSETS ARE ENTITLED TO DEPRECIATION IN TERMS OF SECTION 32(1)(II) OF THE ACT AS HAS BEEN HELD IN THE FOLLOWING CASES: ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 32 CIT V. HINDUSTAN COCA COLA BEVERAGES P. LTD.: 331 I TR 192 (DEL) AFFIRMED BY SUPREME COURT IN SLP NO. 26151/2011. CIT V. SMIFS SECURITIES LTD: 348 ITR 302 (SC) CIT VS. L.T. OVERSEAS PVT. LTD. : ITA NO. 50/2010 ( DEL.) B. RAVEENDRAN PILLAI V. CIT: 332 ITR 531 (KER.) GURUJI ENTERTAINMENT NETWORK LTD. V. ACIT: 108 TTJ 180 (DEL.) ACIT VS. M/S CLC GLOBAL LTD: ITA NO. 2288 (DEL) 200 8 SKS MICRO FINANCE V. DCIT: 145 ITD 111 (HYD.) RE: GROUND OF APPEAL NO. 4: THE CIT(A) HAS ENHANCED THE ASSESSMENT BY DISALLOWI NG DEPRECIATION ALLOWED BY THE AO ON THE TANGIBLE ASSETS TO THE EXTENT OF R S. 16,86,487 ON THE GROUND THAT THE APPELLANT AS SUCCESSOR OF TPPL WAS ONLY EN TITLED TO DEPRECIATION APPORTIONED TO THE NUMBER OF DAYS OF USER OF THE AS SETS ACQUIRED FROM TPPL, IN TERMS OF FIFTH PROVISO TO SECTION 32(1) READ WITH S ECTION 170 OF THE ACT. RE: PROVISIONS OF SECTION 170 NOT APPLICABLE IN ORDER TO ATTRACT SECTION 170, THERE HAS TO BE, IN OUR RESPECTFUL SUBMISSION, SUCCESSION OF THE PERSON CARRYING ON THE BUSINESS AND NOT OF THE BUSINESS ITSELF. THUS, IN ORDER FOR SUCCESSION TO TAKE PLA CE, IDENTITY OF THE PERSON SHOULD BE SUBSUMED BY THAT OF THE SUCCESSOR, WITHOU T DISTURBING THE CONTINUITY AND INTEGRITY OF THE BUSINESS; THAT IS, THE PREDECE SSOR SHOULD CEASE TO EXIST AS A LEGAL ENTITY IN THE EYES OF LAW. THE CIT(A) HAS MISAPPLIED THE PROVISIONS OF SECTIO N 170 OF THE ACT AND HAS NOT APPRECIATED THAT THE APPELLANT COULD NOT BE TREATED AS A SUCCESSOR SINCE THE IDENTITY OF THE TRANSFEROR ENTITY HAS BEEN PRESERVE D; TPPL DID NOT CEASE AS A LEGAL ENTITY ON TRANSFER OF THE AFORESAID DESIGN AN D ENGINEERING BUSINESS TO THE APPELLANT AND IN FACT, DID CARRY OUT PROJECT CONSUL TANCY BUSINESS SUBSEQUENTLY. THE AFORESAID CONTENTION IS FORTIFIED BY THE PROVI SIONS OF SECTION 47(XIII)/(XIV) WHEREIN THE WORD SUCCESSION HAS BEEN USED IN THE CONTEXT OF CONVERSION OF FIRM/ SOLE PROPRIETORSHIP INTO COMPANY. IT MAY BE W ORTHWHILE TO NOTE THAT THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 33 AFORESAID SECTIONS USES THE TERM SUCCESSION TO RE FER TO TAKING OVER OF SOLE PROPRIETORSHIP/ PARTNERSHIP FIRM BY A COMPANY, WHER EBY THE IDENTITY OF THE CONCERN/ FIRM IS LOST WHILE THE SAME BUSINESS CONTI NUES TO BE CARRIED ON BY THE COMPANY, WHICH STEPS INTO THE SHOES OF THE CONCERN/ FIRM. ON THE FACTS OF THE CASE, THERE WAS NO SUCCESSIO N OF TPPL BY THE APPELLANT; THERE WAS ONLY TRANSFER OF BUSINESS ON SLUMP SALE B ASIS, ON WHICH CAPITAL GAINS TAX WAS PAID BY TPPL IN TERMS OF SECTION 50B OF THE ACT. IN THAT VIEW OF THE MATTER, PROVISIONS OF SECTION 170 OF THE ACT ARE NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE. RE: WITHOUT PREJUDICE, EVEN IF CASE OF SUCCESSIO N, FIFTH PROVISO TO SECTION 32(1) NOT APPLICABLE DEPRECIATION IS ALLOWABLE IN TERMS OF SECTION 32(1) OF THE ACT ON THE WRITTEN DOWN VALUE (WDV) OF BLOCK OF ASSETS. AS PER THE PROVISIONS OF SECTION 43(6) OF THE ACT, WDV IN CASE OF ANY BLOCK OF ASSETS IS DETERMINED AS WDV AT THE BEGINNING OF THE RELEVANT PREVIOUS YEAR AS ADJUSTED BY THE FOLLOWING: A. SUCH WDV IS INCREASED BY THE ACTUAL COST OF ASSETS FALLING WITHIN THAT BLOCK, ACQUIRED DURING THE RELEVANT YEAR; B. INCREASED WDV [AS ADJUSTED IN TERMS OF (A) ABOVE] I S REDUCED BY CONSIDERATION RECEIVED ON TRANSFER OF ANY ASSET FAL LING WITHIN THAT BLOCK, TO THE EXTENT OF WDV OF THE BLOCK. WHERE AN ASSET(S) FORMING PART OF BLOCK OF ASSETS IS SOLD, THE SALE PRICE RECEIVED THEREFOR IS CREDITED AGAINST THE WDV OF THAT BLOCK OF ASSETS. IN OTHER WORDS, IN BLOCK CONCEPT NO DEPRECIATION IS ADMISSIBLE ON ASSE TS IN THE YEAR OF SALE THEREOF. ITEM (C) OF SECTION 43(6)(C)(I) OF THE ACT FURTHE R PROVIDES THAT IN CASE OF SLUMP SALE, WDV OF THE BLOCK OF ASSETS SHALL BE REDUCED B Y WDV OF ASSETS TRANSFERRED BY WAY OF SLUMP SALE. SUCH WDV OF ASSETS TRANSFERRE D IS DETERMINED BY REDUCING THE ACTUAL COST OF ASSETS SO TRANSFERRED A S PART OF SLUMP SALE BY THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 34 AMOUNT OF DEPRECIATION ALLOWABLE ON THE ASSETS SO T RANSFERRED, AS IF SUCH ASSET WAS THE ONLY ASSET(S) WAS THE ONLY ASSET(S) IN THE RELEVANT BLOCK. AS NOTICED ABOVE, IN TERMS OF ITEM (C) OF SECTION 43(6)(C)(I) OF THE ACT, WDV OF THE ASSETS TRANSFERRED BY WAY OF SLUMP SALE IS REQU IRED TO BE REDUCED FROM THE WDV OF THE RELEVANT BLOCK OF ASSETS. FURTHER, UNDE R THE SCHEME OF THE ACT, DEPRECIATION UNDER SECTION 32 OF THE ACT IS ALLOWAB LE ON WDV OF THE BLOCK OF ASSETS AS ON THE LAST DATE OF THE RELEVANT PREVIOUS YEAR. WDV OF THE BLOCK ASSETS AS ON THE LAST DATE OF RELEVANT PREVIOUS YEA R, IT WILL KINDLY BE APPRECIATED, WOULD BE THE AMOUNT AS REDUCED BY THE WDV OF THE ASSETS TRANSFERRED BY WAY OF SLUMP SALE AS MANDATED BY ITE M (C) OF SECTION 43(6)(C)(I) OF THE ACT. THE SAID WDV, AS ON THE LAST DATE OF TH E PREVIOUS YEAR, WOULD THUS NOT INCLUDE THE WDV OF THE ASSETS TRANSFERRED BY WA Y OF SLUMP SALE AND CONSEQUENTLY, DEPRECIATION UNDER SECTION 32 OF THE ACT IS ALLOWED ON THE REDUCED WDV OF THE RELEVANT BLOCK (AS REDUCED BY TH E WDV OF THE ASSETS TRANSFERRED). [RE: THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DHARAMPAL SATYAPAL VS. DCIT: 138 TTJ 74 . IN VIEW OF THE AFORESAID, DEPRECIATION UNDER SECT ION 32 OF THE ACT IS NOT ADMISSIBLE IN THE HANDS OF THE TRANSFEROR IN THE YE AR OF TRANSFER ON ASSETS TRANSFERRED BY WAY OF SLUMP SALE. FIFTH PROVISO TO SECTION 32(1) WAS INSERTED IN OR DER TO PLUG THE LOOPHOLE WHERE MORE THAN 100% DEPRECIATION IN THE AGGREGATE IS ADM ISSIBLE TO TWO PERSONS, IN THE YEAR IN WHICH THE ASSET IS TRANSFERRED FROM ONE PERSON TO ANOTHER (OTHERWISE OTHER THAN BY WAY OF SALE). TO REMEDY SUCH A SITUA TION, FIFTH PROVISO TO SECTION 32(1) WAS INTRODUCED PROVIDING THAT DEPRECIATION AL LOWABLE TO THE PREDECESSOR AND SUCCESSOR IN CASE OF SUCCESSION REFERRED TO IN SECTION 47(XIII)/(XIIIB)/(XIV) OR SECTION 170 OR IN CASE OF AMALGAMATION AND DEMER GER WOULD BE APPORTIONED IN THE RATIO OF NUMBER OF DAYS FOR WHICH THE ASSETS WERE BEING USED AND SHALL NOT EXCEED THE AMOUNT ALLOWABLE AT PRESCRIBED RATE, AS IF THE SUCCESSION OR AMALGAMATION OR DEMERGER HAD NOT TAKEN PLACE. THE FIFTH PROVISO TO SECTION 32(1) SEEKS TO REMEDY THE SITUATION WHERE TWO ENTITIES SEEK TO CLAIM MORE THAN 100% DEPRECIATION IN THE AGGREGATE, BY ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 35 RESTRICTING THE AGGREGATE DEPRECIATION ADMISSIBLE T O 100% AND FURTHER, APPORTIONING SUCH DEPRECIATION BETWEEN THE TWO ENTI TIES IN THE RATIO OF NUMBER OF DAYS OF USER. IT IS IMPORTANT TO NOTE THAT IN SUCH SITUATION(S) OF TRANSFER OF ASSET (OTHER THAN BY WAY OF SALE), THERE IS NO CONSIDERATION PAID FOR SUCH TRANSFER, UNLIKE IN THE CASE OF SLUMP SALE. IN THE CASE OF SLUMP SALE OF BUSINESS, THE SELLER ENTITY IS NOT ENTITLED TO DEPRECIATION, AT ALL ON THE ASSETS TRANSFERRED BY W AY OF SLUMP SALE AND, THEREFORE, THE FIFTH PROVISO TO SECTION 32(1) OF TH E ACT DOES NOT, AT THE THRESHOLD, APPLY. THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. K.H. CHAMBERS: 55 ITR 674 RELIED UPON BY THE CIT(A) HAS BEEN QUOTED OUT OF C ONTEXT. THE DEFINITION OF SUCCESSION PROPOUNDED BY THE APEX C OURT IN THE SAID DECISION, RELYING UPON EARLIER JUDGEMENTS RENDERED IN THE CON TEXT OF INTERPRETATION OF SECTION 25(4) OF THE INCOME-TAX ACT, 1918 HAS NO AP PLICABILITY WITH RESPECT TO INTERPRETATION OF FIFTH PROVISO TO SECTION 32(1) RE AD WITH SECTION 170 OF THE ACT AND MORE SO IN THE CONTEXT OF BLOCK CONCEPT OF DEPR ECIATION. THAT BEING SO, SINCE NO DEPRECIATION IS ALLOWABLE TO TRANSFEROR, VIZ., TPPL THE FIFTH PROVISO TO SECTION 32 CANNOT BE APPLIED TO TH E APPELLANTS CASE. RE: GROUND OF APPEAL NO. 5 TO 5.1: THE CIT(A) HAS INVOKING PROVISIONS OF EXPLANATION 3 TO SECTION 43(1) OF THE ACT, ENHANCED THE ASSESSMENT BY DISALLOWING DEPRECIATION ALLOWED BY THE AO ON TANGIBLE ASSETS HOLDING THAT DEPRECIATION WOULD BE ADMISSIBLE TO THE APPELLANT ONLY WITH REFERENCE TO THE WDV OF THE ASSETS (IN BO OKS OF TPPL) FORMING PART OF THE BUSINESS PURCHASED BY THE APPELLANT AND NOT WIT H REFERENCE TO THE VALUES PLACED ON SUCH ASSETS BY THE APPELLANT, ON THE BASI S OF VALUERS REPORT. THE MISCHIEF OF EXPLANATION 3 TO SECTION 43(1) OF THE ACT CAN BE INVOKED ONLY IF THE MAIN PURPOSE OF TRANSFER OF ASSETS (PREVIOUSLY USED FOR PURPOSES OF BUSINESS) IS DEDUCTION OF TAX LIABILITY BY CLAIMING DEPRECIATION WITH REFERENCE TO ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 36 ENHANCED COST. THE PROVISIONS OF THE SAID EXPLANAT ION ARE NOT APPLICABLE TO THE PRESENT FACTS FOR THE FOLLOWING REASONS: A) THE APPELLANT ACQUIRED DESIGN AND ENGINEERING BUSIN ESS OF TPPL BY WAY OF SLUMP SALE FOR LUMPSUM CONSIDERATION OF RS.45.85 CRORES. B) THE AFORESAID CONSIDERATION WAS ACTUALLY DISCHARGED IN CASH BY THE APPELLANT. THE SAME, THEREFORE, CONSTITUTED ACTUAL COST OF THE TANGIBLE AND INTANGIBLE ASSETS ACQUIRED BY THE APPELLANT AS PART OF PURCHASE OF THE DESIGN AND ENGINEERING BUSINESS OF TPPL ON SLUM P SALE BASIS. C) THE CONSIDERATION PAID BY THE APPELLANT FOR ACQUISI TION OF DESIGN AND ENGINEERING BUSINESS OF TPPL ON SLUMP SALE BASIS WA S BASED ON THE VALUE OF SUCH BUSINESS. D) SAIPEM INTERNATIONAL BV, A FORTUNE 500 COMPANY HAD INVESTED RS.45.85 CRORES FOR ACQUIRING 50% EQUITY OF THE APPELLANT CO MPANY BASED ON THE ENTERPRISE VALUATION OF THE COMPANY WHICH, IN TURN, DERIVED ITS VALUE FROM THE BUSINESS OF TPPL ACQUIRED BY THE APPELLANT COMPANY. E) THE MAIN PURPOSE OF ACQUISITION OF THE DESIGN AND E NGINEERING BUSINESS OF TPPL WAS TO CARRY ON SUCH BUSINESS AS A JOINT VE NTURE WHEREIN SAIPEM INTERNATIONAL BB WOULD HOLD 50% OF EQUITY. THE CIT(A) HAS EXCEPT FOR MAKING BALD ALLEGATIONS IN THIS REGARD, NOT BROUGHT ANY THIRD PARTY EVIDENCE TO DEMONSTRATE THAT THE VA LUE OF THE ASSETS ON WHICH DEPRECIATION WAS CLAIMED, WAS INFLATED AND THAT THE MAIN PURPOSE BEHIND PURCHASE OF BUSINESS OF TPPL BY THE APPELLANT WAS T O CLAIM HIGHER DEPRECIATION WITH REFERENCE TO ENHANCED COST. IT MAY BE APPRECIATED THAT ON THE BASIS OF ENTERP RISE VALUATION OF THE APPELLANT COMPANY, SAIPEM INTERNATIONAL B.V WHICH IS A FORTUN E 500 COMPANY AND AN INDEPENDENT PARTY HAD INVESTED IN THE JOINT VENTURE AT PREMIUM. ACTUAL CONSIDERATION HAS FLOWED FROM THE PURCHASER TO THE SELLER AND ON THE BASIS OF USEFUL LIFE OF THE ASSETS, DEPRECIATION WAS CLAIMED ON THE WRITTEN DOWN VALUE AS PER THE BOOKS, CALCULATED IN ACCORDANCE WITH PROVIS IONS OF THE COMPANIES ACT, 1956; THERE WAS NO INTENTION WHATSOEVER TO CLAIM D EPRECIATION ON ENHANCED COST. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 37 THE CASE LAWS RELIED UPON BY THE CIT(A) IN NAGAMMA L COTTON MILLS P. LTD. V. CIT: 258 ITR 390(MAD.); CIT V. POULOSE & MATHEW P. LTD. : 236 ITR 416 (KER.) AND ESCORTS LTD. V. UOI: 199 ITR 43 (SC) ARE NOT APPLICABLE, BEING CLEARLY DISTINGUISHABLE ON FACTS. RE: GROUND OF APPEAL NO. 6 TO 6.2 (DISALLOWANCE OF LEASE RENTALS): THE APPELLANT COMPANY DECIDED TO OPERATE FROM THE SAME OFFICE PREMISES FROM WHICH TPPL WAS EARLIER RUNNING ITS BUSINESS WHICH W ERE TWO IN NUMBER. THE APPELLANT OBTAINED ON LEASE BUILDING NO. H-4A IN MO HAN COOPERATIVE INDUSTRIAL AREA (HAVING AIR CONDITIONING AND POWER BACK UP FACILITY) FROM A RELATED PARTY VIZ., AMLO ENGINEERING LTD. WHICH WAS 100% SUBSIDIARY OF TPPL. IT MAY BE POINTED OUT THAT IN SLUMP SALE TRANSACTIO N, THE AIR CONDITIONING UNIT AND DG SETS, WHICH WERE MERE UTILITIES AND REPRESEN TED NON CRITICAL ASSETS OF THE BUSINESS WERE RETAINED BY TPPL. VIDE AGREEMENT DATED 22.09.2006 BETWEEN TPPL AND THE APPELLANT, THE LESSOR TPPL HAD LEASED OUT AIR CONDITIONING AND DG SETS FO R PROVIDING AIR CONDITIONING AND POWER BACK UP FACILITY FOR BOTH TH E OFFICE PREMISES FOR WHICH LEASE RENTAL @ RS. 30 PER SQ. FT PER MONTH WAS CHAR GED. ACCORDINGLY THE APPELLANT PAID RS. 69,74,000/- TO TPPL AS LEASE REN TAL WHICH WAS CLAIMED REVENUE DEDUCTION. THE CIT(A) ENHANCED THE ASSESSMENT TO DISALLOW RS 5 5,79,200 OUT OF LEASE RENTAL PAID FOR AIR-CONDITIONING EQUIPMENT AND DG S ETS, INVOKING SECTION 40A(2) OF THE ACT. THE CIT(A), WITHOUT BRINGING ANY COMPARABLE CASES ON RECORD, HELD RS 6 PER SQ FT AS REASONABLE CHARGES F OR LEASE OF AIR-CONDITIONING EQUIPMENT AND DG SETS AS AGAINST RATE OF RS. 30 PER SQ. FT PAID BY THE APPELLANT. IT HAD NOT BEEN APPRECIATED BY THE CIT(A) THAT THE RENT OF RS. 20.87/- PER SQ. FT PAID BY THE APPELLANT TO AMLO ENGINEERING AND RS. 2 2/- PER SQ. FT PAID TO SHRI MANMOHAN SINGH FOR ADJACENT PREMISES WAS FOR THE BA RE SHELL. TPPI HAD INCURRED SUBSTANTIAL EXPENDITURE ON PROVIDING AIR C ONDITIONING DUCTS, OTHER FIXTURES AND FITTINGS WITHIN THE BUILDING, IN ADDIT ION TO THE AIR-CONDITIONING ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 38 EQUIPMENT. THE SAID RENT OF RS. 50 PER SQ. FT PAID BY THE APPELLANT FOR AN AIRCONDITIONED BUILDING COULD NOT, BY ANY SET OF IM AGINATION BE REGARDED AS EXCESSIVE. THE CIT(A) ERRED IN NOT TAKING INTO ACC OUNT THE AGGREGATE RENT OF RS.50 PER SQ. FT. PAID BY THE APPELLANT FOR USE OF AIR CONDITIONED BUILDING, WHILE INVOKING SECTION 40A(2) OF THE ACT. THE DISALLOWANCE MADE BY THE CIT(A) IS, THEREFORE, NOT SUSTAINABLE AND CALLS FOR BEING DELETED. 35. THE SUBMISSIONS OF THE LD. DEPARTMENTA L REPRESENTATIVE ARE AS UNDER :- BARE FACTS: TRIUNE PROJECTS P. LTD. (TPPL) IS ENGAGED IN CONSUL TING AND ENGINEERING IN OIL AND GAS INDUSTRY. SH. BINOY JACOB HELD 74% SHARES IN TPPL. TRIPARTITE MOU/05-06-06 ENTERED INTO BETWEEN BINOY JACOB, SAIPEM ITALY & TPPL. MOU 05-06-2006 PROVIDES FOR A NEW JOINT VENTURE COM PANY SAIPEM IN WHICH BONOY JACOB & SAIPEM ITALY WILL HAVE EQUITY 50:50 TO ACQU IRE TPPL. NEW JV CO. TO RENDER CERTAIN SERVICES TO SAIPEM ITALY. PURSUANT TO MOU/05-06-2006 THREE DIFFERENT AGREEMEN TS SIGNED ON 22-09-2006 -(I) TPPL & SAIPEM, APPELLANT-FOR SLUMP SALE; -(II) SAIPEM; SAIPEM ITALY & BINOY JACOB-FOR SHA RE SUBSCRIPTION AGREEMENT (SSA). -(III) SAIPEM; SAIPEM ITALY & BINOY JACOB-SHARE H OLDERS AGREEMENT (SHA). SAIPEM (ASSESSEE) FORMED ON 15-07-2006 WITH SHAREHO LDING OF 9999(JACOB) & 1 (DVS RAIZADA WHO LATER TRANSFERRED THIS TOO TO JACOB). LATER ON 22-09-2006 SAIPEM ITALY BOUGHT 10000 SHARE S OF SAIPEM OF 10 EACH AT A PREMIUM OF 45840 PER SHARE AS A RESULT NOW SHAREHOLDING WAS 10000 (JACOB) & 10000( SAIPEM ITALY). IMPORTANTLY WHILE SAIPEM ITALY GOT SHARES AT PREMIU M WHILE JACOB GOT AT PAR OF RS.10/-. SLUMP SALE AGREEMENT/22-09-2006 (TPPL & SAIPEM) PROVIDED FOR -PURCHASE CONSIDERATION OF GOING BUSINESS OF TPPL T O BE AT 45.85 CRORES. -TPPL AGREED (CLAUSE 14) TO NOT TO COMPETE WITH SAI PEM FOR UNSPECIFIED PERIOD(UNLIKE FOR MR.JACOB). SHARE HOLDERS AGREEMENT (SHA-TRIPARTITE) DATED 22-0 9-2006 PROVIDED FOR -NOT ISSUING/TRANSFERRING ANY SHARE TO ANY ONE ELSE . ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 39 -NON-COMPETE CLAUSE FOR JACOB 3 YRS AFTER EXPIRY OF SHA & AT LEAST FOR 4 YEARS FROM SIGNING OF SHA. -ASSETS TO BE TRANSFERRED AND NOT TO BE TRANSFERRED (PAGE 17). SHARE SUBSCRIPTION AGREEMENT (SHA TRIPARTITE) DATE D 22-09-2006 PROVIDED FOR -ASSETS TO BE TRANSFERRED AND THESE WERE (A) TPPL ASSETS (EXCLUDING AC, POWER SUPPLY INFRAST RUCTURE, GENERATOR SET; INVESTMENTS; SURPLUS CASH IN HAND /BANK) (B) WORKIN G CAPITAL (C) TPPL CONTRACTS (D) TPPL BUSINESS RECORDS & KNOW HOW (E) TPPL EMPLOYEES (F) ASSUMED LIABILITIES (G) GOODWILL. FURTHER INFERENTIAL FACTS (A) ON DAY OF ACQUISITION I.E. ON 22-09-2006 BALANC E SHEET SHOWS VALUE OF GOODWILL AT 40.58 CR. (B) VALUATION REPORT (UNDATED) SPLITS GOODWILL VALU E OF 40.58 CR INTO (A) KNOW-HOW AT 26.20 CR. (B) BUSINESS ON HAND AT 12.50 CR. (C) NON-COMPETITIVE AT 1.88 CR. ASSETS WHICH HAVE NOT BEEN TRANSFERRED/SOLD ARE LEA SED OUT BY TPPL TO SAIPEM. 1. IN THE PRESENT APPEAL IT WILL BE IMPORTANT TO KE EP IN MIND THE DOCUMENTS/AGREEMENTS ENTERED INTO AND THE CONDUCT OF THE PARTIES THERETO . IN THE CONTEXT OF THE INTERPRETATION OF VARIOUS AGREEMENTS REFERRED TO ABOVE IT WILL BE RELEVANT TO KEEP IN MIND THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN DELTA INTERNATION AL LTD. V. SHYAM SUNDER GANERIWALA & OTHERS (1999) 4 SCC 545 THAT THE DOCUM ENTS HAVE TO BE CONSTRUED IN ACCORDANCE WITH WELL-ESTABLISHED PRINCIPLES AND IN CASE OF CAMOUFLAGE OR ATTEMPT TO AVOID THE RIGOURS OF ANY LEGISLATION, THE MASK IS T O BE REMOVED OR VEIL LIFTED FROM THE SELF-SERVING INSTRUMENTS AND TRUE INTENTION GATHERE D FROM THE RELEVANT CIRCUMSTANCES. 2. LIKEWISE, DELHI HIGH COURT IN DIT-1, INTERNATION AL TAXATION V. ALCATEL LUCENT USA INC (JUDGMENT DATED 07-11-2013) REFERRING ESTHURI A SWATHIAH V. CIT MYSORE (1967) 66 ITR 478 SC HAS EMPHASIZED THAT THE TRIBUNAL MAY ACT UPON PROBABILITY AND PRESUMPTIONS AND MAY SUPPLY GAPS IN THE EVIDENCE WH ICH MAY NOT, ON ACCOUNT OF DELAY OR THE NATURE OF TRANSACTIONS OR FOR OTHER RE ASONS, BE SUPPLIED FROM INDEPENDENT SOURCES..BETWEEN THE CLAIMS OF THE PUBLIC REVENUE AND OF THE TAXPAYERS, THE TRIBUNAL MUST MAINTAIN A JUDICIAL BALANCE. 3. HAD SAIPEM ITALY PAID TO MR. JACOB DIRECTLY TO A CQUIRE HIS SHAREDHOLDING PARTLY (TPPL), MR. JACOB WOULD HAVE SUFFERED HUGE TAX LIAB ILITY (EITHER AS SALARY OR AS CAPITAL GAINS). TO MINIMISE HIS TAX LIABILITY COLOURABLE DEVICE OF CREATING NEW ENTITY SAIPEM, TO BUY HOLLOW STRUCTURE OF TPPL, WAS CREATED. FOR THIS REASON AND THE REASON THAT AFTER ACQUISITION NOTHING CHANGED (EXCEPT THE NAME PLATE) AT THE GROUND ( EMPLOYEES, LEADER ETC. REMAINED UNCHANGED). ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 40 4. IN THE FACTS THAT NOT ALL ASSETS AND LIABILITIES WERE TRANSFERRED TO SAIPEM (TPPL DID NOT TRANSFER DEBT OF 27 LACS TO PETRO VIETNAM, 25-L ACS OF BHARAT HEAVY, AC, GENERATOR SET ETC.) SHOW THAT ASSESSEES TREATMENT OF TRANSAC TIONS ON SLUMP SALE BY CREATING NEW ENTITY SAIPEM AS DISCUSSED U/S 2(42C) ITSELF IS DOU BTFUL AND APPARENTLY IS AIMED AT EVASION OF TAX AT ANY COSTS. 5. IT IS PRAYED TO KEEP IN VIEW THAT TAX IS KINGS (HERE REVENUES) SHARE IN THE INCOME/PROFIT OF A BUSINESS/TAXPAYER TO USE FOR PUBLIC CAUSE. NATU RALLY, THE REVENUE BECOMES A PARTNER OR SHAREHOLDER IN THE PROFITS OR TRANSACTIONS OF AN AS SESSEE AND ACCORDINGLY LOOKED FROM THIS ANGLE IT WILL BE WITHIN THE RIGHTS OF REVENUE TO PROBE AN D QUESTION THE FINANCIAL ARRANGEMENTS SO AS TO FIND THAT IT DOES NOT CAUSE UNDUE PREJUDICE TO ITS INTEREST. WHEN WE KEEP THE ABOVE ASPECTS IN MIND IT WILL BE CLEAR THAT THE ARRANGEMENTS WERE AR RIVED AT BY MR. BINOY JACOB AND TPPL IN A WAY WHEREBY THEY WERE GETTING UNDUE TAX BENEFITS TH US CAUSING SERIOUS PREJUDICE TO THE INTEREST/SHARE OF REVENUE. ASSESSEE ALSO KNEW THAT ON GOODWILL NO DEPRECIATION IS ALLOWABLE THAT IS WHY IT TRIFURCATED IT INTO KNOW HOW, BUSINE SS ON HAND AND NON-COMPETE FEE SO THAT IT IS ABLE TO CLAIM REDUCTION OF TAX BY CLAIMING DEPRECIA TION. GROUNDWISE-ISSUEWISE DISCUSSION: 1. EXCLUSION OF 18.07 LACS FROM TURNOVER : AS SUBMITTED IN THE HEARING AS ALSO BY WAY OF WRITT EN BROAD PROPOSITION FILED ON 27-02- 2014 THIS GROUND IS NOT PRESSED I.E. IT IS WITHDRAW N BY THE APPELLANT HENCE NEEDS NO COMMENTS. 2. DEPRECIATION ON INTANGIBLE ASSETS: AO DISALLOWED DEPN OF 10.14 CR {@25%} ON INTANGIBLE S BEING GOODWILL OF 40.58 CR. TRIFURCATED INTO TECH KNOW HOW; EXISTING BUSINESS IN BRAND NAME TPPL & BRAND NAME/NON COMPETE FEE. THE CIT(A) SAYS ORIGINAL TRANSACTION WAS TREATED AS SLUMP SALE & SUBSEQUENT ASSIGNMENT WAS A COLOURABLE DEVISE TO GAIN TAX. TO BUTTRESS AO TA KES NOTE OF SHAREHOLDING OF MR.BINOY JACOB (74% IN TPPL AND THEN 50% IN SAIPEM, THE APPELLANT ) AND SAYS CLAIM OF DEPRECIATION RESULTS IN TAX GAIN OF 10% OVER THE PERIOD OF TIME. IT WAS EM PHASIZED THAT TPPL DID NOT HAVE ANY REGISTERED BRAND NAME/LICENCE ETC WHICH WOULD HAVE SUPPORTED ASSESSEES CASE. QUA VALUATION, IT WAS OBSERVED THAT THE VALUER WAS THE NOT AN INDE PENDENT PERSON AS HE WAS THE ONE REPRESENTING THE ASSESSEE BEFORE AO/CIT(A) IN ASSES SMENT. ALSO REFERRED THE ASSESSMENT ORDER FOR AY 8-9 AND NOTED THAT THE ASSESSEE HAD FAILED T O FILE SPECIFIC DETAILS QUA INTANGIBLES EXCEPT THE VAGUE REPLY THAT IT (TPPL) WAS IN BUSINESS FOR LAST 15 YEARS, BUT STILL FAILED TO EXPLAIN HOW ASSETS WERE USED IN BUSINESS. REGARDING THE VARIOUS ARGUMENTS MADE OUT IN THE BRO AD PROPOSITIONS IT IT TO BE NOTED THAT THE CIT(A) ON LIFTING THE CORPORATE VEIL FOUND INTER ALIA THAT NET GAIN WOULD BE 10% & NOT 5% AS SAID BY AO AS ENTIRE AMOUNT WILL BE CLAIMED AS DEDUCTION WHICH WOULD HAVE ATTRACTED TAX @ 30% AS AGAINST 20% PAID BY TPPL U/S 50B. CIT(A) SAYS THAT THE CONSOLIDATED PRICE NOT APPORTIONED ON FAIR BASIS TO DIFFERENT ASSETS AND THAT SO CALLED VALUER WAS APPELLANTS OWN CA & HENCE WAS NO T INDEPENDENT ENOUGH TO ENTHUS CREDIBILITY. IT WAS MORE OF TAX EVASION VALUATION. FURTHER, THE CIT(A) POINTED OUT THAT TOTAL CONSIDERATION PAID FOR ACQUIRING THE BUSINESS OF TPPL WAS 45.85 CRORES BIFURCATED AS UNDER; -FURNITURE, EQUIPMENT, VEHICLES RS. 2.56 CRORES (BOOK VALUE) ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 41 -SUNDRY CREDITORS RS. 2.71 CRORES -BALANCE TREATED TOWARDS GOODWILL RS.40.58 CRORE S LATER, ON THE BASIS OF VALUATION REPORT THE CONSIDE RATION ALLOCATED TO GOODWILL WAS TRIFURCATED AS UNDER; -TECHNICAL KNOW-HOW RS. 26.20 CRORES -EXECUTING BUSINESS IN BRAND NAME TPPL RS. 12.50 C RORES -BRAND NAME/NON COMPETE FEE RS. 1.88 CRORES DESPITE THIS BEING THE CASE OF SLUMP SALE BIFURCATI ON/ATTRIBUTION OF IT SIZABLY TO SPECIFIC INTANGIBLE AS WELL AS TANGIBLE ASSETS BAFFLED THE A O AND ABOUT THIS THE CIT(A) OBSERVED AS THE FOLLOWING. (I) KNOW-HOW (VALUED AT 26.20 CR) THOUGH UNDOUBTEDLY AN INTANGIBLE ASSET BUT THE TPPL WAS NEVER ENGAGED IN MANUFACTURING HENCE IST PART OF DEFINITION EXPLN 4 TO 32(1) IS NOT ATTRACTED. LIKEWISE SINCE TPPL WAS NEVER EN GAGED IN R & D AND ONLY BUSINESS IS TRANSFERRED & NO KNOW HOW IS ALSO TRANSFERRED WITHI N THE MEANING OF EXPLANATION 4 TO 32(1). EVEN OTHERWISE ALLOCATION OF 26.20 CR TO KNO WHOW WAS FOUND TO BE INFLATED AS NO BASIS IS GIVEN. (II) BUSINESS ON HAND (VALUED AT 12.50 CR) WHICH THE VALUER INITIALLY NOMENCLATURED AS BUSINESS IN HAND AS ON 22-09-06 BUT LATER CHANGED TO EXECUTING BSN IN BRAND NAME TPPL. WHY THE NOMENCLATURE WAS CHANGED HAS NOT BE EN EXPLAINED BY THE APPELLANT AT ANY STAGE OF THE PROCEEDINGS. (III) BRAND NAME/NON-COMPETE RIGHTS (VALUED AT 1. 88 CR) ABOUT WHICH THE CIT(A) HAS HELD THAT THIS ITEM IS NOT COVERED BY S.32(1)(I I)-INTANGIBLE ASSETS- NOT COVERED BY KNOW-HOW, PATENT, TM, LICENCE ETC. FURTHER, THE CIT(A) SAYS THESE RIGHTS WERE RIGHTS IN PERSONAM AND NOT IN REM HENCE NO DEPRECIATION IS ALLOWABLE. SHIFTING STAND OF THE APPELLANT ( INITIALLY ALLOCAT ING 40.58 TOWARDS GOODWILL AND LATER TRIFURCATION OF IT AND ATTRIBUTING NOTHING TOWARDS GOODWILL) GOES TO SHOW THAT THE TREATMENT GIVEN BY THE APPELLANT WAS NOT BONAFIDE. AFTER CAREFUL PERUSAL OF THE DOCUMENTS PRODUCED BEFORE HIM CIT(A) INTER ALIA HELD : -DEAL WAS DESIGNED TO BENEFIT MR. BINOY IN THE FORM OF CONSIDERATION BEING THE HUGE PREMIUM OF 45,840 PER SHARE GOT FROM SAIPEM ITALY. CIT(A) FOUND THERE TO BE NO EXPLANATION WHY SAIPEM ITALY PAID PREMIUM WHEN OTHE R SHAREHOLDER BINOY JACOB WAS NOT PAYING ANY SUCH PEMIUM. -DEAL WAS CLEARLY A COLOURABLE DEVICE HENCE DELHI H C JUDGMENT IN AREVA T &D INDIA LTD ON WHICH THE ASSESSEE WAS PLACING RELIANCE WILL NOT APPLY. -VALUER, WHOSE REPORT IS BANKED TO DETERMINE THE VA LUATION, IS NOT INDEPENDENT PERSON. VALUATION REPORT WAS FOUND TO BE JUST ON WRONG ASSU MPTIONS (4 YEARS NON-COMPETITION WHEREAS IT WAS IN PERPETUITY). ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 42 -MR. BINOY JACOB WHO WAS 74% PARTNER/SHAREHOLDER IN TPPL WAS THE LARGEST BENEFICIARY & HENCE 40A(2)(B) WOULD APPLY I.R.O 40. 58 CR WHICH IS ABOUT 15 TIMES THE VALUE OF PHYSICAL ASSETS & HENCE PRICE PAID OVER TH E IDENTIFIABLE TANGIBLE PHYSICAL ASSETS-FURNITURE & FIXTURES; VEHICLES ETC- (OF 2.56 CR) & OTHER CURRENT ASSETS-SUNDRY CREDITORS- (2.77 CR) IS EXCESSIVE & UNREASONABLE. CIT (A) FINALLY DOES ENHANCEMENT BY RS. 30.44 CR. (40.58 CR LESS 10.14 CR DEPRECIATION DISALLOWED BY AO). REVENUES REPLY ON THE APPELLANTS BROAD WRITTEN PR OPOSITIONS: WHEN PRINCIPLES OF INTERPRETATION QUA THE INTERPRET ATION OF DOCUMENTS (HERE VARIOUS AGREEMENTS) QUA THE REVENUES INTEREST AND THE PROV ISIONS OF THE INCOME TAX ACT AS INDICATED HEREINBEFORE ARE APPLIED IT WILL BE CLEAR THAT ENT IRE ARRANGEMENT WAS ARRIVED AT BY MR. BINOY JACOB AND TPPL IN A WAY WHEREBY THEY WERE GETTING U NDUE TAX BENEFITS THUS CAUSING PREJUDICE TO THE INTEREST/SHARE OF REVENUE. (A) ABOUT THE ARGUMENTS OF THE APPELLANT THAT TPPL WAS ENGAGED IN THE BUSINESS OF DESIGN ENGINEERING AND PROJECT CONSULTANCY FOR OIL AND GAS PROJECTS FOR THE PAST 10 YEARS AND THAT APPELLANT CARRIED ON THIS VERY BUSINESS ACQUIRED LO CK, STOCK AND BARREL WITHOUT BREAK AND HENCE IN NO WAY SLUMP SALE WAS SHAM/BOGUS FOR VARIOUS REA SONS INCLUDING THE REASON THAT THE AO HAS ACCEPTED THE FACTUM OF SLUMP SALE IN THE HANDS OF A PPELLANT WHICH BECOMES APPARENT FROM ALLOWANCE OF DEPRECIATION ON TANGIBLE ASSETS TAKEN OVER AND TAXATION OF PROFITS POST ACQUISITION IN THE HANDS OF THE APPELLANT ONLY IT IS SUBMITTED THAT THESE ARE MERE SPECIOUS ARGUMENTS. IN FACT THE AO THERE HAD DOUBT WHETHER IT WAS REALLY AS SLU MP SALE? FURTHER, THESE ARE FACTUAL ASPECTS ABOUT WHICH AS S UCH THERE CANNOT BE DOUBT BUT WHILE MAKING SUCH FACTUAL AVERMENTS THE APPELLANT HAS NOT TAKEN CARE TO TAKE NOTE OF THE LOGICAL INFERENCE WHICH THE AO/CIT(A) WERE DRAWING. NEVER THE AO/CIT HELD THAT ENTIRE TRANSACTONS WERE BOGUS BUT INSTEAD THEY WERE DOUBTING THE ARRANGEMENTS ARR IVED AT TO RECORD THE INFUSION OF MONEY BY SAIPEM (IN ACQUIRING THE BUSINESS OF THE TPPL) WHER EBY MR. JACOB AND SAIPEM WERE GETTING UNDUE AND UNREASONABLE TAX BENEFITS BY COMPROMISING THE REVENUES INTEREST. IT IS ONLY IN THIS MANNER THAT CIT(A) HAS CALLED THE MULTIPLE AGREEMEN TS A COLOURABLE DEVICE AND NOT BEYOND. NEVER THE REVENUE HAS ARGUED THAT MONEY PAID BY SAI PEM OR SAIPEM ITALY WAS NOT PAID OR WAS OF MR. JACOB OR WAS OF TPPLS OWN MONEY ROUTED THRO UGH THIS MANNER. THUS, ARGUMENTS AS MADE OUT NOW AS WELL AS MADE IN ASSESSMENT/APPELLAT E PROCEEDINGS BEFORE CIT(A) HAVE NO MERITS. (B) QUA THE PROPOSITION THAT IT IS NOT CORRECT THAT MR. BINOY JACOB ENJOYED UNFAIR TAX ADVANTAGE OR THAT HE GOT BENEFITTED TWICE (ONCE BY NOT PAYING PREMIUM ON SHARES IN APPELLANT COMPANY & SECOND BY RECEIVING HUGE AMOUNT OF 45.85 CRORES IN THE HANDS OF SELLER TPPL WHERE THE PHYSICAL ASSETS STOOD JUST AT 2.58 CRORES) IT IS SU BMITTED THAT THE APPELLANT HAS NOT APPRECIATED THE MATRICES OF THE CASE IN ENTIRETY. IT IS POINTED OUT THAT IF THE MULTIPLE AGREEMENTS E NTERED INTO ARE EXAMINED CONJOINTLY CAREFULLY, IT WOULD BECOME APPARENT THAT FINDINGS OF THE CIT(A) A RE IN ORDER. UNDENIABLY, THE TPPL WHERE MR. JACOB WAS 74% SHAREHOLDER PAID TAX AT A LESSER RATE BY OFFERRING THE INCOME U/S 50B AS COMPARED TO NORMAL TAX RATE WHICH HAD GONE TO BENEF IT MR. JACOB SUBSTANTIALLY, AND LIKEWISE IT BE NOTED THAT WHILE MR. JACOB BECAME SHAREHOLDER IN SAIPEM (50%) WITHOUT PAYING ANY PREMIUM SAIPEM ITALY HAD TO ACQUIRE SHAREHOLDING BY PAYING HUGE PREMIUM. IT IS NOT UNDERSTOOD WHY THE APPELLANT IGNORES THIS TANGIBLE BENEFIT GOT BY MR. JACOB. CIT(A) HAS ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 43 CLEARLY POINTED OUT THAT KINGPIN IN THE TPPL WAS MR . JACOB AROUND WHOM THE ENTIRE BUSINESS WAS HOVERING. TO PUT BLINKERS IN THE EYES OF THE RE VENUE THE TPPL AGREED (CLAUSE 14) TO NOT TO COMPETE WITH SAIPEM FOR UNSPECIFIED PERIOD UNLIKE I N CASE OF JACOB THOUGH MR. JACOB AFTER 3 YEARS (AT LEAST FOR 4 YEARS FROM SIGNING OF SHA) WA S ENTITLED TO RUN THE SIMILAR BUSINESS MAY BE IN OWN NAME OR BY CREATING A DIFFERENT ENTITY. WAS THIS ARRANGEMENT NOT BENEFITTING MR. JACOB AS COMPARED TO TPPL. THUS, THERE ARE NO MERITS IN THE ARGUMENTS OF THE APPELLANT. (C) REGARDING THE ARGUMENT THAT MR. JACOB NEVER BEN EFITTED TWICE, IT IS SUBMITTED THAT APPELLANT HAS IGNORED CERTAIN FACETS OF THE CASE WH ILE MAKING THIS ARGUMENT. IT BE KINDLY APPRECIATED THAT SINCE MR. BINOY JACOB WAS (74%) PA RTNER IT WAS HE WHO IS DESTINED TO BE THE LARGEST BENEFICIARY DIRECTLY OR INDIRECTLY. FURTHER, MR. JACOB BECAME 50% SHAREHOLDER IN SAIPEM BY ACQUIRING SHARES AT NO PRE MIUM WHEREAS THE OTHER 50% SHAREHOLDER OF SAIPEM HAD TO ACQUIRE SHARE AT A EXH ORBITENT PREMIUM OF 45000. THUS CLEARLY MR. JACOB BENEFITS GOT TWICE. (D) FOR THE PROPOSITION OF THE APPELLANT THAT IF TH E SLUMP SALE WAS BOGUS/COLLUSIVE NO WAY THE AO/CIT(A) COULD HAVE TAXED THE INCOME OF THE APPELL ANT AND THAT THE AMOUNT THAT WENT OUT OF COFFERS OF THE APPELLANT CAN IN NO CIRCUMSTANCES BE TAXED AS ITS INCOME IS CONCERNED IT IS POINTED OUT THE APPELLANT HAS NOT APPRECIATED THE FINDINGS OR THE OBSERVATIONS OF THE AO/CIT(A) IN CORRECT PERSPECTIVE. IT MAY KINDLY BE NOTED THAT NEVER THE AO/CIT HELD T HAT ENTIRE TRANSACTIONS WERE BOGUS BUT INSTEAD THEY WERE DOUBTING THE ARRANGEMENTS ARRIVED AT TO RECORD THE INFUSION OF MONEY BY SAIPEM IN ACQUIRING THE BUSINESS OF THE TPPL WHEREB Y MR. JACOB AND SAIPEM WERE GETTING UNDUE AND UNREASONABLE TAX BENEFITS BY COMPROMISING THE REVENUES INTEREST. IT IS ONLY IN THIS MANNER THAT CIT(A) HAS CALLED THE MULTIPLE AGREEMEN TS A COLOURABLE DEVICE AND NOT BEYOND. NEVER THE REVENUE HAS ARGUED THAT MONEY PAID BY SAI PEM OR SAIPEM ITALY WAS NOT PAID OR WAS OF MR. JACOB OR WAS TPPLS OWN MONEY ROUTED THROUGH THIS MANNER. THUS, ARGUMENTS OF THE APPELLANT AS MADE OUT NOW AS WELL AS MADE IN ASSESS MENT/APPELLATE PROCEEDINGS BEFORE CIT(A) HAVE NO MERITS. PROPOSITION QUA THE APPLICABILITY OF PROVISIONS OF SEC.40A(2)(B): TO BEGIN WITH, IT IS CONSIDERED NECESSARY TO POINT OUT THAT NEITHER IN ASSESSMENT PROCEEDINGS NOR IN PROCEEDINGS BEFORE THE CIT(A) EX PLANATION WAS PUT FORTH BY THE APPELLANT AS TO WHY SAIPEM ITALY PAID PREMIUM WHILE MR. BINOY JACOB WHO WAS ALSO ACQUIRING 50% IN THE COMPANY, DID NOT PAY ANY SUCH PREMIUM. IN FACT BINOY JACOB WHO OWNED 74% SHARES IN THE TPPL WAS THE LARGEST BENEFI CIARY WHICH MEANT THAT THIS PAYMENT WAS GOING TO BENEFIT MR. JACOB CLEARLY & HE NCE 40A(2)(B) WERE CLEARLY APPLICABLE. PAYMENT OF RS. 40.58 CR WHICH IS ABOUT 15 TIMES OF THE VALUE OF PHYSICAL ASSETS GOES TO SHOW THAT IT HAD UNREASONABLY ARRIVE D AT. PRECISELY FOR THE DISPROPORTIONATE RATE VIS--VIS THE PHYSICAL VALUE OF ASSETS THE CIT(A) HELD THAT PROVISIONS OF SEC 40A(2)(B) ARE CLEARLY ATTRACTED & HENCE HOLDING PRICE PAID OVER THE IDENTIFIABLE PHYSICAL ASSETS (2.56 CR) & SUNDRY CUR RENT ASSETS/CREDITORS (2.71 CR) TO BE EXCESSIVE & UNREASONABLE DISALLOWED RESULTING IN EN HANCEMENT OF 30.44 CR.(40.58 CR LESS 10.14 CR DEPRECIATION DISALLOWED BY AO. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 44 (A) QUA THE ARGUMENT ADVANCED BY THE APPELLANT THAT SECTION 40A(2)(B) IS ONLY RESTRICTED TO REVENUE EXPENDITURE DEBITED IN THE P & L A/C AND NOT OTHERWISE, IT IS POINTED OUT THAT THIS ARGUMENT HAS NO MERITS BECAUS E THE APPELLANT FAILS TO APPRECIATE THAT FIRSTLY THERE IS NOTHING IN THE LAW TO EXCLUDE THE APPLICATION OF SECTION 40A(2)(B) TO NON-REVENUE EXPENDITURE AND SECONDLY EVEN THE PAYME NT ON A/C OF CAPITAL EXPENDITURE WAS GOING TO BE ROUTED THROUGH THE P & L A/C ONLY THOUGH IN THE GARB OF DEPRECIATION ETC- WHICH FIGURE WOULD NOT HAVE BEEN SO HIGH IF TH E PAYMENT MADE WAS REASONABLE. (B) THIS APART, IF FOR ARGUMENT SAKE IT IS PRESUMED THAT THE ARGUMENT OF THE APPELLANT HAS SOME MERITS, STILL IT BE NOTED THAT THE TREATME NT GIVEN BY THE APPELLANT WAS LEADING TO EVASION TO THE PROVISIONS OF SECTION 40A (2)(B) AND IN TURN TO EVASION TO INCOME TAX AND HENCE SUCH AN INTERPRETATION HAS TO BE DISCARDE D OUT RIGHTLY AS IT IS A CARDINAL PRINCIPLE OF INTERPRETATION THAT INTERPRETATION SHO ULD BE SUCH WHICH DOES NOT RESULT IN EVASION OF TAX/STATUTE. (C) REGARDING THE RELIANCE PLACED BY THE APPELLANT ON THE PRIMA FACIE OBSERVATIONS MADE BY THE HIGH COURT (ORDER DATED 01-03-2013 WHILE DISPOSING OFF THE WRIT PETITION OF THE APPELLANT) IT IS SUBMITTED THAT THE ASSESSEE CANNOT DO SO WHEN THE H IGH COURT IN THE PENULTIMATE PARA QUALIFIED ITS ORDER SAYING ANY OBSERVATIONS MADE IN THIS ORDER ARE ONLY PRIMA FACIE OBSERVATIONS AND WILL NOT BE TAKEN INTO ACCOUNT BY THE TRIBUNAL WHIL E CONSIDERING AND DECIDING THE APPEAL. IN VIEW OF THIS IT IS PRAYED TO NOT TO TAKE ANY COGNIZ ANCE OF THIS ARGUMENT OF THE APPELLANT EVEN INDIRECTLY. 5. DEPRECIATION ON GOODWILL: 5.1 THE CIT(A) HAS DEALT WITH THIS ISSUE AS AN ALTE RNATE CLAIM ( ON PAGE 93 ONWARDS) AND HELD THAT DEPRECIATION ON GOODWILL WAS NOT ALLOWABLE INTER ALIA FOR THE REASONS THAT; -GOODWILL IS NOT MENTIONED IN INTANGIBLE ASSETS IN EXPLN 3 TO 32(1)(II). -IT IS A CASE OF CONTRADICTORY CLAIMS AS INITIALLY DEBITED AS GOODWILL & LATER ITS COST REDUCED TO ZERO. -SAIPEM LENT NAME WITHOUT CHARGING FOR GOODWILL & W HEN COST IS ZERO THERE CAN BE NO DEPRECIATION. -ONLY 2.56 CR. ASSIGNED TO TANGIBLE ASSETS & HENCE SUM OF RS.40.58 CR. FOR GOODWILL HENCE AREVA T &D 250 CTR 151 DELHI WILL NOT APPLY A S THERE JUST 38% WAS ASSIGNED TO GOODWILL. -VARIOUS DECISIONS OF THE COURTS HOLD THAT DEPRECIA TION IS NOT ALLOWABLE ON GOODWILL. 5.2.1 OVER AND ABOVE TO WHAT THE CIT(A) HAD HELD IN HIS ORDER, IT IS SUBMITTED THAT THE SUPREME COURT JUDGMENT IN SMIFS SECURITIES LTD 348 ITR 302 IS NOT APPLICABLE BECAUSE OF DISTINCTION IN FACTS. IN THAT CASE UNLIKE THE C ASE OF SAIPEM THERE WAS NO PAYMENT ON A/C OF GOODWILL AND ONLY THE EXCESS OVER THE VALUE OF ASSETS WAS DEEMED TO BE TOWARDS THE GOODWILL AND FURTHER THERE WAS CONSISTENT STAND IN ASSIGNING THE VALUE WHEREAS IN THE CASE IN HAND THERE IS SHIFTING IN STAND ON ASSE SSEES PART ESPECIALLY QUA THE ASSIGNMENT OF THE VALUE TO IT. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 45 5.2.2 FURTHER, ON THE ISSUE WHETHER GOODWILL IS COV ERED BY THE PRINCIPLE OF EJUSDIM GENERIS AND IF AT ALL IT IS SO THEN HOW IT IS POIN TED OUT THAT THE APPLICABILITY OF THIS PRINCIPLE WAS NOT AT ALL ARGUED THERE. IT IS JUST A CASE THAT THEIR LORDSHIPS INVOKED IT AT THEIR OWN AND FURTHER IT IS A CASE OF RATIO SUB SI LENTIO WHICH ITSELF IS ENOUGH TO WEAKEN THE PRECEDENTIAL VALUE OF THE JUDGMENT. 5.2.3 AS A MATTER OF FACT, WITH RESPECT IT IS POINT ED OUT THAT PRINCIPLE OF EJUSDEM GENERIS IS NOT APPLICABLE IN THE PRESENT CASE BECA USE UNLIKE THE GOODWILL ALL OTHER INTANGIBLE ASSETS ENUMERATED U/S 32(1)(II) DEPRECIA TES BECAUSE OF EFFLUX OF TIME AND OTHER FACTORS WHICH ARE NOT IN THE HANDS OF THE ASS ESSEE. THIRD PARTY CAN CAUSE THE DEMISE OF THESE RIGHTS AND HENCE THESE ARE CLEARLY DEPRECIABLE ASSETS. THIS APART IT NEEDS TO BE NOTED THAT WHEREVER THE LEGISLATURE INT ENDED TO DEAL WITH GOODWILL, IT HAS DONE SO, AS WOULD BE NOTICED U/S 55(2)(A) WHEREBY A LONG WITH TRADE MARK, BRAND NAME IT HAS MADE SPECIFIC PROVISION FOR GOODWILL. HAD T HESE BEEN POINTED OUT, THE SUPREME COURT WOULD NOT HAVE PROCEEDED TO APPLY THE PRINCIP LE OF EJUSDEM GENERIS. CLEARLY BECAUSE OF THIS DIFFERENCE IT IS SUBMITTED THAT GOO DWILL DOES NOT BELONG TO THE GENUS KNOW-HOW, PATENT, COPYRIGHTS, TRADE-MARKS ETC. 5.2.4 FURTHER, SMIFS CASE IS THE JUDGMENT BASED O N CONCESSION AS WAS ALSO OBSERVED BY THE SUPREME COURT WHERE IT WAS POINTED OUT THAT THE REVENUE CONCEDED THE FINDING RECORDED BY THE TRIBUNAL THAT DIFFERENCE OF RECEIPT S OVER THE VALUE OF ASSETS CAN BE DEEMED AS GOODWILL AND LOGICALLY AFTER HAVING CONCE DED SO IT WAS NOT PERMISSIBLE FOR THE REVENUE TO RE-AGITATE ISSUE AGAIN. 5.3 WHILE SUBMITTING ABOVE IT IS PERTINENT TO MENTION T HAT THE APPELLANT HAS NOT FILED ITS ARGUMENT IN WRITING ON THE ABOVE SPECIFIC ISSUE I.E. ALLOWANCE OF DEPRECIATION ON GOODWILL WHICH IMPLIES THAT THE AP PELLANT ACCEPTS FINDINGS OF THE CIT(A) THAT ON GOODWILL NO DEPRECIATION IS ALLOWA BLE. 6. DEPRECIATION & SUCCESSION: 6.1 AO SAYS EXCESS OVER THE VALUE OF TANGIBLES NOT TO GET DEPRECIATION AS IT IS A CASE OF SUCCESSION U/S 170. CONJOINT READING OF 5 TH PROVISO TO S.32(1) & SEC.170 PROVIDES THAT DEPRECIATION WOULD BE DIVIDED ON THE BASIS OF NUMBER OF DAYS OF USER AND NO SEPARATE ALLOWABILITY IS POSSIBLE IN BOTH THE HANDS . 6.2 THE CIT(A) HELD THAT THOUGH THE AO INVOKED 5 TH PROVISO BUT HE MISSED OUT TO RESTRICT DEPRECIATION PROPORTIONATELY AND ACCORDING LY DIRECTED THE AO TO DO SO AS PER WHICH ALLOWABLE DEPRECIATION WOULD BE 17.71 LACS AS AGAINST 34.58 LACS WHICH WILL RESULT IN E NHANCEMENT BY 16.86 LACS. 6.3 IN THIS RESPECT IT IS NOW SUBMITTED THAT (A) IN REGARD TO THE APPLICABILITY OF SECTION 170 T HE TRIBUNAL WOULD APPRECIATE THAT THE VERY TITLE OF THE SECTION SUCCESSION TO BUSINESS OTHERWISE THAN ON DEATH GOES TO SHOW ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 46 THAT IT HAS APPLICABILITY WHEN THERE IS SUCCESSION OF BUSINESS. FOR THE PURPOSE OF THIS SUCCESSION WHAT IS IMPORTANT IS THE SUCCESSION OF B USINESS. (B) FURTHER, THE BENCH WOULD APPRECIATE THAT REVEN UES CASE IS THAT MULTIPLE AGREEMENTS ENTERED INTO NEED TO BE HOLISTICALLY REA D OUT TO FIND OUT THE TRUE INTENT AND PURPOSE AND WHEN IT IS DONE IT WOULD OBSERVED THAT THESE HAVE BEEN CAMOUFLAGED SO AS TO EVADE THE TAXES. EVASION & AVOIDANCE OF THE PRO VISIONS WOULD BECOME APPARENT FROM THE ASPECT THAT IN SO FAR AS THE SELLER IS CON CERNED IT HAD PARTED WITH ALL ITS ASSETS IN THE SENSE THAT WHATEVER IS NOT SUBJECTED TO SLUM P SALE HAS BEEN LEASED OUT LEAVING WITH IT POSSESSION OF VIRTUALLY NONE OF THE ASSETS. THUS, ON PRESSING INTO THE SERVICE THE PRINCIPLE OF PITH AND SUBSTANCE IT WOULD BECOME C LEAR THAT PRACTICALLY ( IF NOT IN LAW) THERE WAS COMPLETE SUCCESSION OF TPPL, THE SELLE R. (C) IN REGARD TO RELIANCE OF THE APPELLANT ON SECTI ON 47(XIII)(XIV) IT IS SUBMITTED THAT THIS SECTION HAS NO APPLICATION AT ALL HERE. IT HAS APP LICABILITY ONLY IN REFERENCE TO SECTION 45 I.E. QUA THE CAPITAL GAINS AND NOT IN REFERENCE TO THE ISSUE OF DEPRECIATION TO BE ALLOWED WHILE COMPUTING INCOME U/H BUSINESS & PROF ESSION. (D) IN REGARD TO APPLICABILITY OF 5 TH PROVISO TO SEC.32(1) IT IS SUBMITTED THAT THE AO W AS DEALING WITH THE ASSESSMENT OF THE APPELLANT WHERE IT WAS TO BE ENSURED BY HIM THAT ALL APPLICABLE PROVISIONS OF THE STATUTE ARE PRESSED IN TO SERVICE WHICH INTER ALIA INCLUDED 5 TH PROVISO ALSO WHICH NECESSARILY MANDATED RESTRICTING THE DEPRECIATION IN THE CASE OF SUCCESSOR OF A BUSINESS IN PROPORTION TO THE NUMBER OF DAYS OF THE USE BY THE BUYER. THIS MEANS THAT EVEN IF THE SELLER HAS NOT CLAIMED DEPRECIATION STILL THE CLAIM OF THE BUYER NEEDS TO BE RESTRICTED ON PROPORTIONATE USER BASIS. 7. TANGIBLE ACQUISITION BOOK VALUE (GOA 5): 7.1 TANGIBLE ASSETS WERE ACQUIRED FOR 2.56 CR. (AS PER COMPANIES ACT VALUATION) WHEREAS WDV AS WORKED OUT AS PER THE INCOME TAX ACT WAS 1.42 CR. THIS CLEARLY MEANS THAT THE ASSESSEE ENHANCED COST TO CLAIM HIGH ER DEPRECIATION. CIT(A) FOUND THE CASE FIT FOR BEING INVOKED INTO PROVISIONS OF EXPLA NATION 3 TO SEC. 43(1) TO DETERMINE THE ACTUAL COST. HE REJECTED CONTENTION OF THE ASSES SEE THAT SINCE THE INSTANT CASE WAS OF ACQUISITION IN A SLUMP SALE, HE WAS FREE TO RECORD THE ASSETS AT A VALUE AS CONSIDERED RIGHT BY HIM. IN THE FACTS OF THE CASE THE CIT(A) FOUND THE CASE TO BE FIT FOR INVOKING PROVISIONS OF SECTION 43(1) EXPLN 3 AND REWORKED DE PRECIATION AND ENHANCED INCOME BY 51.47 LACS. 7.2 IT IS RESPECTFULLY SUBMITTED THAT (A) QUA THE PLEA OF THE ASSESSEE THAT EXPLN 3 TO SE C. 43(1) IS NOT APPLICABLE THE CIT(A) HAS REFERRED JUDGMENT TO SUPPORT HIS ORDER. UNDISP UTEDLY, BY RECORDING THE ASSET AT VALUE UNDER THE COMPANIES ACT THE ASSESSEE HAS BEEN ABLE TO CLAIM HIGHER DEPRECIATION ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 47 AS COMPARED TO THE QUANTUM OF THE DEPRECIATION WORK ED OUT ON THE BASIS OF WDV AS WORKED OUT UNDER THE INCOME TAX ACT. (B) IN REGARD TO THE ARGUMENT OF THE ASSESSEE THAT CIT(A) HAS NOT BROUGHT ON RECORD ANY THIRD PARTY EVIDENCE TO SUPPORT EXCESSIVE CLAIM OF DEPRECIATION, IT IS POINTED THAT FOR SUCH AN OBVIOUS INFERENCE THERE WAS NO NEED FOR ANY EVIDENCE TO BE BROUGHT ON RECORD. BY ADOPTING COMPANIES ACT VALUATION VIS--VIS THE I NCOME TAX ACT WDV, THE ASSESSEE HAS BEEN ABLE TO CLAIM MORE DEPRECIATION ABOUT WHIC H THERE CANNOT BE ANY DISPUTE AND HENCE, SUCH AN OBVIOUS INFERENCE/ FACT DOES NOT NEE D ANY FURTHER EVIDENCE TO SUPPORT. THE BENCH IS PRAYED TO APPRECIATE THAT THE VALUATIO N ADOPTED BY THE ASSESSEE WAS CAUSING SERIOUS PREJUDICE TO THE INTERESTS OF REVEN UE WHICH ITSELF WAS SUFFICIENT TO INVOKE THE RELEVANT EXPLANATION. 8. LEASE RENTALS (GROUND NO. 6): 8.1 THE CIT(A) NOTICED THAT IN THE AY 8-9, THE AO H AD DISALLOWED U/S 40A(2)(B) THE PAYMENTS (EXCESS OVER THE REASONABLE ESTIMATE DONE) FOR THE LEASE RENT FOR USE OF AC, DG SET. DURING THE PENDENCY OF THE APPELLATE PROCE EDINGS THE CIT (A) EXERCISING PLENARY POWERS CONFERRED ON HIM, SOUGHT TO VERIFY W HETHER THE SIMILAR DISALLOWANCE IS CALLED FOR EVEN IN THE YEAR UNDER CONSIDERATION. T HE CIT(A) NOTICED THAT PAYMENT BY THE ASSESSEE TO TPPL OF RS. 69.74 LACS AS RENT FOR USE- JUST- OF AC, DG SET @ OR RS.30/- PER SFT. WAS EXCESSIVE CONSIDERING THE FACT THAT FO R THE OFFICE SPACE IN WHICH THE SAID FACILITIES ARE INSTALLED WAS ACQUIRED BY THE ASSESS EE BY PAYING RENT @ RS.20 TO 22 PER SFT. BENCH WOULD APPRECIATE THAT IT IS A NORMAL EX PERIENCE OF LIFE THAT THE RENTAL FOR THE IMMOVABLE SPACE ARE ALWAYS HIGHER AS COMPARED TO TH E PAYMENT FOR FACILITIES OBVIOUSLY BECAUSE OF INHERENT COST/VALUE INVOLVED WHICH IS I N MOST OF THE CASES HIGHER. WHILE HOLDING THE PAYMENT @ RS.30 AS EXCESSIVE THE CIT(A) HAS BEEN JUDICIOUS ENOUGH IN MAKING REDUCTION @ RS.6/- PER SQ.FT AS A REASONABLE PAYMENT ON A/C OF LEASE RENT FOR THE UTILITIES. THIS RESULTED IN ENHANCEMENT OF RS.55.79 LACS. 8.2 APART FROM REITERATING THE SUBMISSIONS MADE EARLIER BEFORE THE CIT(A), THE APPELLANT HAS SUBMITTED THAT THE DG SET AND AC PLAN TS WERE NON-CRITICAL ASSETS THAT IS WHY THESE WERE NOT ACQUIRED IN THE SLUMP SALE. IT IS FURTHER SUBMITTED THAT RENTAL PAID @ RS.20 TO 22 WERE FOR BARE SHELL WHEREAS PAYMENT @ RS.30 FOR UTILITIES WERE CONSIDERING THE FACT THAT TPPL HAD MADE SUBSTANTIAL INVESTMENT FOR ACQUIRING THIS. 8.3.1 QUA THESE TWO ARGUMENTS IT IS SUBMITTED THAT THESE ARGUMENTS WERE FIRSTLY NOT RAISED BEFORE THE AO AND SECONDLY NO DETAILS OF THE INVESTMENT MADE BY TPPL IN INSTALLING THESE FACILITIES HAVE BEEN FILED WHICH W OULD HAVE BEEN USEFUL TO ASCERTAIN FURTHER THE REASONABLENESS OF THE PAYMENTS @ RS.30/ - PER SQ.FT. LIKEWISE, THE BENCH IS PRAYED TO APPRECIATE THAT INVESTMENT IN ACQUISITION OF PROPERTY (IMMOVABLE SPACE) IS ALWAYS ON THE HIGHER SIDE AS COMPARED TO CREATING O F FACILITIES. 8.3.2 REGARDING THE THIRD ARGUMENT {MADE NOW AND NO T BEFORE CIT(A)} THAT NO COMPARABLE CASES ARE BROUGHT ON RECORDS IT IS SUBMI TTED THAT IN THE FACTS OF THE CASE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 48 WHERE ENTIRE TRANSACTIONS ENTERED INTO BY THE APPEL LANT COMPANY WITH TPPL AND IN TURN WITH MR. JACOB WERE DESIGNED IN A WAY TO MAKE UNREA SONABLE PAYMENTS TO TPPL/MR. JACOB THERE WAS NO REQUIREMENT TO BRING ON RECORD A NY INDEPENDENT COMPARABLE CASES ESPECIALLY WHEN THESE WERE DIFFICULT BECAUSE OF THE DEVISE ADOPTED TO DODGE THE REVENUE. IT IS MORE SO WHEN THE INSTANCES OF PAYMEN T OF RENTAL FOR ACQUIRING THE SPACE ITSELF WERE CLEARLY SUGGESTING THAT PAYMENT QUA THE FACILITIES WERE UNREASONABLE. 8.3.3 WHILE SUBMITTING SO ATTENTION OF THE BENCH IS DRAWN TO THE JUDGMENT ABDULLABHAI ABDUL KADAR VS. CIT {22 ITR 241} WHERE IT WAS HELD THAT EVIDENCE TO BE CONSIDERED CAN, APART FROM CIRCUMSTANTIAL EVIDENCES, BE EVEN P ROBABILITIES JUDGED BY HUMAN COURSE OF CONDUCT. FURTHER ATTENTION IS DRAWN TO THE JUDG MENT DATED 07-11-2013 OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF DIT- 1,INTERNATIONAL TAXATION V. ALCATEL LUCENT USA INC WHERE THE HIGH COURT AFTER DISCUSSIN G THE SUPREME COURT JUDGMENT IN ESTHURI ASWATHIA V. CIT {66 ITR 478 } POINTED OUT T HAT THE TRIBUNAL MAY ACT UPON PROBABILITIES AND PRESUMPTIONS MAY SUPPLY GAPS IN T HE EVIDENCE WHICH MAY NOT BE SUPPLIED FROM INDEPENDENT SOURCES. ACCORDINGLY, IT IS SUBMITTED THAT THE ESTIMATE AS WORKED OUT BY THE CIT(A) AFTER DRAWING REASONABLE I NFERENCES MAY NOT BE DISTURBED ESPECIALLY WHEN IT WAS VIRTUALLY IMPOSSIBLE FOR THE REVENUE TO BRING ON RECORD THE INDEPENDENT COMPARABLE CASES HAVING THE IDENTICAL F ACTS. SINCE, THE MATTER IS DECIDED BY THE CIT(A) AGAINST BY THE APPELLANT IT IS NOT UN DERSTOOD WHY THE APPELLANT DOES NOT REBUT THE INFERENCES DRAWN AGAINST BY BRINGING, AT ITS OWN, COMPARABLE CASES ESPECIALLY WHEN IT IS NOW ITS OWN BURDEN. IN THE LIGHT OF WHAT IS SUBMITTED ABOVE HONBLE BEN CH IS PRAYED TO DISMISS THE APPELLANTS APPEAL. ADDITIONAL POINTS OVER AND & REVENUES WRITTEN SUBM ISSIONS & RELIANCE ON ORDER OF CIT(A) ORDER. 1. CIT V. KHARWAR 72 ITR 603 SC TO EXPLAIN THAT I F THE PARTIES HAVE CHOSEN BY A DEVICE THE LEGAL RELATION, IT IS OPEN TO THE TAXING AUTHORITY TO UNRAVEL THE DEVICE AND TO DETERMINE THE TRUE CHARACTER OF THE RELATIONSHIP. 2. MAC DOWELL & CO. 154 ITR 152 SC TAX AVOIDANCE I S THE ART OF DODGING TAX WITHOUT BREAKING THE LAW. THIS IS A FIVE JUDGE JUDGMENT W HICH HAS NOT BEEN OVER-RULED OR DILUTED NOR IT WAS POSSIBLE TO DO SO FOR THE SUBSEQ UENT BENCHES OF THE SC HAVING THE SMALLER CONSTITUTION. THE DECISIONS RELIED BY THE ASSESSEE (INCLUDING THAT OF VODAFONE BV ) WERE HAVING SMALLER CONSTITUTION. 3. VODAFONE INTERNATIONAL HOLDINGS BV 341 ITR 1 SC DOES NOT COME IN REVENUES WAY BECAUSE THE FACTS INVOLVED THERE ARE DISTINGUISHABL E FROM THE FACTS OF THE PRESENT APPEAL. 4. VODAFONE INTERNATIONAL IS CONSIDERED BY THE KARN ATAKA HC IN BHOURUKA ENGG. LTD. 356 ITR 40 WHERE IT IS VIEWED THAT A COLOURABLE DE VICE CANNOT BE A PART OF TAX PLANNING WHICH EXACTLY IS THE CASE IN HAND. 5. TO BUTTRESS THAT THE JUDGMENTS RELIED BY THE APP ELLANT INCLUDING THE SUPREME COURT JUDGMENT IN SMIFS SECURITIES 348 ITR 302 SC IS NOT APPLICABLE, REFERENCE WAS INVITED INTER ALIA TO FOLLOWING; 5.1 NO JUDGMENT CAN BE CITED AS A PRECEDENT, HOWEVE R SIMILAR THE FACTS MAY BE. EACH CASE MUST REST ON ITS OWN FACTS AND THE MERE SIMILA RITY OF THE FACTS IN ONE CASE CANNOT BE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 49 USED TO DETERMINE A CONCLUSION OF FACT IN ANOTHER. ( RUDRAPPA RAMAPPA JAIPUR V. STATE OF HYD. AIR 1955 SC 216}. 5.2 A LITTLE DIFFERENCE IN FACTS OR ADDITIONAL FACT S MAY MAKE A LOT OF DIFFERENCE IN THE PRECEDENTIAL VALUE OF A DECISION. A DECISION IS AN AUTHORITY FOR THE QUESTION OF LAW DETERMINED BY IT. SUCH A QUESTION IS DETERMINED HAV ING REGARD TO THE FACT SITUATION OBTAINING THEREIN. WHILE APPLYING THE RATIO, THE C OURT MAY NOT PICK OUT A WORD OR SENTENCE FROM THE JUDGMENT DIVORCED FROM THE CONTEX T IN WHICH THE SAID SITUATION AROSE FOR CONSIDERATION. { ZEE TELEFILMS LTD. UOI (2005) 4 SCC 649 (PARA 254 & 256). 5.3 A PRECEDENT WHICH IS FOUND TO BE SUB-SILENTIO CEASES TO BE A BINDING PRECEDENT AS HELD IN CIT V. BR CONSTRUCTIONS 202 ITR 242 (AP FUL L BENCH) AND IT WAS SUBMITTED THAT SMIFS SECURITIES JUDGEMENT CANNOT BE PRESSED INTO S ERVICE BECAUSE FIRSTLY IT WAS BASED ON CONCESSION AND IT BEING A VERY BRIEF ORDER IS SI LENT ON IMPORTANT ASPECTS. EVEN THE PRINCIPLE OF EJUSDEM GENERIS WAS ALSO NOT ARGUED WHICH WAS NOT APPLICABLE BECAUSE OF THE FACT THAT GOODWILL IS SPECIFICALLY DEALT WITH I N THE ACT ITSELF. FURTHER REFERENCE WAS MADE OF SC JUDGMENT IN ARNIT DAS V. STATE OF BIHAR (2000) 5 SCC 488 & UP SYNTHETICS & CHEMICALS (1991) 4 SCC 139. IN THESE SC JUDGMENT S IT WAS HELD THAT ANOTHER EXCEPTION TO THE RULE OF PRECEDENTS IS THE RULE OF SUB-SILENTIO. A DECISION IS PASSED SUB- SILENTIO WHEN THE PARTICULAR POINT OF LAW INVOLVED IN THE DECISION IS NOT PERCEIVED BY THE COURT OR NOT PRESENT TO ITS MIND OR IS NOT CONSCIOU SLY DETERMINED BY THE COURT AND IT DOES NOT FORM PART OF THE RATIO DECIDENDI AND IS NO T BINDING. 6. IT WAS SUBMITTED THAT EARLIER INTANGIBLE ASSETS WERE NOT ENTITLED FOR DEPRECIATION AS SUCH AND WHEN IT WAS ALLOWED GOODWILL WAS NOT INC LUDED IN SECTION 32(1) WHICH MEANT THAT LEGISLATURE DELIBERATELY OMITTED IT & IN THAT CONTEXT ATTENTION WAS INVITED TO SC JUDGMENT IN CA ABRAHAM V. ITO KOTTAYAM AIR 1961 609 IN CONSTRUING PROVISIONS DESIGNED TO PREVENT TAX EVASION, IF THE LEGISLATURE USED WORDS OF COMPREHENSIVE IMPORT THE COURTS CANNOT PROCEED ON AN ASSUMPTION THAT THE WORDS USED IN A RESTRICTED SENSE SO AS TO DEFEAT THE AVOWED OBJECT OF THE LEGISLATURE. .IT WAS ALSO POINTED OUT THAT TAX PLANNING IS BY AN ASSESSEE QUA HIS OWN AFFAIRS WHEREAS IN THIS CASE MR. BINOY JACOB HAS ARRANGED A FFAIRS OF HIS GROUP INCLUDING THAT OF HIS GROUP COMPANIES ( WHICH WERE INDEPENDENT OF THE APPELLANT) WHICH BRINGS THE CASE OF THE APPELLANT WITHIN THE SCOPE OF TAX EVASI ON. PAPER BOOK: TO SHOW THAT ATTEMPT OF THE APPELLANT IS BASED ON C HANGE OF OPINION OR AFTER THOUGHT & BASED ON UNRELIABLE & INCOMPLETE DOCUMENTATION WHIC H IS ENOUGH TO SHOW THAT CASE LAWS RELIEF BY THE APPELLANT ON VODAFONE BV OR OF S MIFS SECURITIES CANNOT BE APPLIED ( FIRST GOODWILL & THEN TRIFURCATION THEN PRESSING FO R ALTERNATIVE CLAIM WHEREBY REVENUES INTEREST GET COMPROMISED) SPECIFIC REFERE NCE WAS MADE OF THE FOLLOWING PAGES OF THE PAPER BOOKS PLACED ON RECORD BY THE AP PELLANT; PAGE 50: TO SHOW THAT THIS DOCUMENT TITLED SLUMP S ALE/BUSINESS TRANSFER AGREEMENT IS USED AS A COLOURABLE DEVICE TO DEFEAT REVENUES INT EREST. IF IT WAS A SLUMP SALE REALLY IT WOULD HAVE CONTAINED WORDS BUSINESS TRANSFER AGREE MENT. PAGES 64-76- WHICH IS A VALUATION REPORT(VR) WHICH IS UNDATED-SELF SERVING-BASED ON INCORRECT FACTS/MISREPRESENTATION-NOT INDEPENDENT-P REPARED BY ASSESSEES OWN INTERESTED COUNSEL & HENCE DOES NOT ENTHUSE CONFIDE NCE TO DECIDE THE LIS. INTER ALIA REFERENCE WAS MADE OF PARAGRAPH/CLAUSE NO. 1.3 SHOWS THAT IT AIMED TO JUSTIFY THE CONSIDERATIO N ALREADY DECIDED OR RECEIVED. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 50 1.7 IS CONTRADICTORY BECAUSE TPPL AGREED TO NOT TO DO SIMILAR BUSINESS IN PERPETUITY & NOT FOR 4 YEARS. 1.8 SHOWS STRANGELY THAT IT WAS DONE POST TRANSACTI ON JUST TO BIFURCATE CONSIDERATION & TO JUSTIFY CONSIDERATION DECIDED TO EXCLUSIVE BENEF IT OF MR. JACOB. THIS ALSO SHOWS THAT THE CLAIM OF THE ASSESSEE TO ATTRIBUTE CONSIDERATIO N TO GOODWILL IS AN AFTER THOUGHT. 2.1 SHOWS THAT VR IS NOT RELIABLE AS IT IS PREPARED WITHOUT VERIFICATION, ACCURACY & IS BASED ON INCOMPLETE INFORMATION. 2.1 SHOWS THAT IT IS A MERELY SELF SERVING DOCUMENT AIMED TO CORNER MAXIMUM BENEFIT TO APPELLANT. 2.5 SHOWS IT IS NOT RELIABLE AT ALL AS IS AIMED AT FOR DISCUSSION PURPOSES ONLY WITH PROSPECTIVE INVESTORS; WHEREAS AS A MATTER OF FACT TRANSACTION HAS ALREADY BEEN DO WN WITH SAIPEM ITALY. 2.6 AGAIN SHOWS THAT THIS VR & OTHER DOCUMENTS ARE PART OF COLOURABLE DEVICE TO JUSTIFY THE ACQUISITION WHICH HAD ALREADY TAKEN PLA CE. 6.2 IS CONTRARY TO PARA 2.5 AND SHOWS THAT IS A CA MOUFLAGED DOCUMENT. PAGE 119 : NO DETAILS OF WITNESS MAKING IT DIFFICUL T TO UNDERTAKE VERIFICATION & HENCE NOT FULLY RELIABLE. PAGE 121: WHICH SHOWS THAT NOT ALL ASSETS/LIABILITI ES ARE TRANSFERRED WHICH MEANS PROBABLY THE TRANSACTION WAS NOT AS SUCH A SLUMP SA LE WHICH IN TURN DISTINGUISHES FACTS OF THIS CASE FROM THAT OF SMIFS SECURITIES. PAGE 135: MOU IS INCOMPLETE DOES NOT CONTAIN VITAL DETAILS & HENCE NOT FULLY RELIABLE. PAGE 141: VITAL DETAILS NECESSARY FOR VERIFICATION MISSING. PAGE 143: VITAL DETAILS NECESSARY FOR VERIFICATION MISSING. DECISIONS RELIED BY THE APPELLANT ON ISSUE OF DEPRE CIATION: 1. RC COOPER V. UNION OF INDIA {AIR 1970 SC 564} THE WORDS AGGREGATE VALUE OF COMPONENTS IS NOT NEC ESSARILY THE VALUE OF THE ENTIRETY OF A UNIT OR PROPERTY ACQUIRED, ESPECIALLY WHEN THE PROPERTY IS A GOING CONCERN WITH AN ORGANIZED BUSINESS AS CONTAINED IN PARA 116 OF THE JUDGMENT ARE NOT RELEVANT TO THE PRESENT ISSUE IN HAND BECAUSE HERE WE ARE DEALING W ITH THE PROVISIONS OF THE INCOME TAX ACT AND NOT WITH THE VALIDITY OF ACQUISITION AS WAS UNDER CONSIDERATION THERE. THUS, THIS DECISION IS NOT IN THE CONTEXT OF THE INCOME T AX ACT AND SECONDLY THIS HAS ABSOLUTELY NO APPLICATION IN THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE. 2. PNB FINANCE LTD. V. CIT 307 ITR 75 SC AT THE OUTSET IT IS POINTED OUT THAT THAT WAS THE C ASE WHERE PROVISIONS OF SECTION 45 WERE UNDER CONSIDERATION WHEREAS IT IS NOT SO IN THE PRE SENT CASE. CLEARLY THIS DECISION IS NOT APPLICABLE FOR THE SIMPLE REASON THAT THE CONTR OVERSY INVOLVED IN THIS CASE IS ENTIRELY DIFFERENT FROM THE CONTROVERSY UNDER CONSIDERATION IN THE CASE IN HAND. 3. CIT V. TECHNO SHARES & STOCKS LTD. V. CIT 327 I TR 323 SC THIS DECISION IS FIRSTLY NOT ON GOODWILL. SECONDLY , THE SC ITSELF CONFINED ITS DECISION ONLY TO RIGHT OF MEMBERSHIP CONFERRED BY BSE . THU S, QUA GOODWILL THIS DECISION CANNOT BE RELIED UPON. 4. AREVA T & D INDIA LTD 345 ITR 421 ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 51 THE CIT(A) HIMSELF HAS HIGHLIGHTED AS TO HOW THIS D ECISION IS NOT ATTRACTED. IN THE CASES OF COLOURABLE DEVICE THE DECISION CANNOT BE RELIE D UPON. 5. HINDUSTAN COCA COA BEVERAGES P. LTD. 331 ITR 192 DE L. DECISION IS NOT APPLICABLE BECAUSE THIS DECISION WA S GIVEN IN REFERENCE TO ACTION TAKEN BY THE CIT U/S 263 OF THE ACT. FURTHER, SINCE NO Q UESTION OF LAW WAS FOUND TO BE ARISING THIS DECISION LOSES PRECEDENTIAL VALUE. IT NEEDS T O BE APPRECIATED THAT THE HIGH COURT WOULD HAVE GOT THE JURISDICTION WHEN THE QUESTION O F LAW AROSE OTHERWISE NOT. 6. SMIFS SECURITIES LTD. 348 ITR 302 SC: FOR THE REASONS MENTIONED IN THE WRITTEN SYNOPSIS, THE DECISION HAS NO APPLICATION AT ALL. 7. CIT V. L & T OVERSEAS P. LTD. ITA NO.50/2010 DEL. COPY NOT MADE AVAILABLE. 8. B. RAVEENDDRAN PILLAI V. CIT 332 ITR 531 KER . FIRSTLY THE FACTS ARE DIFFERENT AND SECONDLY FOR TH E REASONS AS GIVEN BY THE CIT(A) IN THE CONTEXT OF AREVA T & D AND BY THE REVENUE QUA THE S MIFS CASE THE DECISION IS NOT OF HELP TO THE CAUSE OF THE APPELLANT. 9. ACIT V. CLC GLOBAL LTD. LTA NO.2288 (DEL) 2008 THE ISSUE WAS NOT QUA THE GOODWILL. THE TRIBUNAL I N PARA HELD THE ASSETS ACQUIRED TO BE BUSINESS AND COMMERCIAL RIGHTS AND HENCE DISALLO WANCE OF DEPRECIATION. 10. SKS MICRO FINANCE V. DCIT 145 ITD 111 HYD. FIRSTLY THIS DECISION IS NOT ON GOODWILL AND SECO NDLY TO BE IGNORED WHEN THE ISSUE IS DIRECTLY ANSWERED BY THE JURISDICTIONAL BENCH OF TH E TRIBUNAL IN GURUJI ENTERTAINMENT NETWORK LTD. 108 TTJ DEL. 180 WHERE IT WAS HELD TH AT GOODWILL PER SE IS NOT ELIGIBLE FOR CLAIM OF DEPRECIATION (PARA 12) AND ALSO BY RG KESWANI 116 ITD MUM WHERE IT WAS HELD THAT GOODWILL DOES NOT COME UNDER THE EXPR ESSION OF ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF THE NATURE SIMILAR TO KNOW-HOW , PATENT, COPY RIGHTS ETC. 36. REJOINDER OF AR ARGUMENTS/COMMENTS OF THE LEARNED CIT-DR THE LEARNED CIT-DR HAS SUBMITTED WRITTEN SUBMISSION S/SYNOPSIS OF THE ARGUMENTS MADE DURING THE HEARINGS AND IN RESPONSE TO APPELLANTS WRITTEN SUBMISSIONS FILED BEFORE THE TRIBUNAL. IN THE SAID SYNOPSIS, BROADLY, THE LEARNE D CIT-DR HAD RAISED THE FOLLOWING AVERMENTS/ARGUMENTS: ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 52 I. THE LD. CIT-DR ARGUED THAT TAX PAYABLE TO A CITIZEN /ASSESSEE REPRESENTS THE KINGS (HERE REVENUES) SHARE IN THE INCOME OF A BU SINESS AND IS THE PRICE OF CIVILIZATION. ACCORDING TO THE LD. CIT DR THE REVEN UE IS A PARTNER OR SHAREHOLDER IN THE PROFITS OF THE ASSESSEE AND HAS RIGHT TO PROBE INTO FINANCIAL ARRANGEMENTS ENTERED INTO BY THE ASSESSEE, TO PREVE NT UNDUE PREJUDICE TO ITS INTEREST. IT WAS ARGUED THAT DOCUMENTS HAVE TO BE C ONSTRUED IN ACCORDANCE WITH WELL ESTABLISHED PRINCIPLES AND BALANCE MUST BE MAI NTAINED. IN SUPPORT OF THE SAID PROPOSITION, THE RELIANCE WAS PLACED ON FOLLOW ING LEGAL DECISIONS: A) DELTA INTERNATIONAL LTD. V. SHYAM SUNDER GANERIWALA & OTHERS: 4 SCC 545 (SC) B) DIT (INTL. TAXATION) V. ALCATEL LUCENT USA INC : 66 ITR 478 (DEL.)(HC) THE CIT-DR ARGUED THAT IT IS NOT DISPUTED THAT MONE Y HAS ACTUALLY BEEN EXCHANGED BUT IN WHAT FORM IS NOT CLEAR. THE ONUS L IES ON THE ASSESSEE TO SHOW WITH DOCUMENTARY EVIDENCES AS TO IN WHAT FORM THE C ONSIDERATION WAS RECEIVED. II. IT WAS ARGUED THAT THE APPELLANT HAD AN INTENTION T O EVADE TAX AND THE TRANSACTION OF SLUMP SALE WAS COLOURABLE DEVICE. AC CORDING TO THE LD. CIT DR, THE APPELLANT KNEW THAT NO DEPRECIATION WAS ALLOWAB LE ON GOODWILL. THE APPELLANT THUS CHANGED STAND BY TRIFURCATING THE EX CESS AMOUNT PAID OVER AND ABOVE BOOK VALUE OF ASSETS VIZ., RS. 40.58 CRORES, INITIALLY TREATED AS GOODWILL INTO KNOW HOW, BRAND NAME AND NON COMPETE FEE IN OR DER TO CLAIM DEPRECIATION AND THEREBY REDUCE THE TAX OUTGO. THE APPELLANT ITS ELF CLAIMED THE VALUE OF GOODWILL TO BE ZERO. III. THE VALUATION REPORT WAS PREPARED BY A VALUER WHO W AS NOT AN INDEPENDENT PERSON, BASED ON WRONG ASSUMPTIONS AND WAS TAILORMA DE TO DEFRAUD REVENUE. ON PERUSAL OF THE VALUATION REPORT, IT COULD NOT BE INFERRED AS TO WHETHER THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 53 TRANSACTION HAD ALREADY TAKEN PLACE OR WAS TO TAKE PLACE IN FUTURE BASED ON SAID VALUATION OF INTANGIBLES. IV. MR. BINOY JACOB WAS THE CONTROLLER/MASTER AND PROPR IETOR BEING HOLDER OF 74% SHARES IN TPPL. THE TRANSACTION REPRESENTED CASE OF TAX EVASION AND NOT TAX PLANNING. THE PURPOSE OF ENTERING INTO TRANSACTION WAS TO HAVE MAXIMUM GAINS TO THE ASSESSEE AND LOSS TO THE REVENUE. V. THE PROVISIONS OF SECTION 40A(2) WERE CLEARLY APPLI CABLE IN THE PRESENT CASE IN AS MUCH AS THE PAYMENT OF RS. 40.58 CRORES BY THE A PPELLANT WAS EXCESSIVE, BEING ABOUT 15 TIMES THE VALUE OF PHYSICAL ASSETS. VI. THE ALTERNATE CLAIM OF DEPRECIATION ON GOODWILL IS NOT ALLOWABLE; THE SAME IS NOT COVERED BY THE DECISION OF SUPREME COURT IN CASE OF CIT V. SMIFF SECURITIES LTD. : 348 ITR 302 SINCE THERE WAS SHIFTING IN STAND OF ASSESSEE QUA THE ASSIGNMENT OF VALUE THERETO. APPELLANTS SUBMISSION I. THE AUTHORITY TO LEVY TAX IS DERIVED FROM THE CONST ITUTION OF INDIA WHICH ALLOCATES THE POWER TO LEVY VARIOUS TAXES BETWEEN T HE CENTRE AND THE STATE. AN IMPORTANT RESTRICTION ON THIS POWER IS ARTICLE 265 OF THE CONSTITUTION WHICH STATES THAT 'NO TAX SHALL BE LEVIED OR COLLECTED EX CEPT BY THE AUTHORITY OF LAW. THEREFORE EACH TAX LEVIED OR COLLECTED HAS TO BE BA CKED BY THE STATUTE, PASSED EITHER BY THE PARLIAMENT OR STATE. IT IS RESPECTFUL LY SUBMITTED THAT INCOME TAX LEVIED BY GOVERNMENT WITHOUT AUTHORITY OF LAW IS UN CONSTITUTIONAL. II. AMONGST SEVERAL INTERNATIONAL COMPANIES WHO HAD EVI NCED INTEREST, SAIPEM INTERNATIONAL BV WAS CHOSEN AS THE JOINT VENTURE PA RTNER FOR THE JOINT VENTURE COMPANY (THE APPELLANT). SAIPEM INTERNATIONAL B.V M ADE THE INVESTMENT IN THE APPELLANT AT THE ENTERPRISE VALUATION. THE DESIGN A ND ENGINEERING BUSINESS OF ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 54 TPPL WAS TRANSFERRED AS A GOING CONCERN BY WAY OF S LUMP SALE TO THE APPELLANT COMPANY FOR LUMPSUM CONSIDERATION OF RS.45.85 CRORE S. THE APPELLANT CARRIED ON THE SAID BUSINESS ACQUIRED LOCK, STOCK AND BARRE L, WITHOUT ANY BREAK / INTERRUPTION. THE SAID TRANSACTION WAS NOT SHAM/BOG US IN VIEW OF THE FOLLOWING: G) TANGIBLE ASSETS AND LIABILITIES FORMING PART OF THE DESIGN AND ENGINEERING BUSINESS OF TPPL VESTED IN THE APPELLAN T COMPANY PURSUANT TO SLUMP SALE; H) THE APPELLANT TOOK OVER THE INTANGIBLE ASSETS OF TPPL IN THE FORM OF TECHNICAL KNOWHOW, CUSTOMER/VENDOR DATABASE, PEN DING CONTRACTS, LICENSES, LEASES AND PERMITS, ETC IN THE NAME OF TPPL; I) THE EMPLOYEES OF TPPL WERE TRANSFERRED AND TAKEN OVER BY THE APPELLANT COMPANY; J) ACTUAL CASH CONSIDERATION OF RS.45.85 CRORES WAS PAID BY THE APPELLANT COMPANY TO TPPL; K) TPPL HAD DULY ACCOUNTED FOR TRANSACTION OF SLUMP SALE IN ITS AUDITED BOOKS OF ACCOUNT AND PAID TAX ON CAPITAL GA INS ON SLUMP SALE OF THE BUSINESS; IN VIEW OF THE AFORESAID ADMITTED / UNDISPUTED FACT S, THE CIT DR CLEARLY ERRED IN HOLDING THAT THE SLUMP SALE AGREEMENT BET WEEN TPPL, ON THE ONE HAND, AND THE APPELLANT, ON THE OTHER, WAS SHAM / COLLUSIVE. THE DECISIONS RELIED UPON BY THE CIT DR WERE DISTIN GUISHABLE ON FACTS. IN DELTA INTERNATIONAL LTD. V. SHYAM SUNDER GANERIWALA & OTHERS RELIED UPON BY CIT DR, THE ISSUE BEFORE THE SUPREME COURT WAS T O ASCERTAIN AS TO WHETHER DOCUMENT IN QUESTION WAS A LEASE AGREEMENT OR 'LEAV E AND LICENSE' AGREEMENT. IN ORDER TO DETERMINE THE TRUE NATURE OF THE TENANCY T RANSACTION, IT WAS HELD THAT THE REAL TEST WAS THE INTENTION OF THE PARTIES WHIC H MAY BE GATHERED FROM THE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 55 DOCUMENT ITSELF. ONLY WHEN THE DOCUMENT IS CAMOUFLA GED THAT THE SURROUNDING CIRCUMSTANCES AND CONDUCT OF PARTIES MAY BE LOOKED INTO. IN THE APPELLANTS CASE, THERE IS NO EVIDENCE THAT DOCUMENTS INCLUDING SLUMP SALE, SUBSCRIPTION AGREEMENTS, MEMORANDUM OF UNDERS TANDING ETC. WERE CAMOUFLAGED SO THAT IT IS DIFFICULT TO ASCERTAIN TH E REAL INTENTION OF THE PARTIES AND TO TERM THE BUSINESS TRANSFER AS COLOURABLE DE VICE. THE SUBMISSIONS ALREADY MADE @PAGE 3 OF THE WRITTEN SYNOPSES WHICH ARE NOT REITERATED. LIKEWISE, IN CASE OF DIT (INTL. TAXATION) V. ALCATEL LUCENT USA INC RELIED UPON BY CIT DR, THE REFERENCE WAS MADE TO THE DECISION O F SUPREME COURT IN CASE OF ESTHURI ASWATHIAH V. CIT MYSORE: 66 ITR 478 HOLDING THAT TRIBUNAL MAY ACT UPON PROBABILITIES AND PRESUMPTIONS MAY SUPPLY GAPS IN THE EVIDENCE WHICH MAY NOT BE SUPPLIED FROM INDEPENDENT SOURCES. THE T RIBUNAL CANNOT HOWEVER MAKE ARBITRARY DECISIONS, IT CANNOT FOUND ITS JUDGE MENT ON CONJECTURES, SURMISES OR SPECULATION. IN THE PRESENT CASE, THE DESIGN AND ENGINEERING BUSINESS OF TPPL WAS TRANSFERRED AS GOING CONCERN BY WAY OF SLUMP SA LE TO APPELLANT COMPANY FOR LUMP SUM CONSIDERATION OF RS. 45.85 CRORES WHEREBY ALL THE TANGIBLE ASSETS AND LIABILITIES, INTANGIBLE ASSETS, ALL EMPLOYEES ETC. WERE TRANSFERRED. ACTUAL CASH CONSIDERATION WAS PAID AND THE TRANSACTION WAS DULY ACCOUNTED IN AUDITED BOOKS OF ACCOUNTS. ALL THESE FACTS ARE CLEARLY EVIDENT ON PERUSAL OF VARIOUS AGREEMENTS AND DOCUMENTS PLACED ON RECORD IN THE PAPER BOOK. T HE ASSESSEE THUS HAS DISCHARGED THE ONUS CAST ON IT TO PROVE THAT THE TR ANSACTION WAS GENUINE AND WAS NOT SHAM /COLLUSIVE. THEREBY, THERE IS NO ROOM FOR MAKING PRESUMPTIONS AND DRAWING ADVERSE INFERENCES. THE ONUS INFACT LIES ON THE REVENUE TO PROVE AS TO HOW THE TRANSACTION WAS SHAM WHEN THE REVENUE ITSEL F ACCEPTED THE FACTUM OF SLUMP SALE BY: A) ALLOWING DEPRECIATION ON TANGIBLE ASSETS; ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 56 B) ASSESSING APPELLANT ON PROFITS FROM DESIGN AND ENGI NEERING BUSINESS; C) ACCEPTING THE FACT THAT ACTUAL CASH CONSIDERATION W AS PAID BY APPELLANT TO TPPL. III. THE SUBMISSION REGARDING THE TRANSACTION NOT BEING SHAM/COLOURABLE HAS ALREADY BEEN MADE VIDE WRITTEN SYNOPSIS (REFER PAGE S 2-4) WHICH ARE NOT BEING REPEATED FOR SAKE OF BREVITY. THE ARGUMENT MADE BY CIT DR THAT APPELLANT HAS BEEN SHIFTING STAND BY INITIALLY TREATING THE AMOUN T OF RS. 40.58 CRORES AS GOODWILL AND LATER TRIFURCATED THE SAME IN ORDER TO CLAIM DEPRECIATION, IS WITHOUT APPRECIATING THE FACTS OF THE CASE AND POSI TION IN LAW. IT NEEDS TO BE APPRECIATED THAT APPELLANT HAD PAID A SUM OF RS. 45 .85 CRORES TO ACQUIRE THE ONGOING DESIGN AND ENGINEERING BUSINESS OF TPPL LOC K, STOCK AND BARREL. OUT OF THE SAID SUM, RS. 40.58 CRORES REPRESENTED THE EXCE SS PAID OVER THE BOOK VALUE OF TANGIBLE ASSETS WHICH WAS ATTRIBUTED TO THE INTA NGIBLE ASSETS VIZ., TECHNICAL KNOW HOW, EXECUTING BUSINESS SIN BRAND NAME, NON CO MPETE FEE. GOODWILL, IT MAY BE APPRECIATED, IS COMPENDIOUS NAME GIVEN TO AF ORESAID INTANGIBLE ASSETS. THERE IS NO SINGLE GENERALLY ACCEPTED DEFINITION OF GOODWILL AND IT IS MADE UP OF A WHOLE LOT OF FACTORS, EACH INFLUENCING THE FIN AL MAKE UP OF BUSINESS. IT IS THUS, RESPECTFULLY SUBMITTED THAT THERE HAS BEEN NO CHANGE IN STAND OF THE APPELLANT. IV. THE VALUATION REPORT HAS ALSO BEEN QUESTIONED BY TH E CIT DR ON THE GROUND THAT IT IS NOT DATED AND HENCE IT IS NOT KNOWN WHETHER T HE SAME WAS OBTAINED BEFORE OR AFTER THE ENTERING OF THE SLUMP SALE AGREEMENT. IT HAS ALSO BEEN STATED THAT THE VALUATION SHOULD HAVE BEEN MADE ON HISTORICAL AND N OT FUTURE DATA/PROJECTIONS. IN THIS REGARD IT IS STATED THAT THE VALUATION REPO RT WAS OBTAINED POST THE SLUMP SALE AGREEMENT, IN ORDER TO DETERMINE/RECORD THE VALUE OF VARIOUS TANGIBLE AND INTANGIBLE ASSETS ACQUIRED BY THE APPE LLANT UNDER THE SLUMP ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 57 SALE AGREEMENT, IN ITS BOOKS OF ACCOUNTS. THIS WOUL D BE CLEAR ON PERUSAL OF THE VALUATION REPORT, WHICH, IN FACT, REFERS TO THE SLUMP SALE AGREEMENT. FURTHER, THE VALUER HAS APPLIED THE RECOGNIZED METH OD OF A VALUATION LIKE DCF, WHICH ARE BASED ON FUTURE PROJECTIONS, TAKING INTO CONSIDERATION THE REASONABLE RATE OF RETURN BASED ON QUANTUM OF BUSIN ESS IN THE PAST AFTER SUITABLY DISCOUNTING THE SAME. THE ASSUMPTIONS MADE ARE SCIENTIFIC, RATIONAL, REASONABLE AND REASONS FOR THE SAME HAVE BEEN DETAILED IN THE REPORT. IT HAS NOT APPRECIATED THAT VALUATION IS AL WAYS BASED ON FUTURE PROJECTION AND GROWTH OF THE BUSINESS AND NOT ON HI STORICAL DATA. IN ANY CASE, NOTHING MUCH TURNS ON THE VALUATION RE PORT, FOR THE SIMPLE REASON THAT THE VARIOUS COMPONENT OVER WHICH THE CO NSIDERATION OF RS.40.58 CRORES PERTAINING TO INTANGIBLE ASSETS A CQUIRED BY THE APPELLANT, HAS BEEN ALLOCATED IN SUCH REPORT ARE AL L OF THE NATURE ON WHICH DEPRECIATION IS ADMISSIBLE UNDER SECTION 32(1 )(II) OF THE ACT. IF THE ENTIRE SUM OF RS. 40.58 CRORES HAD BEEN DESCRIBED A S GOODWILL, BEING IN THE NATURE OF BUSINESS AND COMMERCIAL RIGHTS, DEPRE CIATION WOULD HAVE BEEN ADMISSIBLE THEREON. V. THE APPELLANT HAS VIDE WRITTEN SYNOPSIS (REFER P AGES 5-7) ALREADY ELABORATED AS TO HOW THE PROVISIONS OF SECTION 40A( 2) HAVE BEEN WRONGLY INVOKED IN THE PRESENT CASE WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. VI. THE DECISION OF SUPREME COURT IN CASE OF SMIFF SECURITIES (SUPRA) WAS SQUARELY APPLICABLE TO APPELLANT CASE AND THE DIST INCTION SOUGHT TO BE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 58 DRAWN BY CIT DR ON THE GROUND THAT THERE HAS BEEN C HANGE IN STAND OF THE APPELLANT IS IN OUR RESPECTFUL SUBMISSION, CLEA RLY MISPLACED AND WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE POSITION IN LAW. 37. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD. FIRST WE DEAL WITH TO THE LD. CIT(A) ENH ANCEMENT INCOME BY RS. 30,34,06,647/- ON ACCOUNT OF FINDING THAT THERE IS NO REASONABLENESS OF THE PURCHASE CONSIDERATION OF RS. 45.68 CRORES. 38. WE FIND THAT THE ASSESSEE COMPANY SAIPEM TRIU NE ENGINEERING PRIVATE LTD. (STEP) WAS INCORPORATED DURING THE YEAR . 2006- 07 WHEREIN 50% OF THE HOLDING WAS WITH SAIPEM AND 50% IS HELD BY MR. BINO Y JACOB. SAIPEM IS A GLOBAL EPCI CONTRACTOR IN THE BUSINESS OF OIL AND GA S SERVICES INCLUDING UPSTREAM AND DOWNSTREAM, OFFSHORE AND ONSHORE CONST RUCTION AND DRILLING. 39. TRIUNE PROJECTS PRIVATE LTD. (TPPL) IS AN E NGINEERING AND DESIGN SERVICES COMPANY. VIDE AGREEMENT DATED 22.09.2006 MR. BINOY JACOB, THE MAIN PROMOTER OF TPPL HAD AGREED TO FORM A COMPANY SAIPE M TRIUNE ENGINEERING PRIVATE LTD. (STEP). STEP ACQUIRED THE DESIGN ENGINE ERING BUSINESS OF TPPL FOR A CONSIDERATION OF RS.45.85CRORES IN SLUMP SALE. 40. MR. BINOY JACOB THE MAIN DIRECTOR OF TPPL HA D AGREED TO FORM A COMPANY BEING ASSESSEE COMPANY. THE ASSESEE COMPANY ACQUIRE D THE DESIGN ENGINEERING BUSINESS OF TPPL FOR A CONSIDERATION OF RS. 45.85 CRORE IN ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 59 LUMPSUM. THE CONSIDERATION OF RS. 45.85 CRORE COMPR ISED OF NET ASSET OF RS. 5.27 CRORE AND FOR TECHNICAL KNOW HOW AND OTHER INT ANGIBLE ASSETS OF TPPL WORTH RS. 40.58 CRORE. THE AO HAS REJECTED THE ASSE SSS CLAIM OF DEPRECIATION FOR TECHNICAL KNOW HOW AND OTHER INTANGIBLE ASSETS WORTH RS. 40.58 CRORES AND ACCORDINGLY HAS PROPOSED THE DISALLOWANCE OF RS. 10 ,14,68,882/-. THE LD. CIT(A) IN HIS APPELLATE ORDER HAS NOT ONLY UPHELD T HE DISALLOWANCE OF ABOVE DEPRECIATION BUT HE HAS HELD THAT THE ENTIRE PAYMEN T SUM OF RS. 40.58,75,729/- WAS TO BE DISALLOWED U/S 40A(2). IN THIS REGARD LD. CIT(A) HAS REFERRED THAT SHRI BINOY JACOB WAS MAIN PROMOTER OF TPPL I.E. ON E COMPANY IN WHICH HE HOLDS 74% SHARES. SIMILARLY IN THE ASSESSEE COMPANY WHICH BOUGHT THE ONGOING BUSINESS FOR TPPL SHRI BINOY JACOB HOLDS 50% SHARE. OTHER INVESTOR M/S. SAIPEN ITALY HAD ACQUIRED 50% SHARE AT A PREMIUM OF 45,840 PER SHARE OF RS. 10 /- EACH. BUT SHRI BINOY JACOB DID NOT HAVE TO PA Y A SINGLE RUPEE AS PREMIUM ON ACQUISITION OF 50% EQUITY . LD. CIT(A) FOUND THA T THERE IS NO PLAUSIBLE EXPLANATION AS TO WHY SAIPEN SHOULD PAY SUCH HIGH P REMIUM FOR ACQUISION OF A START UP COMPANY. IN THIS BACKGROUND LD. CIT(A) HAS HELD THAT ENTIRE SUM OF RS. 40.58 CRORES LIABLE TO BE DISALLOWED AND HE ENH ANCED THE ASSESSMENT TO THAT EXTENT. 41. NOW WE HAVE TO CONSIDER AS TO WHETHER A P AYMENT MADE BY THE ASSESSEE WHICH HAS NEITHER BEEN CLAIMED AS AN EXPEN DITURE OR A LOSS CAN BE DISALLOWED AND SUBJECT TO TAXATION. WE FIND THAT IN COMPUTATION OF TAXES TAX IS ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 60 COMPUTED ON THE INCOME OF THE ASSESSEE. IN COMPUTIN G THE TAXABLE INCOME THE REVENUE RECEIPTS ARE ACCOUNTED FOR AND THE EXPENDIT URE AND LOSSES ARE REDUCED THEREFROM. IN ACCOUNTING PARLANCE PAYMENT WHICH HA S NEITHER BEEN CLAIMED AS EXPENDITURE NOR HAS BEEN CLAIMED AS A LOSS CANNOT B E ADDED TO THE INCOME OF THE ASSESSEE AND TAX COMPUTED THEREFROM. THIS IS AN ABSURD PREPOSITION IT ALSO DOES NOT HAVE ANY SUPPORT FROM THE TAX LAWS. THE EN TIRE PAYMENT OF RS. 40.58 CRORE HAS BEEN CLAIMED BY THE ASSESSEE TO BE ON ACC OUNT OF ACQUISITION OF BUSINESS. THIS EXPENDITURE HAS BEEN TREATED BY THE ASSESSSEE IN CAPITAL FIELD AND ONLY DEPRECIATION THEREON HAS BEEN CLAIMED. IF FOR ANY REASON THE CAPITAL EXPENDITURE INCURRED BY THE ASSESEE IS TREATED AS B OGUS THE ONLY CONSEQUENCES THAT WILL FOLLOW WILL BE THE DISALLOWANCE OF DEPREC IATION CLAIMED ON THE ASSETS SO ACQUIRED BY NO STRETCH OF IMAGINATION THE ENTIRE P AYMENT MADE CAN BE TREATED AS THE INCOME OF THE ASSESEE BEING THE PAYER. ITS T AXABILITY IN THE HANDS OF THE RE4CEIPIENT IS ALL TOGETHER DIFFERENT MATTER. 42. IN THIS REGARD LD. CIT(A)S REFERENCE TO SECTION 40A(3) AND 40A(2)(B) ARE TOTALLY OUT OF CONTEXT AND UNSUSTAINABLE. ALL T HESE SECTIONS FALL IN CHAPTER 4 OF THE I.T., ACT WHICH DEALS WITH THE COMPUTATION O F BUSINESS INCOME. THESE SECTIONS REFERS TO EXPENSES AND PAYMENTS NOT ALLOWA BLE IN CERTAIN CIRCUMSTANCES. HENCE ADMITTEDLY IT FOLLOWS THAT THE SE PAYMENTS / EXPENDITURE WILL NOT BE DEDUCTIBLE IN COMPUTATION OF BUSINESS INCOME OF THE ASSESSEE. WHEN THE AMOUNT PAID HAS BEEN CLAIMED AS CAPITAL E XPENDITURE THEN NO ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 61 DISALLOWANCE CAN BE MADE IN THIS REGARD EXCEPT FOR THE DEPRECIATIONO CLAIMED ON THE SAID CAPITAL ACQUISITION. EVEN IF IT IS PRESU MED THAT THE ENTIRE PAYMENT WAS BOGUS AND THE ASSESSEE HAS GIFTED AWAY THE ENTI RE AMOUNT THE SAME CANNOT BE ADDED AS INCOME IN THE HANDS OF THE ASSES EE BEING THE PAYER. THUS WE HOLD THAT REFERENCE TO THESE SECTIONS BY THE LD. CIT(A) IS UNCALLED FOR AND NOT AT ALL GERMANE TO THE ADJUDICATION OF THE ISSUE AT HAND. IN THESE CIRCUMSTANCES WE HOLD THAT THE ENHANCEMENT OF INCOM E BY THE LD. CIT(A) AMOUNTING TO RS. 30,44,06,647/- IS NOT AT ALL SUSTA INABLE AND THE SAME IS LIABLE TO BE SET ASIDE. ACCORDINGLY WE DELETE THE ENHANCEM ENT BY THE LD. CIT(A). 43. NOW WE DEAL WITH THE LD. CIT(A)S DECISIO N THAT THE WHOLE SCHEME WAS A COLOURABLE DEVICE TO OBTAIN UNDUE TAX BENEFIT. FI RST WE FIND THAT THIS FINDING OF THE LD. CIT(A) IS BASED UPON HIS FINDING IN PRECEDI NG PARAGRAPHS WHERE HE HAS ENHANCED THE INCOME BY RS. 30,44,06,647/-. THE ABOV E ENHANCEMENT HAS ALREADY BEEN SET ASIDE BY US, FOR THE REASONS MENTI ONED IN THE PRECEDING PARAGRAPHS. HENCE THE PREMISE ON WHICH THE LD. CIT( A) HAS CONSIDERED THE WHOLE SCHEME AS COLOURABLE IS NO MORE ANY EXISTENCE . THAT THERE WERE CERTAIN DEFECTS IN THE VALUATION REPORT SUBMITTED CANNOT L EAD TO A PRESUMPTION THAT THE ENTIRE TRANSACTION WAS BOGUS AB INITIO. IN THIS REG ARD ASSESSEES COUNSEL HAS FAIRLY ADMITTED THAT THE VALUATION REPORT WAS OBTAI NED POST SLUMP SALE AGREEMENT IN ORDER TO DETERMINE / RECORD THE VALUES OF VARIOUS TANGIBLE AND INTANGIBLE ASSETS ACQUIRED BY THE ASSESEE. IF THERE ARE DEFECTS IN THIS VALUATION ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 62 REPORT THE SAME CANNOT LEAD TO CONCLUSION THAT THE WHOLE AGREEMENT BETWEEN THE ASSESEE AND THE OTHER PARTIES IS BOGUS. THE AGR EEMENT HAS BEEN ENTERED INTO BETWEEN M/S. SAIPEN, AN INTERNATIONAL COMPANY AND MR. BINOY JACOB. THE FINDING THAT THE TERMS AND CONDITIONS, IN THE A GREEMENT WHICH LED TO BENEFIT TO SHRI BINOY JACOB CANNOT BE TAKEN AS A PR EMISE TO REJECT THE WHOLE SCHEME OF TRANSACTION AT BEST IT CAN RESULT IN TAX ATION OF THE AMOUNT INVOLVED IN THE HANDS OF PAYEE BUT IN CANNOT LEAD TO PRESUMP TION THAT ALL THE AGREEMENTS ARE DESIGNED TO EVADE THE TAX. IT IS ALS O SETTLED LAW NOW THAT TAX PLANNING THROUGH LEGITIMATE MEANS IS PERFECTLY JUST IFIED. IN THIS REGARD WE MAY ALSO REFER TO LD. DEPARTMENTAL REPRESENTATIVES SUB MISSION THAT IT HAS NEVER BEEN THE ARGUMENTS OF THE REVENUE THAT THE MONEY PA ID BY SAIPEN ITALY WAS NOT PAID OR WAS OF MR. BINOY JACOB OR WAS OF TPPL O WN MONEY ROUTED THROUGH THIS MANNER. IN THESE CIRCUMSTANCES WE FIND THAT TH E CONCLUSION BY THE AUTHORITIES BELOW THAT THE WHOLE SCHEME WAS A COLOU RABLE DEVICE CANNOT BE SUSTAINED AND IS LIABLE TO BE SET ASIDE. ACCORDING LY THE SAME IS SET ASIDE. 44. NOW WE CONSIDER THE CLAIM OF THE DEPRECIATI ON ON THE PAYMENT OF RS. 40.58 CRORE TOWARDS INTANGIBLES. IT IS NOTED THAT I NITIALLY THE ASSESSEE HAS BOOKED THE IMPUGNED AMOUNT OF RS. 40.58 CRORE AS GO OD WILL. LATER ON ON THE BASIS OF VALUATION REPORT THE ASSESSEE BIFURCATED T HE GOOD WILL INTO THREE DIFFERENT COMPONENTS AND TREATED THEM AS INTANGIBLE ASSETS. THESE WERE A) TECHNICAL KNOW HOW RS. 26.18 CRORE B) VALUATION OF BUSINESS ON HAND RS. 12.50 ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 63 CRORE C) NON COMPETE FEE RS. 1.86 CRORE. WE NOTE TH AT AS ADMITTED BY THE LD. COUNSEL OF THE ASSESSEE THIS VALUATION REPORT WAS O BTAINED POST SLUMP SALE AGREEMENT. THE AUTHORITIES BELOW HAVE EMPHASIZED TH AT THIS VALUATION REPORT IS UNDATED HENCE LACKS CREDIBILITY. WE FURTHER FIND T HAT LD. CIT(A) HAS FOUND THAT VALUATION REPORT WAS PREPARED BY A CHARTERED ACCOU NTANT WHO WAS ALSO APPEARING ON BEHALF OF THE ASSESSEE IN THE APPELLAT E PROCEEDINGS. WE FIND THAT NUMEROUS DEFECTS HAVE BEEN REPORTED IN THE SAID VAL UATION REPORT AND THE SAME WAS ALSO POINTED OUT BY THE LD. DEPARTMENTAL REPRES ENTATIVE BEFORE US . WE NOTE THAT IN PARA 2.1 THE VALUER HAS MENTIONED THA T IN PREPARING THE VALUATION REPORT THE VALUER HAS RELIED UPON AND ASSUMED WITHO UT INDEPENDENT VERIFICATION , THE ACCURACY AND COMPLETENESS OF ALL INFORMATION PROVIDED BY THE COMPANY. THE VALUER HAS CLEARLY POINTED OUT THAT THE INFORMA TION PROVIDED THERE HAS NOT BEEN VERIFIED BY THE VALUER. IT HAS ALSO BEEN MENTI ONED THAT THE VALUATION CONTAINED HEREIN IS PURELY FOR DISCUSSION PURPOSES, IT HAS FURTHER BEEN POINTED OUT THAT ANALYSIS ARE NOT AND DO NOT PURPORT TO BE APPRAISALS OR OTHERWISE REFLECTIVE OF THE PRICE AT WHICH THE SHARES COULD A CTUALLY BE PAID OR SOLD. THEREAFTER WE NOT THAT THE VALUER IS A CHARTERED AC COUNTANT AND HE MADE HIS VALUATION ONLY BY TAKING INTO ACCOUNT THE ECONOMIC DATA AND THE RATIO OF TURN- OVER AND PROFITS. IN THESE BACKGROUND WE FIND THAT THERE IS LACK OF CREDIBILITY ON THE VALUATION ASSIGNED BY THE VALUER TOWARDS TECHNI CAL KNOW HOW, VALUATION OF BUSINESS AND PRICE FOR NON-COMPETE CLAUSE. FURTHER WE NOTE THAT AO HAD OBSERVED THAT ASESSEE HAS ACCEPTED THAT IT WAS NOT HAVING ANY REGISTERED ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 64 BRAND NAME OR TRADE MARK OR ANY COMMERCIAL RIGHT, L ICENCE, TECHNICAL KNOW HOW AND FRANCHISE WHICH WOULD HAVE BEEN SOLD. IT HAS A LSO BEEN NOTED BY THE AO THAT TPPL WAS NOT HAVING PATENT TRADE MARK TECHNICA L KNOW HOW ETC. AT NATIONALS AND INTERNATIONAL LEVEL. IT HAS BEEN FOUN D THAT THE MAIN STAY OF THE TPPL WAS CONSULTANCY AND EXECUTION OF FPSO PROJECT S THOUGH ITS SKILLED EMPLOYEE WHO WERE VERY MUCH A PART OF ASSESSEE COMP ANY. IT HAS FURTHER BEEN NOTED BY THE LD. CIT(A) THAT THE ASSESSEE HAS NEVER ENGAGED IN ANY R & D ACTIVITY. THUS WE NOTE THAT CREDIBLE MATERIALS HAVE NOT BEEN BROUGHT OUT BY THE SAID VALUATION REPORT ON WHICH A SPECIFIC VALUATION CAN BE ATTRIBUTED TO THE INTANGIBLE ASSETS NOTED THEREIN. HENCE WE HOLD THAT AUTHORITIES BELOW ARE JUSTIFIED IN HOLDING THAT ASSESEE IS NOT ENTITLED TO DEPRECIATION ON THE VALUATION OF TECHNICAL KNOW HOW, VALUATION OF BUSINESS AND NO N-COMPETE FEE MENTIONED THEREIN. 45. NOW WE DEAL WITH THE ALTERNATIVE OF THE CLAIM OF THE ASSESSEE THAT THE ENTIRE SUM OF RS. 40.58 CRORE PAID TOWARDS INTANGIB LES SHOULD BE TREATED AS GOOD WILL AND DEPRECIATION ALLOWED THEREIN. WE FIND THAT IT IS UNDISPUTED THAT THE ABOVE SUM OF RS. 40.58 CRORE IS A DIFFERENCE BE TWEEN THE ACQUISITION COST PAID BY THE ASSESEE AND THE NET TANGIBLE ASSETS ACQ UIRED. NOW THE FIRST ISSUE TO BE DEALT IS AS TO WHETHER DEPRECIATION CAN BE CLAIM ED ON GOOD-WILL. IN THIS REGARD WE NOTE THAT SECTION 32 OF THE I.T. ACT WHIC H DEALS WITH DEPRECIATION DOES NOT ENVISAGE DEPRECIATION ON GOOD WILL. SECTIO N 32(2) DOES ENVISAGE ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 65 DEPRECIATION ON KNOW HOW, PATENTS , COPYRIGHT , T RADEMARK, LICENCES , FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE THE INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE FIRST DA Y OF APRIL, 1998. NOW WE HAVE TO EXAMINE WHETHER THE AMOUNT PAID BY THE ASSESSEE IN THIS REGARD WHICH IS NOW BEING CLAIMED AS GOOD WILL WOULD BE ENTITLED TO DEPRECIATION UNDER THE ABOVE PROVISION OF LAW. WE FIND THAT HONBLE APEX C OURT HAS CONSIDERED THIS ISSUE IN THE CASE OF CIT VS. SMITH SECURITIES LTD. REPORTED IN 348 ITR 302. IN THIS REGARD WE MAY REFER HONBLE APEX COURTS OBSER VATION AND FINDING IN PLACITUM 8, 9 AND 10 OF THE SAID ORDER :- 8. THE ASSESSING OFFICER HELD THAT GOODWILL WA S NOT AN ASSET FALLING UNDER EXPLANATION 3 TO SECTION 32(1) OF THE I NCOME TAX ACT, 1961 (THE ACT FOR SHORT) 9. WE QUOTE HEREINABOVE EXPLANATION 3 TO S ECTION 32(1) OF THE ACT : EXPLANATION 3 FOR THE PURPOSE OF THI S SUB SECTION, THE EXPRESSIONS ASSETS AND BLOCK OF ASSETS SHALL MEAN (A) TANGIBLE ASSETS, BEING BUILDINGS, MAC HINERY, PLANT OR FURNITURE; (B) INTANGIBLE ASSETS, BEING KNOW-HOW, P ATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR AN OTHER BUS INESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. EXPLANATION 3 STATES THAT THE EXPRESSION ASSET SHA LL MEAN AN INTANGIBLE ASSET, BEING KNOW-BOW, PATENTS, COPYRIGHTS, TRADE-MARKS, L ICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE. A READING THE WORDS ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WOULD FALL UND ER THE EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NAT URE. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRE TING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT GOOD WILL IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 66 46. NOW A READING OF THE ABOVE SHOWS THAT HON BLE APEX COURT HAS EXPOUNDED THAT GOOD WILL IS AN ASSET UNDER EXPLANAT ION 3 (B) TO SECTION 32(1) OF THE I.T. ACT. WE FIND THAT THE ABOVE IS AN UNAMB IGUOUS AND A SPEAKING ORDER. THE DECISION OF THE HONBLE APEX COURT ARE L AWS OF LAND AND ARE BINDING UPON ALL THE COURTS AND TRIBUNALS AND OTHER AUTHORI TIES. IN THESE CIRCUMSTANCES WE FIND THAT THE SUBMISSIONS OF THE LD. DR REFERRE D IN HIS SUBMISSIONS ABOVE THAT THE ABOVE DECISION OF THE HONBLE APEX COURT SHOULD NOT BE CONSIDERED AND IT DOES NOT LAY DOWN APPROPRIATE LAW IS NOT AT ALL SUSTAINABLE WE FIND THE SUBMISSION OF THE LD. DR IN THIS REGARD ARE DEVOID OF COGENCY AND ARE UNCONVINCING. 47. NOW THE QUESTION ARISES AS TO WHETHER THE VALUATION OF GOOD WILL BY THE ASSESEE AT RS. 40.58 CRORE IS APPROPRIATE OR NO T. NOW IN THIS REGARD WE NOTE THAT THE VALUATION REPORT SUBMITTED BY THE ASSESEE DOES NOT DEAL WITH VALUATION OF GOOD WILL. WE FURTHER NOTE THAT THE DEPARTMENTAL REPRESENTATIVE HAS BROUGHT OUT IN HIS SUBMISSION THAT ASSESEE HAS NOT FILED HI S ARGUMENTS IN WRITING ON THE ABOVE SPECIFIC ISSUE I.E. ALLOWANCE OF DEPRECIATION ON GOOD-WILL. WE FURTHER NOTE THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BEFORE US WHICH CAN AID INTO THE COMPUTATION OF GOOD WILL IN THIS REGARD. LD. DEPAR TMENTAL REPRESENTATIVE IN THIS REGARD HAS SUBMITTED THAT THE AFORESAID SUM O F RS. 40.58 CRORE TOWARDS GOOD-WILL WAS ARRIVED AT BETWEEN THE ASSESSEE AND T HE TPPL BEFORE THE AGREEMENT IN THIS REGARD. LD DEPARTMENTAL REPRESENT ATIVE HAS POINTED OUT THAT ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 67 NO MATERIAL AS TO HOW THIS SUM WAS COMPUTED HAS BEE N BROUGHT ON RECORD. WE ALSO FIND THAT THERE ARE PROPER AND GENERALLY ACCEP TED METHODS OF VALUATION OF GOOD-WILL AND IN THIS CASE NO METHOD OR PROCEDURE APPLIED FOR VALUATION OF GOOD WILL HAS BEEN BROUGHT ON RECORD. IN THESE CIRC UMSTANCES IN OUR CONSIDERED OPINION INTEREST OF JUSTICE WILL BE SERVED IF THE M ATTER IS REMITTED TO THE FILE OF THE AO. ACCORDINGLY WE REMIT THIS ISSUE TO THE FILE OF THE AO. AO IS DIRECTED TO EXAMINE THE VERACITY OF VALUATION ARRIVED AT FOR GO OD-WILL AND SHALL THEREAFTER ALLOW DEPRECATION AS PER LAW. 48. NOW WE DEAL WITH THE APPLICABILITY OF PROVISIONS OF SECTION 170 AND APPLICATION OF EXPLANATION 3 OF SECTION 43(1). WE F IND THAT THE AO HAS FOUND THAT SECTION 170 IS APPLICABLE. HE HAS NOT GIVEN AN Y FINDING OF DISALLOWANCE IN THIS REGARD. SECTION 170 DEALS WITH SUCCESSION TO B USINESS OR PROFESSION OTHERWISE THAN ON DEATH. THE 5 TH PROVISO TO SECTION 32(1) DEALS WITH DEPRECIATION IN CASE OF SUCCESSION ETC. WE FIND THA T FINDINGS OF THE LD. CIT(A) AND THE AO ALSO IN THIS REGARD ARE INTERALIA BASED UPON THE PREMISE THAT THE WHOLE SCHEME IS A SHAM TRANSACTION . WE FIND THAT A S DEALT WITH HEREINABOVE WE HAVE ALREADY HELD THAT THE WHOLE SCHEME IN THIS CASE CANNOT BE TERMED AS SHAM TRANSACTION. FURTHER MORE WE NOTE THAT WHILE D EALING WITH ENHANCEMENT ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION BY INVOK ING 5 TH PROVISO TO SECTION 32(1) LD. CIT(A) HAS OBSERVED THAT THERE IS NO NEED TO GIVE SEPARATE OPPORTUNITY FOR THIS ENHANCEMENT. WE FURTHER NOTE T HAT AO HAS NOT CONSIDERED THESE ASPECTS. IN OUR CONSIDERED OPINION INTEREST O F JUSTICE WOULD BE SERVED IF ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 68 THESE ISSUES ARE REMITTED TO THE FILE OF THE AO. TH E AO SHOULD CONSIDER THESE ISSUES AFRESH KEEPING IN MIND OUR ADJUDICATION ON ISSUES HEREIN ABOVE. NEEDLESS TO SAY ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF HEARING. 49. NOW WE CONSIDER THE ENHANCEMENT ON A CCOUNT OF RENT FOR USE OF ASSETS. IN THIS REGARD WE NOTE THAT IN THE AGREEME NT THE LEASE RENT OF RS. 30 PER SQ. FT. P.M. WAS SPECIFIED. THE FACILITIES IN T HIS REGARD INCLUDED PROVISION FOR AIR CONDITIONING FACILITIES THROUGH AC PLANT AND AL SO POWER BACK UP FACILITIES THROUGH DG SETS. NOW THE LD. CIT(A) HAS FOUND THE A BOVE SUM PAID IS EXCESSIVE AND HE HAD SUBSTITUTED THE SAME WITH THIS FIGURE OF RS. 6 SQ. FT. WE FIND THAT NO BASIS WHATSOEVER FOR ARRIVING AT THIS FIGURE OF RS. 6 PER SQ. FT. HAS BEEN SPECIFIED. WE FIND THAT EVEN IF THE PAYMENT MA DE IN THIS REGARD IS CONSIDERED TO BE EXCESSIVE THE SAME CANNOT BE SUBS TITUTED BY ANY GUESS WORK OR OTHERWISE. IN THESE CIRCUMSTANCES WE REMIT THIS ISSUE ALSO TO THE FILE OF THE AO. THE AO SHALL CONSIDER THIS ISSUE AFRESH AFTER G IVING THE ASSESSE ADEQUATE OPPORTUNITY HAVE BEEN HEARD. IN THE RESULT THIS APPEAL FILED BY THE ASSE SSE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25 TH .JULY, 2014. SD/- SD/- (A.T. VARKEY) JUDICIAL MEMBER (SHAMIM YAHYA) ACCOUNTANT MEMBER DATED : 25 TH JULY, 2014 *VEENA ITA NO. 5239/DEL-12 ASSTT. YEAR 2007-08 69 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER ASSTT. REGISTRAR, ITAT
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Startup Compliance
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1:1 Consultation on Tax Litigation
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1:1 Consultation on Startup Fundraising
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Startup Dissolution Resolution
₹0
Contractor Indemnity Agreement
₹0
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