Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 5775 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 7 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-11-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2006-2007
Appeal Filed On
29-03-2011
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . , ' , % & BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ ITA NO.561/MDS/2011 %' ' /ASSESSMENT YEAR: 2006-07 THE DY. COMMISSIONER OF INCOME- TAX, LARGE TAXPAYER UNIT, CHENNAI-600 101. VS. M/S.AREVA T&D INDIA LTD., FSSC BUILDING, NO.19/1, GST ROAD, PALLAVARAM, CHENNAI-600 043 [PAN: AAACG 2115 R ] ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.668/MDS/2011 %' ' /ASSESSMENT YEAR: 2006-07 M/S.AREVA T&D INDIA LTD., NO.19/1, FSSC BUILDING, GST ROAD, PALLAVARAM, CHENNAI-600 043 VS. THE DY. COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI-600 101. [PAN: AAACG 2115 R ] ( ( /APPELLANT) ( ) *( /RESPONDENT) ASSESSEE BY : MR.TUSHAR JARWAL, ADV & MR.RAHUL SATEEJA, ADV. DEPARTMENT BY : MR.S. BHARATH, CIT , /DATE OF HEARING : 27.11.2017 , /DATE OF PRONOUNCEMENT : 27.11.2017 ITA NOS.561 & 668/MDS/2011 :- 2 -: / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.561/MDS/2011 IS AN APPEAL FILED BY THE REVE NUE & ITA NO.668/MDS/2011 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), LARGE TAX PAYER UNIT, CHENNAI, IN ITA NO.79/09-10/LTU(A) DATED 31.01.2011 FOR THE AY 2006- 07. 2. SHRI S. BHARAT, CIT, REPRESENTED ON BEHALF OF TH E REVENUE AND SHRI TUSHAR JARWAL, ADV. & SHRI RAHUL SATEEJA, ADV. REPR ESENTED ON BEHALF OF THE ASSESSEE. ITA NO.561/MDS/2011 REVENUES APPEAL : 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LA W AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSES SING OFFICER TO ALLOW DEPRECIATION OF THE LUCKNOW PROPERTY. 2.2 THE LEARNED CIT(A) FAILED TO NOTE THAT THE PROPE RTY WAS OBTAINED BY THE ASSESSEE ONLY IN LIEU OF SURRENDERING ITS TENANCY RIGHTS OVER ANO THER PROPERTY. 3. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSI NG OFFICER TO ALLOW DEPRECIATION ON NON- COMPETE FEE. 3.1. HAVING REGARD TO THE FOLLOWING DECISIONS OF TH E ITAT, CHENNAI BENCH, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSE SSING OFFICER. A.B.MAURI INDIA PVT. LTD. ITA NO.1293/MDS/2006 - DATE D 23.11.2007 PENTASOFT TECHNOLOGIES LTD. ITA NO.1325/MDS/2006 - DA TED 06.02.2008 4. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS THE AMOUNT TAKEN TO GENERA L RESERVE BY THE ASSESSEE ON A SUM OF RS.54,26,56,000/- REPRESENTING THE DIFFERENCE BE TWEEN THE VALUE OF ASSETS OVER THE VALUE OF LIABILITIES OF THE TRANSFEROR COMPANIES, A FTER ADJUSTING THE AGGREGATE FACE VALUE OF NEW SHARES ISSUED WAS ADDED TO GENERAL RESERVE. ITA NOS.561 & 668/MDS/2011 :- 3 -: 4.1. THE LEARNED CIT(A) FAILED TO NOTE THAT THE AMOU NT TAKEN TO GENERAL RESERVE BY THE ASSESSEE WAS DUE TO NET ASSET VALUE CONSEQUENT TO A MALGAMATIONS SCHEME. THE AMALGAMATION WAS COMPLETED AS PER BUSINESS EXPEDIEN CY AND IN THE COURSE OF ONGOING BUSINESS. THUS, THE AMOUNT IS CLEARLY TAXABLE U/S.28 (IV) OF THE IT ACT. 4.2. HAVING REGARD TO THE DECISION OF THE JURISDICT IONAL HIGH COURT IN THE CASE OF M/S.ARIES ADVERTISING CO. LTD. (255 ITR 510) WHEREIN, IT WAS O BSERVED THAT (QUOTING FROM THE SUPREME COURTS DECISION IN THE CASE OF VAZIR SULTA N TOBACCO CO. LTD. (133 ITR 559) ANY AMOUNT TRANSFERRED BY THE ASSESSEE TO THE GENERAL R ESERVE IS TREATED AS PROFITS OF THE ASSESSEE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD TH E ACTION OF THE ASSESSING OFFICER. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASID E AND THAT OF THE ASSESSING OFFICER RESTORED. 4. GROUND NOS.1 & 5 ARE GENERAL IN NATURE. 5. IN REGARD TO GROUND NOS.2.1 & 2.2, IT WAS SUBMIT TED BY THE LD.DR THAT THE ISSUE AGAINST THE ACTION OF THE LD.CIT(A) IN DIRECTING THE AO TO ALLOW DEPRECIATION IN RESPECT OF THE LUCKNOW PROPER TY. IT WAS A SUBMISSION THAT THE ASSESSEE IN LIEU OF SURRENDERIN G ITS TENANCY RIGHTS IN RESPECT OF ANOTHER PROPERTY IN LUCKNOW, HAD ACQUIRE D THE SAID PROPERTY IN LUCKNOW. IT WAS A SUBMISSION BEFORE THE AO THAT TH E CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 1993-94 IN ITA NO.725/MDS/1997 DATED 27.05.2005 HAD HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE AO ON THE GROUND THAT THE APPEAL HAD BEEN PREFERRED TO THE HONBLE JURISDICTIONAL HIGH COURT HAD DISALLOWE D THE DEPRECIATION CLAIMED. IT WAS A SUBMISSION THAT THE LD.CIT(A) HA D ALLOWED THE ASSESSEES CLAIM BY FOLLOWING THE DECISION OF THE C O-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.725/M DS/1997 DATED 27.05.2005. IT WAS A SUBMISSION THAT THE ORDER OF THE AO WAS LIABLE TO BE RESTORED. ITA NOS.561 & 668/MDS/2011 :- 4 -: 5.1 IN REPLY, THE LD.AR VEHEMENTLY SUPPORTED THE OR DER OF THE LD.CIT(A) ON THIS ISSUE. 5.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 1993 -94 IN ITA NO.725/MDS/1997 DATED 27.05.2005 AND AS IT IS NOTIC ED THAT THE LD.CIT(A) HAS FOLLOWED THE JUDICIAL DISCIPLINE IN FOLLOWING T HE DECISION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. IN THE RESULT, GROUND NOS.2.1 & 2.2 OF THE REVENUES APPEA L STANDS DISMISSED. 6. IN REGARD TO GROUND NOS.3 & 3.1, IT WAS SUBMITTE D BY THE LD.DR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) I N DIRECTING THE AO TO ALLOW DEPRECIATION ON NON-COMPETE FEE PAID. IT WAS A SUBMISSION THAT M/S.AREVA T&D INSTRUMENT TRANSFORMERS PVT. LTD., HA D PAID A SUM OF RS.16.00 CR. IN THE NATURE OF THE NON-COMPETE FEE A T THE TIME OF ACQUISITION OF RUNNING BUSINESS FROM M/S.WS INDUSTR IES AND M/S.SSB INDUSTRIES. IT WAS A SUBMISSION THAT THE AO HAD DI SALLOWED THE DEPRECIATION ON NON-COMPETE FEE ON THE GROUND THAT IT WAS NOT A BUSINESS OR COMMERCIAL RIGHT, WHICH THE ASSESSEE HAD RECEIVE D. IT WAS A SUBMISSION THAT ON APPEAL THE LD.CIT(A) HAD ALLOWED THE ASSESSEES CLAIM BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.MEDICORP TECHNOLOGIES INDIA LTD., IN 20 09-TIOL-203-ITAT MAD DATED 16.01.2009 WHEREIN IT HAS BEEN HELD THAT THE NON-COMPETE RIGHT ITA NOS.561 & 668/MDS/2011 :- 5 -: ACQUIRED BY THE ASSESSEE COMPANY WAS ELIGIBLE FOR D EPRECIATION. IT WAS A SUBMISSION THAT THE ORDER OF THE AO WAS LIABLE TO B E RESTORED. 6.1 IN REPLY, THE LD.AR DREW OUR ATTENTION TO THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.PENTAS OFT TECHNOLOGIES LTD., REPORTED IN [2014] 41 TAXMANN.COM 120 (MAD) WHEREIN IT HAS BEEN HELD THAT THE NON-COMPETE FEE IS IN THE NATURE OF COMMER CIAL RIGHT OF SIMILAR NATURE SUCH AS PATENTS, COPYRIGHTS AND TRADEMARKS A ND THEREFORE, THE ASSESSEE WAS ENTITLED TO THE DEPRECIATION. 6.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.PENTASOFT TECHNOLOGIES LTD ., RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF M/S.PENTASOFT TECHNOLOGIES LTD., THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. IN THE RESULT, GROUND NOS.3 & 3.1 OF TH E REVENUES APPEAL STANDS DISMISSED. 7. IN REGARD TO GROUND NOS.4,4.1 & 4.2, IT WAS SUBM ITTED BY THE LD.DR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT (A) IN DELETING THE ADDITION MADE BY THE AO TOWARDS THE AMOUNT TAKEN TO THE GENERAL RESERVE BY THE ASSESSEE REPRESENTING THE DIFFERENCE BETWEEN THE VALUE OF THE ASSETS OVER THE VALUE OF THE LIABILITIES OF THE TRANSFEROR COMPANIES AFTER ADJUSTING THE AGGREGATE FACE VALUE OF THE NEW SHARE S ISSUED. THE LD.DR ITA NOS.561 & 668/MDS/2011 :- 6 -: DREW OUR ATTENTION TO PAGE NO.13 OF THE ASSESSMENT ORDER, IT WAS A SUBMISSION THAT M/S.AREVA T&D SYSTEMS INDIA LTD., M /S.AREVA T&D INSTRUMENT TRANSFORMERS INDIA PVT. LTD. AND M/S.ARE VA T&D LIGHTNING ARRESTERS INDIA PVT. LTD., WAS AMALGAMATED WITH THE ASSESSEE COMPANY. IT WAS A SUBMISSION THAT THE ASSETS AND LIABILITIES OF THE ERSTWHILE COMPANIES WERE TRANSFERRED TO THE ASSESSEE COMPANY W.E.F. 01.01.2006. ON ACCOUNT OF THE SAID TRANSFER, A NET EXCESS ASSET S VALUE OVER LIABILITIES OF THE AMALGAMATING COMPANIES TO AN EXTENT OF RS.54,26 ,56,000/- HAD ARISEN, WHICH HAD BEEN ADJUSTED UNDER GENERAL RESER VE OF THE COMPANY. THE AO HAD PROPOSED TO TAX THE SAID SURPLUS ADDED T O THE GENERAL RESERVE AS INCOME U/S.28(1)(IV) OF THE ACT AS A VAL UE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM THE BUSINESS OR THE EXERCISE OF A PROFESSION. IT WAS R EPLIED BY THE ASSESSEE IN THE COURSE OF THE ASSESSMENT THAT THE SAID AMOUNT C OULD NOT BE TAXED AS A TRADING RECEIPT AS A SURPLUS ARISEN IN THE HAND S OF THE ASSESSEES COMPANY CONSEQUENT TO THE MERGER. IT WAS A SUBMISS ION THAT THE AO HAD REJECTED THE ASSESSEES EXPLANATION AND HAD HELD TH AT THE AMALGAMATION WAS COMPLETED AS PER THE AGREEMENTS BETWEEN THESE C OMPANIES AND THE ASSESSEE AND IT WAS IN THE COURSE OF THE ONGOING BU SINESS AND CONSEQUENTLY THE EXCESS OF THE AMALGAMATION AMOUNT WAS BROUGHT TO TAX UNDER THE HEAD PROFITS & GAINS OF BUSINESS BY INV OKING THE PROVISIONS OF SEC.28(1)(IV) OF THE ACT. ON APPEAL, THE LD.CIT(A) HAD HELD THAT THE ASSESSEE HAVING TAKEN OVER THE ASSETS & LIABILITIES OF THE THREE COMPANIES AND PAID A CONSIDERATION, WHICH WAS A LOWER THAN NE T BOOK VALUE OF THOSE ITA NOS.561 & 668/MDS/2011 :- 7 -: ENTITIES, THE ASSESSEE HAD REFLECTED THE BOOK VALUE OF THE ASSETS & LIABILITIES OF THE THREE MERGER ENTITIES IN ITS BOO K AND CREDIT THE DIFFERENCE BETWEEN THE NET BOOK VALUE OF THE ASSETS AND THE VA LUE OF THE SHARES ALLOTTED TO THEM TO ITS RESERVE. THE LD.CIT(A) HAD HELD THAT THE ASSESSEE HAS ONLY PURCHASED THREE ENTITIES AND THEREFORE, TH ERE WAS NO QUESTION OF MAKING ANY PROFIT ON THE SAID TRANSACTION. CONSEQU ENTLY, THE LD.CIT(A) HAD DELETED THE ADDITION. THE LD.DR VEHEMENTLY SUP PORTED THE ORDER OF AO. 7.1 IN REPLY, THE LD.AR SUBMITTED THAT THE AO HAD H ELD THAT THE EXCESS OF THE NET BOOK VALUE OF THE THREE ENTITIES AS AGAI NST THE CONSIDERATION PAID AS INCOME IN THE REVENUE FIELD. IT WAS A SUBM ISSION THAT THE ASSESSEE HAVING ACQUIRED THE THREE COMPANIES, THE E XCESS OF THE NET BOOK VALUE OVER THE CONSIDERATION PAID WAS, IN EFFECT, A CAPITAL RECEIPT WHICH WAS LIABLE TO BE ADJUSTED ONLY TO THE GENERAL RESER VE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. 7.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE PROVISIONS OF SEC.28(IV) SHOWS THAT THE SAID PROVIS ION IS TO TREAT THE INCOME AS PROFITS & GAINS OF BUSINESS OR PROFESSION , THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MON EY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF PROFESSION. IN THE PRE SENT CASE, IT IS CLEARLY SHOWS THAT THE ACQUISITION, MORE SO, THE AMALGAMATI ON OF THE THREE COMPANIES WITH THE ASSESSEE COMPANY IS NOT THE BUSI NESS OF THE ASSESSEE ITA NOS.561 & 668/MDS/2011 :- 8 -: COMPANY. CONSEQUENTLY, IT CANNOT BE SAID THAT THE PROVISIONS OF SEC.28(1)(IV) OF THE ACT APPLIED TO THE EXCESS OF T HE NET BOOK VALUE OF THE ENTITIES OVER THE CONSIDERATION PAID IN ANY WAY NOR IS IT INCOME LIABLE TO TAX UNDER THE HEAD PROFITS & GAINS OF BUSINESS IN THE HANDS OF THE ASSESSEE COMPANY. FURTHER CLEARLY, THE REVENUE HAS NOT BEEN ABLE TO POINT OUT ANY DEFECTS IN THE FINDINGS OF THE LD.CIT (A) ON THIS ISSUE. CONSEQUENTLY THE FINDING OF THE LD.CIT(A) ON THIS I SSUE STANDS CONFIRMED. IN THE RESULT, GROUND NOS.4, 4.1 & 4.2 OF THE REVEN UES APPEAL STANDS DISMISSED. 7.3 IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ITA NO.668/MDS/2011 ASSESSEES APPEAL : 8. IN THE ASSESSEES APPEAL, THE ASSESSEE RAISED TH E FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR CONTINGENCIES AMOUNTING TO RS.1,07,63 ,000/- DISREGARDING THE APPELLANTS SUBMISSIONS THAT THESE WERE REQUIRED TO BE PROVIDED UNDER INDIAN ACCOUNTING STANDARD-7 & REPRESENTED CRYSTALLIZED LIABILITIES. 2. THE LEARNED OFFICER HAS ERRED IN NOT ALLOWING DEPRE CIATION ON PLASTIC MOULDS WITHOUT APPRECIATING THE FULL FACTS. 3. THE LEARNED OFFICER HAS ERRED IN DISALLOWING THE CO NTRIBUTIONS MADE TO EMPLOYEE WELFARE FUNDS AMOUNTING TO RS.2,60,198/- ENTERED IN TO WITH THE EMPLOYEES UNDER SECTION 12(3) OF THE INDUSTRIAL DISPUTES ACT. 4. THE LEARNED OFFICER HAS WRONGLY CONCLUDED THAT NO A PPROVAL WAS RECEIVED BY THE APPELLANT FROM THE COMPETENT AUTHORITIES UNDER SECT ION 12(3) OF THE INDUSTRIAL DISPUTES ACT IGNORING THE CONTENTS OF THE AGREEMENT. 5. THE LEARNED OFFICER HAS ERRED IN DISALLOWING DEPREC IATION ON GOODWILL, WITHOUT APPRECIATING THE FULL FACTS BEHIND THE TRANSACTION & IGNORING THE JUDICIAL PRECEDENTS IN FAVOUR OF THE APPELLANT. 6. THE LEARNED OFFICER HAS ERRED IN DISALLOWING THE FO LLOWING PROVISIONS THAT WAS TRANSFERRED TO THE BUYER COMPANY AS PART OF BUSINES S PURCHASE AGREEMENT. HE SHOULD HAVE APPRECIATED THAT THESE PROVISIONS WERE DISALLO WED IN THE HANDS OF THE APPELLANT IN THE EARLIER YEARS. A. PROVISION FOR BAD DEBTS AMOUNTING TO RS.6,90,00,001 /-. B. PROVISION FOR UNAMORTIZED PORTION OF VOLUNTARY RETI REMENT SCHEME RS.44,22,000/- ITA NOS.561 & 668/MDS/2011 :- 9 -: C. PROVISION FOR WARRANTIES RS.4,02,21,000/- D. PROVISION FOR CONTRACT LOSSES RS.36,84,000/- E. PROVISION FOR VACATION PAY RS.66,28,000/- 7. THE LEARNED OFFICER HAS ERRED IN NOT APPRECIATING T HE FACT THAT BY TRANSFERRING THE ABOVE SAID PROVISIONS & BY ACCEPTING A LOWER CONSIDERATIO N, THE APPELLANT HAD IN FACT DISCHARGED ITS LIABILITIES & SHOULD BE ENTITLED TO FULL DEDUCTION. 8. THE LEARNED OFFICER HAS ERRED IN TAXING UNDER CAPIT AL GAINS, THE EXCESS CONSIDERATION RECEIVED ON TRANSFER OF BUSINESS IGNORING THE SUBMI SSIONS OF THE APPELLANT THAT THE TRANSFER OF BUSINESS UNDER A SCHEME OF ARRANGEMENT DID NOT ATTRACT CAPITAL GAINS U/S.50B. 9. THE LEARNED OFFICER HAS ERRED IN NOT GRANTING DEDUC TION FOR EXCISE DUTY PAID ON CLOSING STOCK. HE HAS FURTHER ERRED IN IGNORING ALL THE JUD ICIAL PRECEDENTS IN FAVOUR OF THE APPELLANT. 10. THE APPELLANT CRAVES LEAVE TO ADD, WITHDRAW, AMEND OR FOREGO ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL DURING THE APPELLATE PROCEEDINGS. 9. AT THE TIME OF HEARING, THE LD.AR SUBMITTED THAT HE DID NOT WISH TO PRESS THE GROUND NOS.1 & 2 OF THE ASSESSEES APPEAL . IT WAS HOWEVER, SUBMITTED THAT THE LEGAL ISSUE IS TO BE KEPT OPEN. 9.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. CONS IDERING THE SUBMISSIONS OF THE LD.AR, GROUND NOS.1 & 2 OF THE A SSESSEES APPEAL IS DISMISSED AS NOT PRESSED. LIBERTY IS GIVEN TO THE ASSESSEE TO RAISE LEGAL ISSUES, IF ANY, IN RESPECT OF THE ISSUES RAISED IN THE SAID GROUNDS. 10. IN REGARD TO GROUND NOS.3 & 4 OF THE ASSESSEES APPEAL, IT WAS SUBMITTED THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF THE CONTRIBUTIONS MA DE TO THE EMPLOYEE WELFARE FUNDS. IT WAS A SUBMISSION THAT THE AO HAD DISALLOWED THE CONTRIBUTIONS TO THE VARIOUS EMPLOYEES WELFARE FUND S ON THE GROUND THAT THE PAYMENTS WERE NOT STATUTORY OBLIGATIONS. IT WA S A SUBMISSION THAT THE PAYMENTS TO THE EMPLOYEES WELFARE FUNDS WERE ON ACC OUNT OF THE ITA NOS.561 & 668/MDS/2011 :- 10 -: SETTLEMENT SCHEMES ARRIVED AT BETWEEN THE ASSESSEE AND ITS EMPLOYEES U/S.12(3) OF THE INDUSTRIAL DISPUTES ACT. IT WAS A SUBMISSION THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE C O-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY S 2003-04 & 2004-05 IN ITA NOS.799 & 800/MDS/2010 DATED 21.06.2011 WHEREIN THIS ISSUE WAS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. IT WAS A FURTHER SUBMISSION THAT FOR THE AY 2001-02 ALSO THE CO-ORDI NATE BENCH OF THIS TRIBUNAL HAD RESTORED THE ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION IN ITA NO.2317/MDS/2005 DATED 16.05.2007 WHEREIN IT HA S BEEN HELD AS FOLLOWS: 13. THE NEXT ISSUE RELATES TO THE ALLOWABILITY OF C ONTRIBUTION TO RETIREMENT CUM DEATH FUND, STAFF RECREATION CLUB AND DEATH BENEFIT FUND. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ASSESSING OFFICER DISALLOWED RS.6,45,541/- CLAIM ED BY THE ASSESSEE AS CONTRIBUTION TO VARIOUS WELFARE FUNDS UNDER SECTION 40A(9) OF THE AC T, THE ASSESSEE CLAIMED THE FOLLOWING EXPENDITURE: SL. NO. DESCRIPTION AMOUNT (RS.) 1 CONTRIBUTION TO RETIREMENT CUM DEATH RELIEF FUND 3,03,224/- 2 CONTRIBUTION TO STAFF RECREATION CLUB 1,71,437/- 3 CONTRIBUTION TO DEATH BENEFIT FUND 1,70,880/- TOTAL 6,45,541/- THE ASSESSING OFFICER HELD THAT THESE CONTRIBUTIONS WERE NOT ALLOWABLE AS THEY WERE SPECIFICALLY BARRED BY THE PROVISIONS OF SEC.40A(9) OF THE ACT. THE COMMISSIONER (APPEALS), RELYING ON THE EARLIER DECISION, DELETED THE ADDITI ON. COPY OF THE EARLIER DECISION WAS NOT PLACED BEFORE US. THE LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED ON THE DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 1998-99 IN ITA NO.154(MDS)/2003 DATED 28-3-2005. IN THAT CASE, THE ASSESSEE DID NOT PRODUCE THE SETTLEMENT DEED AND THE AGREEMENT ENTERED INTO WITH THE LABOUR UNION AND HAS ALSO NOT DEMONSTRATED THAT THE PAYMENT WAS IN ACCORDANCE WIT H THE INDUSTRIAL DISPUTES ACT AND WAS FOR THE DISCHARGE OF STATUTORY OBLIGATION. AS SUCH THE APPEAL WAS DISMISSED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE PRES ENT CASE ALL THE DOCUMENTS WERE PRODUCED AND AS SUCH THE EARLIER ORDER SHOULD NOT B E APPLIED TO ADJUDICATE THE ISSUE INVOLVED IN THE PRESENT CASE. HAVING HEARD BOTH TH E PARTIES ON THE POINT WE FIND THAT THERE IS NO SUFFICIENT DISCUSSION ON THE POINT. THE NATUR E OF THE PAYMENT NEEDS TO BE EXAMINED. IT IS NOT CLEAR AS TO WHETHER THE PAYMENT WAS MADE TO DISCHARGE THE STATUTORY OBLIGATION. THIS FACT CAN BE EXAMINED WITH REFERENCE TO THE REC ORDS. AS THERE WAS NO ENQUIRY ON THIS COUNT BY THE REVENUE AUTHORITIES, WE IN THE INTERES T OF JUSTICE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE DE NOVA IN ACCORDANCE WITH LAW AFTER PROVIDIN G ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. ITA NOS.561 & 668/MDS/2011 :- 11 -: 10.1. IT WAS A FURTHER SUBMISSION THAT THE HONBLE MADRAS HIGH COURT HAD HELD IN THE ASSESSEES OWN CASE IN TAX CASE APPEAL NO.2537 & 2546 OF 2006 DATED 03.09.2012 HAS CATEGORICALLY HELD THAT T HE AGREEMENTS BEING STATUTORY AGREEMENTS THERE CANNOT BE ANY REASON TO DISBELIEVE THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER THE INCOME TAX ACT. AFTER THE SAID FINDINGS THE HONBLE JURISDICTIONAL HIGH COURT REST ORED THE ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER VERIFYING THE C OPY OF THE AGREEMENTS AND SETTLEMENTS. IT WAS A SUBMISSION THAT THE ASSE SSEE HAD NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER EXAMINING THE SAID SETTLEMENT AGREEMENTS ENTERED IN TO BY THE ASSESSEE WITH ITS EMPLOYEES U/S.12(3) OF THE INDUSTRIAL DISP UTES ACT. 10.2 IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE O RDER OF THE LD.CIT(A). 10.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT IT HAS BEEN CATEGORICALLY HELD BY THE HONBLE HIGH COU RT OF MADRAS IN THE ASSESSEES OWN CASE FOR THE AY 1997-98 THAT THE SET TLEMENT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH ITS EMPLOYEES U/S .12(3) OF THE INDUSTRIAL DISPUTES ACT ARE STATUTORY AGREEMENTS, WE ARE OF TH E VIEW THAT ONLY FOR THE PURPOSE OF EXAMINING, AS TO WHETHER THE QUANTIF ICATION IS CORRECT, THE ISSUE IS RESTORED TO THE FILE OF THE AO. IN THE RE SULT, GROUND NOS.3 & 4 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. ITA NOS.561 & 668/MDS/2011 :- 12 -: 11. IN REGARD TO GROUND NO.5, IT WAS SUBMITTED BY T HE LD.AR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) IN DI SALLOWING THE DEPRECIATION ON GOODWILL. IT WAS A SUBMISSION THAT THE ASSESSEE HAD CLAIMED THE DEPRECIATION ON GOODWILL RELATED TO M/S .AREVA T&D SYSTEMS INDIA LTD. IT WAS A SUBMISSION THAT M/S.AREVA T&D SYSTEMS INDIA LTD., HAD PAID AN ADDITIONAL CONSIDERATION IN RESPECT OF THE BUSINESS TAKEN OVER OF M/S.ALSTOM PROJECTS INDIA LTD., ON THE ADDITIONA L CONSIDERATION PAID WHICH WAS TREATED AS GOODWILL BY THE ASSESSEE IN IT S BOOK. THE ASSESSEE HAD CLAIMED DEPRECIATION AND THE SAME HAD BEEN DISA LLOWED ON THE GROUND THAT THE DEPRECIATION WAS NOT A BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE SPECIFIED IN SEC.32(1)(II) OF THE AC T. IT WAS A SUBMISSION THAT THE ISSUE HAD BEEN HELD AGAINST THE ASSESSEE I N ITAT DELHI BENCHES. IT WAS A SUBMISSION THAT ON APPEAL THE HONBLE DELH I HIGH COURT IN THE ASSESSEES OWN CASE IN ITA NO.315/2010 DATED 30.03. 2012 HAD HELD THAT THE DEPRECIATION WAS AN INTANGIBLE ASSET ACQUIRED U NDER SLUMP SALE AGREEMENT AND WAS IN THE NATURE OF BUSINESS OR COMM ERCIAL RIGHT OF SIMILAR NATURE SPECIFIED IN SEC.32(1)(II) OF THE AC T AND WAS ACCORDINGLY ELIGIBLE FOR DEPRECIATION. IT WAS A SUBMISSION THA T IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE ASSESSEES O WN CASE FOR THE AY 2005-06, THE ASSESSEE WAS ENTITLED TO THE CLAIM OF THE DEPRECIATION. 11.1 IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE O RDER OF THE AO AND THE LD.CIT(A). ITA NOS.561 & 668/MDS/2011 :- 13 -: 11.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A P ERUSAL OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE ASSESSEES O WN CASE FOR THE AY 2005-06 IN ITA NO.315/2010 DATED 30.03.2012 SHOWS T HAT THE HONBLE DELHI HIGH COURT HAS HELD AS FOLLOWS: 12. IN THE PRESENT CASE, IT IS SEEN THAT THE ASSESS EE VIDE SLUMP SALE AGREEMENT DATED 30TH JUNE, 2004, ACQUIRED, AS A GOING CONCERN, THE TRANS MISSION AND DISTRIBUTION BUSINESS OF THE TRANSFEROR COMPANY W.E.F. 1ST APRIL, 2004. AS A RES ULT THEREOF, THE RUNNING BUSINESS OF TRANSMISSION AND DISTRIBUTION WAS ACQUIRED BY THE T RANSFEREE LOCK, STOCK AND BARREL MINUS THE TRADEMARK OF THE TRANSFEROR WHICH WAS RETAINED BY THE TRANSFEROR, FOR LUMP SUM CONSIDERATION OF RS.44.7 CRORES. IT IS FURTHER SEEN THAT THE BOOK VALUE OF THE NET TANGIBLE ASSETS (ASSETS MINUS LIABILITIES) ACQUIRED WAS RECOR DED IN THE BALANCE SHEET OF THE TRANSFEROR AS ON THE DATE OF TRANSFER AS RS.28.11 C RORES. THE SAID ASSETS AND LIABILITIES WERE RECORDED IN THE BOOKS OF TRANSFEREE AT THE SAME VAL UE AS APPEARED IN THE BOOKS OF THE TRANSFEROR. THE BALANCE PAYMENT OF RS.16,58,76,000/ - OVER AND ABOVE THE BOOK VALUE OF NET TANGIBLE ASSETS, WAS ALLOCATED BY THE TRANSFERE E TOWARDS ACQUISITION OF BUNDLE OF BUSINESS AND COMMERCIAL RIGHTS, CLEARLY DEFINED IN THE SLUMP SALE AGREEMENT, COMPENDIOUSLY TERMED AS GOODWILL IN THE BOOKS OF ACCOUNTS, WHICH COMPRISED, INTER ALIA, THE FOLLOWING:- (I) BUSINESS CLAIMS, (II) BUSINESS INFORMATION, (III) BUSINESS RECORDS, (IV) CONTRACTS, (V) SKILLED EMPLOYEES, (VI) KNOWHOW. IT IS ALSO OBSERVED THAT THE AO ACCEPTED THE ALLOCATION OF THE SLUMP CONSIDERATION OF RS.44. 7 CRORES PAID BY THE TRANSFEREE, BETWEEN TANGIBLE ASSETS AND INTANGIBLE ASSETS (DESCRIBED AS GOODWILL) ACQUIRED AS PART OF THE RUNNING BUSINESS. THE AO, HOWEVER, HELD THAT DEPREC IATION IN TERMS OF SECTION 32(1)(II) OF THE ACT WAS NOT, IN LAW, AVAILABLE ON GOODWILL. THE CIT(A) AND THE ITAT APPROVED THE REASONING OF THE AO THEREBY HOLDING DISALLOWANCE OF DEPRECIATION ON THE AMOUNT DESCRIBED AS GOODWILL. IT WAS THUS ARGUED ON BEHALF OF THE AS SESSEE COMPANY THAT SECTION 32(1)(II) WOULD MEAN RIGHTS SIMILAR IN NATURE AS THE SPECIFI ED ASSETS, VIZ., INTANGIBLE, VALUABLE AND CAPABLE OF BEING TRANSFERRED AND THAT SUCH ASSETS W ERE ELIGIBLE FOR DEPRECIATION. ON BEHALF OF THE RESPONDENT IT WAS ARGUED THAT APPLYING THE D OCTRINE OF NOSCITUR SOCIIS THE EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE USED IN EXPLANATION 3(B) TO SECTION 32(1) HAS TO TAKE COLOUR FROM THE PRECEDING WORDS KNOWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES. IT WAS URGED THA T THE SUPREME COURT HAD CLEARLY HELD IN TECHNO SHARES AND STOCKS LTD.(SUPRA) THAT OUR JUDGME NT SHOULD NOT BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A LICENCE OR A FRANCHISE IN TERMS OF SECTION 32(1)(II) OF 1961 ACT. 13. IN THE PRESENT CASE, APPLYING THE PRINCIPLE OF EJUSDEM GENERIS, WHICH PROVIDES THAT WHERE THERE ARE GENERAL WORDS FOLLOWING PARTICULAR AND SPECIFIC WORDS, THE MEANING OF THE LATTER WORDS SHALL BE CONFINED TO THINGS OF THE SAM E KIND, AS SPECIFIED FOR INTERPRETING THE EXPRESSION BUSINESS OR COMMERCIAL RIGHTS OF SIMILA R NATURE SPECIFIED IN SECTION 32(1)(II) OF THE ACT, IT IS SEEN THAT SUCH RIGHTS NEED NOT ANSWE R THE DESCRIPTION OF KNOWHOW, PATENTS, TRADEMARKS, LICENSES OR FRANCHISES BUT MUST BE OF SIMILAR NATURE AS THE SPECIFIED ASSETS. ON A PERUSAL OF THE MEANING OF THE CATEGORIES OF SPE CIFIC INTANGIBLE ASSETS REFERRED IN SECTION 32(1)(II) OF THE ACT PRECEDING THE TERM BUSI NESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, IT IS SEEN THAT THE AFORESAID INTANGIBLE A SSETS ARE NOT OF THE SAME KIND AND ARE CLEARLY DISTINCT FROM ONE ANOTHER. THE FACT THAT AF TER THE SPECIFIED INTANGIBLE ASSETS THE WORDS BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NAT URE HAVE BEEN ADDITIONALLY USED, CLEARLY DEMONSTRATES THAT THE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF SPECIFIED INTANGIBLE ASSETS BUT ALSO TO OTHER CA TEGORIES OF INTANGIBLE ASSETS, WHICH WERE NEITHER FEASIBLE NOR POSSIBLE TO EXHAUSTIVELY ENUME RATE. IN THE CIRCUMSTANCES, THE NATURE OF BUSINESS OR COMMERCIAL RIGHTS CANNOT BE RESTRI CTED TO ONLY THE AFORESAID SIX CATEGORIES OF ASSETS, VIZ., KNOWHOW, PATENTS, TRADEMARKS, COPY RIGHTS, LICENSES OR FRANCHISES. THE NATURE OF BUSINESS OR COMMERCIAL RIGHTS CAN BE OF THE SAME GENUS IN WHICH ALL THE AFORESAID SIX ASSETS FALL. ALL THE ABOVE FALL IN TH E GENUS OF INTANGIBLE ASSETS THAT FORM PART OF THE TOOL OF TRADE OF AN ASSESSEE FACILITATING SMOOT H CARRYING ON OF THE BUSINESS. IN THE CIRCUMSTANCES, IT IS OBSERVED THAT IN CASE OF THE A SSESSEE, INTANGIBLE ASSETS, VIZ., BUSINESS ITA NOS.561 & 668/MDS/2011 :- 14 -: CLAIMS; BUSINESS INFORMATION; BUSINESS RECORDS; CON TRACTS; EMPLOYEES; AND KNOWHOW, ARE ALL ASSETS, WHICH ARE INVALUABLE AND RESULT IN CARR YING ON THE TRANSMISSION AND DISTRIBUTION BUSINESS BY THE ASSESSEE, WHICH WAS HITHERTO BEING CARRIED OUT BY THE TRANSFEROR, WITHOUT ANY INTERRUPTION. THE AFORESAID INTANGIBLE ASSETS A RE, THEREFORE, COMPARABLE TO A LICENSE TO CARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTIO N BUSINESS OF THE TRANSFEROR. IN THE ABSENCE OF THE AFORESAID INTANGIBLE ASSETS, THE ASS ESSEE WOULD HAVE HAD TO COMMENCE BUSINESS FROM SCRATCH AND GO THROUGH THE GESTATION PERIOD WHEREAS BY ACQUIRING THE AFORESAID BUSINESS RIGHTS ALONG WITH THE TANGIBLE A SSETS, THE ASSESSEE GOT AN UP AND RUNNING BUSINESS. THIS VIEW IS FORTIFIED BY THE RAT IO OF THE DECISION OF THE SUPREME COURT IN TECHNO SHARES AND STOCKS LTD.(SUPRA) WHEREIN IT WAS HELD THAT INTANGIBLE ASSETS OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSE WHIC H ENABLES THE ASSESSEE TO ACCESS THE MARKET AND HAS AN ECONOMIC AND MONEY VALUE IS A LI CENSE OR AKIN TO A LICENSE WHICH IS ONE OF THE ITEMS FALLING IN SECTION 32(1)(II) OF THE ACT. 14. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE SPECIFIED INTANGIBLE ASSETS ACQUIRED UNDER SLUMP SALE AGREEMENT WERE IN THE NAT URE OF BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE SPECIFIED IN SECTION 32(1)(II) OF THE ACT AND WERE ACCORDINGLY ELIGIBLE FOR DEPRECIATION UNDER THAT SECTION. 15. IN VIEW OF THE ABOVE, IT IS NOT NECESSARY TO DE CIDE THE ALTERNATIVE SUBMISSION MADE ON BEHALF OF THE ASSESSEE THAT GOODWILL PER SE IS ELIG IBLE FOR DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT. IN THE CIRCUMSTANCES, THE SUBST ANTIAL QUESTION OF LAW IS DECIDED IN THE AFFIRMATIVE AND THIS APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND THE IMPUGNED ORDER IS SET ASIDE. 11.3 AS IT IS NOTICED THAT THE HONBLE DELHI HIGH C OURT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOR THE AY 2005-06, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT, THE F INDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS REVERSED. THE AO IS DIRECTED TO GRANT THE ASSESSEE THE BENEFIT OF DEPRECIATION ON THE GOODWILL AS CLAI MED. IN THE RESULT, GROUND NO.5 OF THE ASSESSEES APPEAL STANDS ALLOWED . 12. IN REGARD TO GROUND NOS.6 & 7, IT WAS SUBMITTED BY THE LD.AR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) I N CONFIRMING THE DISALLOWANCE OF VARIOUS PROVISIONS WHICH HAD BEEN CLAIMED AS AN EXPENDITURE IN RESPECT OF THE NON-TRANSMISSION AND DISTRIBUTION BUSINESS. IT WAS SUBMITTED BY THE LD.AR THAT THE ASSESSEE HAD A BUSINESS OF TRANSMISSION AND DISTRIBUTION OF POWER AS ALSO NON- T&D BUSINESS. THE NON-T&D BUSINESS WAS TRANSFERRED TO ITS SUBSIDIARY M/S.ALSTOM INDUSTRIAL ITA NOS.561 & 668/MDS/2011 :- 15 -: PRODUCTS LTD. IN LIEU OF THE TRANSFER OF NON-T&D B USINESS, THE ASSESSEE HAD RECEIVED RS.41.30 CRS. IN THE FORM OF 39 LAKHS EQUITY SHARES OF RS.10/- EACH AT A PREMIUM OF RS.96/- PER SHARE FULL Y PAID UP. IT WAS A SUBMISSION THAT THE ASSESSEE HAD CREATED CERTAIN PR OVISIONS IN ITS BOOKS WHEN IT WAS DOING THE BUSINESS AND THE SAME HAD ALS O BEEN WRITTEN BACK. THE PROVISIONS FOR BAD & DOUBTFUL DEBTS AMOUNTING T O RS.6,90,01,000/-, PROVISION FOR UNAMORTIZED PORTION OF THE VOLUNTARY RETIREMENT SCHEME TO AN EXTENT OF RS.44,22,000/-, PROVISION FOR WARRANTI ES TO AN EXTENT OF RS.4,02,21,000/-, PROVISION FOR CONTRACT LOSSES TO AN EXTENT OF RS.36,84,000/- AND PROVISION FOR VACATION PAY RS.66 ,28,000/-. IT WAS A SUBMISSION THAT AS THE NON-T&D BUSINESS HAD ALREADY BEEN HIVED OFF TO M/S.ALSTOM INDUSTRIAL PRODUCTS LTD., THE SAID PROVI SIONS WERE CLAIMED AS AN EXPENDITURE. IT WAS A SUBMISSION THAT THE AO HA D DISALLOWED THE SAME BY HOLDING THAT THE COMPANY HAD TRANSFERRED THESE P ROVISIONS TO THE NEW ENTITY AND CONSEQUENTLY, IT COULD NOT BE ALLOWABLE AS A DEDUCTION. IT WAS A SUBMISSION THAT THESE PROVISIONS ARE RELATED TO THE NON-T&D BUSINESS AND CONSEQUENTLY, THE SAME COULD NOT BE MAINTAINED IN I TS BOOKS AND WAS ELIGIBLE FOR WRITE OFF. 12.1 IN REPLY, THE LD.DR SUBMITTED THAT THE NON-T&D BUSINESS HAD BEEN TRANSFERRED AS AN ONGOING CONCERN AND CONSEQUENTLY, ALL THE ASSETS AND LIABILITIES OF THE SAID BUSINESS HAD BEEN TRANSFERR ED AND CONSEQUENTLY, THE SAID PROVISIONS COULD NOT BE ALLOWED IN THE HANDS O F THE ASSESSEE. ITA NOS.561 & 668/MDS/2011 :- 16 -: 12.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SCHEME OF ARRANGEMENT BETWEEN THE ASSESSEE AND M/S.ALSTOM IND USTRIAL PRODUCTS LTD., IN RESPECT OF THE TRANSFER OF THE ASSESSEES NON-T&D BUSINESS TO M/S.ALSTOM INDUSTRIAL PRODUCTS LTD., WERE SHOWN AT PAGE NO.11 ONWARDS OF THE PAPER BOOK. A PERUSAL OF PARA NO.4 OF THE S AID SCHEME BEING THE SALIENT FEATURES OF THE SCHEME SHOWS THAT THE ENTIR E BUSINESS INCLUDING THE ASSETS AND LIABILITIES AND EVEN THE EMPLOYEES, THE CONTRACTS AND WARRANTEES IN RESPECT OF NON-T&D BUSINESS HAD BEEN TRANSFERRED TO M/S.ALSTOM INDUSTRIAL PRODUCTS LTD., FOR A CONSIDER ATION OF RS.41.30 CRS. ONCE THE WHOLE OF THE NON-T&D BUSINESS HAS BEEN TRA NSFERRED THEN ADMITTEDLY THERE IS NOTHING LEFT OF THE SAID BUSINE SS REPRESENTING A LIABILITY WHICH IS LIABLE TO BE ALLOWED IN THE ASSESSEES HAN DS IN RESPECT OF THE SAID BUSINESS. THIS BEING SO, WE FIND THAT THE ORDER OF THE LD.CIT(A) AND THE AO ON THIS ISSUE TO BE ON A RIGHT FOOTING. FURTHER , IT IS NOTICED THAT THE LD.CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE TH AT THE SALE OF THE NON- T&D BUSINESS WAS ON A SLUMP SALE BY APPLYING THE PR OVISIONS OF SEC.50B AND THE LIABILITIES WHICH HAVE BEEN CLAIMED FOR DED UCTION NOW HAVE ALSO NOT CRYSTALLIZED DURING THE YEAR AS ALSO THE ISSUE THAT THE CLAIM OF THE ASSESSEE IS IN RESPECT OF THE PROVISIONS AND MERE P ROVISIONS CANNOT BE ALLOWED AS A DEDUCTION. THIS BEING SO, THE FINDING OF THE LD.CIT(A) & THE AO ON THIS ISSUE STANDS CONFIRMED. IN THE RESULT, GROUND NOS.6 & 7 OF THE ASSESSEES APPEAL STANDS DISMISSED. ITA NOS.561 & 668/MDS/2011 :- 17 -: 13. IN REGARD TO GROUND NO.8, IT WAS SUBMITTED BY T HE LD.AR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) IN TA XING UNDER CAPITAL GAINS, THE EXCESS CONSIDERATION RECEIVED ON THE TRANSFER O F THE NON-T&D BUSINESS. IT WAS A SUBMISSION THAT THE TRANSFER OF NON-T&D BUSINESS OF THE ASSESSEE TO M/S.ALSTOM INDUSTRIAL PRODUCTS LTD. , COULD NOT BE CONSIDERED AS A SLUMP SALE GIVING RISE TO CAPITAL G AINS U/S.50B IN SO FAR AS THERE WAS NO SALE CONSIDERATION IN MONETARY TERMS B UT THE WHOLE TRANSACTION WAS ONE OF EXCHANGE WHEREIN THE VALUE OF RS.41.30 CRS. HAD BEEN PAID BY M/S.ALSTOM INDUSTRIAL PRODUCTS LTD., B Y WAY OF ISSUANCE OF SHARES. THE LD.AR DREW OUR ATTENTION TO THE SCHEME OF ARRANGEMENT BETWEEN THE ASSESSEE AND M/S.ALSTOM INDUSTRIAL PROD UCTS LTD., IN CLAUSE- 4(L) AT PAGE NO.17 TO SHOW THAT THE CONSIDERATION O F THE TRANSFER OF THE NON-T&D BUSINESS WAS BY ISSUANCE AND ALLOTMENT TO T HE ASSESSEE 39 LAKHS EQUITY SHARES OF RS.10/- EACH IN M/S.ALSTOM INDUSTR IAL PRODUCTS LTD., AT PREMIUM OF RS.96/-. THE LD.AR PLACED RELIANCE ON T HE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S.BHARAT BIJLEE LTD., [2014] 365 ITR 258 (BOM) TO SUBMIT THAT THE TRANSFER OF DI VISION OF UNDERTAKING UNDER SCHEME OF ARRANGEMENT, TRANSFER TAKING PLACE IN EXCHANGE FOR ISSUE OF PREFERENCE SHARES AND BONDS NO MONETARY CONSIDER ATION FOR TRANSFER, THE TRANSFER WAS AN EXCHANGE WAS NOT A SALE NOR A S LUMP SALE U/S.50B OF THE ACT. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) AND THE AO ON THIS ISSUE WAS LIABLE TO BE REVERSED. ITA NOS.561 & 668/MDS/2011 :- 18 -: 13.1 IN REPLY, THE LD.DR SUBMITTED THAT ORIGINALLY THE ASSESSEE HAD FILED WRIT BEFORE THE HONBLE JURISDICTIONAL HIGH COURT O F MADRAS CLAIMING EXEMPTION U/S.54EC IN RESPECT OF THE CAPITAL GAINS. IT WAS A SUBMISSION THAT NOW THE CLAIM OF THE ASSESSEE HAS BEEN CHANGED TO SAY THAT SEC.50B ITSELF DOES NOT APPLY. IT WAS A FURTHER SUBMISSION THAT THE WRIT PETITION FILED BY THE ASSESSEE IN RESPECT OF THE INVESTMENT U/S.54EC BONDS HAD BEEN DISMISSED BY THE MADRAS HIGH COURT AS ALSO DIS MISSED IN SLP NO. BY THE HONBLE SUPREME COURT IN ITS ORDER DATED 04.05. 2009. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) AND THE AO WAS LIABLE TO BE UPHELD ON THIS ISSUE. 13.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A P ERUSAL OF THE ASSESSMENT ORDER IN RESPECT OF THE SAID ISSUE AT PA GE NO.12 PARA NO.10 SHOWS THAT THE TRANSFER OF NON-T&D BUSINESS TO ITS SUBSIDIARY COMPANY IS A TRANSFER U/S.50B HAD BEEN CLAIMED BY THE ASSESSEE ITSELF. THE ASSESSEE HAD ALSO NOT MADE THIS EITHER IN THE RETURN FILED N OR IN THE REVISED RETURN FILED. FURTHER, A PERUSAL OF THE SCHEME OF ARRANGE MENT SHOWS THAT THE VALUE OF THE NET ASSETS OF THE NON-T&D BUSINESS HAS BEEN DETERMINED AT RS.31.30 CRS. IN THE SAID SCHEME. HOWEVER, THE CO NSIDERATION OF THE TRANSFER HAS BEEN SPECIFIED IN THE SAID SCHEME AT R S.41.30 CRS. HOW THIS DIFFERENCE OF RS.10.00 CRS. HAS TAKEN PLACE, HAS NO T BEEN EXPLAINED BY THE ASSESSEE? NOR THE ASSESSEE HAS BEEN ABLE TO EXPLAI N AS TO WHY THE ADDITIONAL SUM OF RS.10.00 CRS. HAS BEEN PAID. IF AT ALL, IT CAN BE CONSIDERED AS AN EXCHANGE, THE QUESTION THAT ARISES IS WHEN THE TOTAL NET ITA NOS.561 & 668/MDS/2011 :- 19 -: ASSETS ONLY RS.31.30 CRS. WHY THE SHARES OF THE VAL UE OF RS.41.30 CRS. HAS BEEN ALLOTTED. THOUGH, THE ASSESSEE HAS MENTIO NED THAT THE VALUATION IS AS PER THE VALUATION DONE BY THE ACCOUNTANTS STI LL THE VALUATION ARRIVED AT BY THE ACCOUNTANTS IS TO AN EXTENT OF RS.41.70 C RS. AND EVEN THAT IS NOT THE CONSIDERATION OF THE TRANSFER BECAUSE AS PER TH E SCHEME, THE CONSIDERATION FOR THE TRANSFER IS SHOWN AT RS.41.30 CRS. EVEN OTHERWISE, A PERUSAL OF THE SCHEME CLEARLY SHOWS THAT THE TERM U SED IS CONSIDERATION FOR THE TRANSFER, THE WORDS ARE NOT EXCHANGE. T HIS BEING SO, WE FIND NO ERROR IN THE FINDINGS OF THE AO AND THE LD.CIT(A) O N THIS ISSUE AND THE SAME STANDS CONFIRMED. IN THE RESULT, THE GROUND N O.8 OF THE ASSESSEES APPEAL STANDS DISMISSED. 14. IN REGARD TO GROUND NO.9, IT WAS SUBMITTED THAT THE LD.CIT(A) ERRED IN NOT GRANTING THE DEDUCTION ON EXCISE DUTY PAID O N THE CLOSING STOCK. THE LD.AR PLACED BEFORE US THAT THE DECISION OF THE HONBLE SPECIAL BENCH OF THE ITAT DELHI B BENCH IN THE CASE OF INDIAN C OMMUNICATION NETWORK (P) LTD., WHEREIN IT HAS BEEN HELD AS FOLLOWS: SECTION 43B OF THE INCOMETAX ACT, 1961 BUSINESS DISALLOWANCE - CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT ASSESSMENT YEAR 198485 ASSESSEECOMPANY CLAIMED DEDUCTION UNDER SECTION 43B OF AMOUNTS PAID ON ACCO UNT OF CUSTOMS DUTY AND EXCISE DUTY, INCLUDED IN VALUE OF CLOSING STOCK BUT TAKEN OUT IN REVISED RETURN ASSESSING OFFICER REJECTED ASSESSEES CLAIM ON GROUND THAT AMOUNTS IN CLUDED IN CLOSING STOCK WOULD BE CARRIED OVER TO NEXT YEAR IN SHAPE OF OPENING STOCK WHETHER REMOVAL OF AFORESAID AMOUNTS FROM FIGURE OF CLOSING STOCK WOULD MEAN NOT TINKERING WITH CLOSING STOCK BUT ALLOWING TO ASSESSEE EFFECTIVE DEDUCTION UNDER SECT ION 43B AND, CONSEQUENTLY, DEDUCTION OF IMPUGNED AMOUNTS COULD BE ALLOWED TO ASSESSEE, FOLL OWED BY CORRESPONDING REDUCTION IN ASSESSEES OPENING STOCK IN SUBSEQUENT ASSESSMENT Y EAR. 14.1 IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE O RDER OF THE LD.CIT(A) AND THE AO. ITA NOS.561 & 668/MDS/2011 :- 20 -: 14.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HO NBLE SPECIAL BENCH OF THIS TRIBUNAL, RESPECTFULLY FOLLOWING THE SAID DECI SION, THE AO IS DIRECTED TO GRANT THE ASSESSEE, THE DEDUCTION OF THE EXCISE DUT Y TO THE EXTENT THAT THE SAME HAS BEEN ACTUALLY PAID DURING THE RELEVANT AY U/S.43B OF THE ACT. 14.3 THE ASSESSEE HAS RAISED THE ADDITIONAL GROUNDS WHEREIN THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION IN RES PECT OF THE ADDITIONS MADE TO THE PLANT & MACHINERY IN THE SECOND HALF OF THE AY 2005-06. A PERUSAL OF THE ASSESSMENT ORDER AS ALSO THE ORDER O F THE LD.CIT(A) DOES NOT SHOW HOW THIS ISSUE HAS ARISEN OR ADJUDICATED. CONSEQUENTLY, IN THE ABSENCE OF THE FACTS REQUIRED FOR THE ADJUDICATION OF THE SAID ISSUE, THE SAID ADDITIONAL GROUNDS STANDS NOT ADMITTED AND CON SEQUENTLY DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27, 2017, AT CHENNAI. SD/- SD/- ( . ) ( ABRAHAM P GEORGE ) /ACCOUNTANT MEMBER ( ' ) (GEORGE MATHAN) % /JUDICIAL MEMBER ITA NOS.561 & 668/MDS/2011 :- 21 -: /CHENNAI, 1 /DATED: NOVEMBER 27, 2017. TLN , )%23 43 /COPY TO: 1. ( /APPELLANT 4. 5 /CIT 2. )*( /RESPONDENT 5. 3 )%% /DR 3. 5 ( ) /CIT(A) 6. ' /GF
