ACIT 1(3)(1), MUMBAI V. SUMITOMO CHEMICAL (I) P.LTD, MUMBAI

ITA 578/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6718 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 25-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAS S SAVLA
• Assessee Lawyers: AARAJ GARODIA
• Keywords: Capital asset; Depreciation; Additional depreciation; Revenue expenditure
• Section: 143(3)

Judgement Text

AAYAKR APILAIYA AIQAKRNA J NYAAYAPIZ MAMUBA[ - MAO. IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , BEFORE SRI RAJENDRA , A M AND SRI PAW AN SINGH , J M AAYAKR APILA SAM . / ITA NO. 578 /MUM/ 20 17 ( INAQA - ARNA BAYA - / ASSESSMENT YEAR 2010 - 11 ) ACIT - 1(3)(1), MUMBAI VS. M/S. SUMITOMO CHEMICAL (I) PVT. LTD., 197/5, 7 TH FLOOR, MOTI MAHAL, J.T. ROAD, CHURCHGATE, MUMBAI - 400 020. ( APILAAQAI - / APPELLANT) .. ( P`%YAQAAI - / RESPONDENT ) . / PAN NO. AAECS 3750 L / APPELLANT BY : SHRI PARAS S. SAVLA AR / RESPONDENT BY : SHRI AARAJ GARODIA, DR / DATE OF HEARING: 25 - 06 - 2018 / DATE OF PRONOUNCEMENT : 25 - 06 - 2018 AADOSA / O R D E R PER PAVAN SINGH, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 58, MUMBAI, [IN SHORT CIT(A)] IN APPEAL NO. CIT(A) - 58/348(TR)2 - 14 - 15 DATED 21.10.2016 . THE ASSESSMEN T WAS FRAMED BY THE ASST. COMMISSIONER OF INCOME TAX, 1(3)(1), MUMBAI (IN SHORT A CIT) FOR THE ASSESSMENT YEAR 20 10 - 11 VIDE 2 ITA NO. 578 /MU M/20 17 ORDER DATED 16.4.2014 UNDER SECTION 143(3) READ WITH SECTION. 144C(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER THE ACT). 2. AT THE OUTSET O F HEARING, THE LD. A.R. OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY REVENUE IN THE PRESENT APPEAL ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07 IN ITQA NO.3078/MUM/2012 DATED 28.3.2014, WHICH WAS SUBSEQUENTLY FOLLOWED IN ASSESSMENT YEAR 2007 - 08 AND IN ASSESSMENT YEAR 2009 - 10 . THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITS THAT THE LD. CIT(A) WHILE PASSING IMPUGNED ORDER FOLLOWED THE DECISION OF TRIBUNAL FOR ASSESSMENT YEAR 2006 - 07. THE LD. A.R. OF THE ASSESSEE ALSO FILED COPY OF ORDER OF TRIBUNAL IN ITA NO.3078/MUM/2012 DATED 28.3.104 FOR ASSESSMENT YEAR 2006 - 07, IN ITA NO.3077/MUM/2012 DATED 25.3.2018, IN ITA NO.7461/MUM/2013 FOR ASSESSMENT YEAR 2008 - 09 DATED 25.3.2018 AND IN ITA NO.3915/MUM/20 15 FOR ASSESSMENT YEAR 2009 - 10 DATED 15.3.2017. 3. THE LD. D.R. FOR THE REVENUE AFTER GOING THROUGH THE GROUNDS OF APPEAL A COPY OF THE ORDERS FURNISHED BY LD. A.R. OF THE ASSESSEE, FAIRLY CONSIDERED THAT THE GROUNDS OF APPEAL RAISED BY REVENUE ARE REALLY COVERED IN FAVOUR OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. GROUND NO.1 RELATES TO DELETING THE DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION OF 42,84,671/ - . WE HAVE NOTED T HAT SIMILAR GROUND OF APPEAL WAS RAISED BY ASSESSEE IN ASSESSMENT YEAR 2006 - 07 AND THE TRIBUNAL WHILE DECIDING THE APPEAL OF ASSESSEE IN ITA NO.3078/MUM/2012 DATED 28.3.4014 PASSED THE FOLLOWING ORDER: 31. WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE DETAILS AS APPENDED IN THE APB. THE ACQUISITION OF THE MACHINERY FROM BILAG IS NOT DISPUTED, IT IS ALSO NOT DISPUTED THAT THE MACHINERY IS A 3 ITA NO. 578 /MU M/20 17 CAPITAL ASSET AND WHATEVER EXPENSE IS INCURRED ON SUCH OUTLAY, IT SHALL BEAR THE CHARACTER OF CAPITAL AND ADDED TO THE COST. SINCE THIS IS A FACT, THEN APPLYING THE RATIO LAID DOWN BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIBA OF INDIA LTD. VS CIT, REPORTED IN 70 TAXMAN 505 (BOM), WHEREIN IT HAS BEEN HELD '... THIS BEING SO, ... THIS AMOUNT WOULD FORM PART OF THE CO ST OF THE ASSESSMENT FOR THE PURPOSE OF DEPRECIATION...' 32. IN SUCH A CASE, THE ADDITIONAL DEPRECIATION, CLAIMED BY THE ASSESSEE ON BILAG MACHINERY IS TO BE ALLOWED. WE ALSO ACCEPT THAT THE ACTION OF THE ASSESSEE DID NOT SUFFER FROM ANY INFIRMITY. 33. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE DEPRECIATION ON THE MACHINERY THAT HAD BEEN ACQUIRED FROM BILAG, AND ALSO INCLUDE INCIDENTAL EXPENSES INCURRED ON ACQUISITION OF ASSETS, AS LAID DOWN BY THE HON'BLE BOMBAY HIGH CO URT IN CIBA (SUPRA}. THIS WOULD ALSO INCLUDE LEGAL AND PROFESSIONAL EXPENSES OF RS. 53,88,637/ - AS INCIDENTAL EXPENSES, RAISED AS AN ADDITIONAL GOA. 5. WE HAVE FURTHER NOTED THAT THE ORDER OF ASSESSMENT YEAR 2006 - 07 WAS FURTHER FOLLOWED BY TRIBUNAL IN AS SESSMENT YEAR 2007 - 08 IN ITA NO. 3077 /MUM/201 2 DATED 25.3.2018 , IN ASSESSMENT YEAR 2008 - 09 VIDE ITA NO. 7461 /MUM/201 3 DATED 25.3.2018 AND IN ASSESSMENT YEAR 2009 - 10 VIDE ITA NO.3915/MUM/2015 DATED 15.3.2017. 6. CONSIDERING THE DECISION OF TRIBUNAL FOR A.Y. 2 006 - 07, WHICH WAS CONSISTENTLY FOLLOWED BY COORDINATE BENCH IN SUBSEQUENT ASSESSMENT YEARS I.E. 2007 - 08 TO 2009 - 10, WE DO NOT FIND ANY MERIT IN THE GROUND OF APPE AL RAISED BY REVENUE, THEREFORE, THE SAME IS DISMISSED. 7. GROUND NOS.2 & 3 RELATES TO ALLOWIN G THE DEPRECIATION ON GOODWILL. WE HAVE NOTED THAT SIMILAR GROUND OF APPEAL WAS RAISED BY ASSESSEE IN APPEAL FOR ASSESSMENT YEAR 2006 - 07 IN ITA NO.3078 AND THE TRIBUNAL PASSED THE FOLLOWING ORDER: 45. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE ASS ESSEE AND WE FIND THAT THE ISSUE OF GOODWILL STANDS COVERED BY THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD REPORTED IN 348 ITR 302, 4 ITA NO. 578 /MU M/20 17 WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT INTANGIBLES LIKE GOODWILL ARE ELIGIBLE FOR DEPRECIATION. 46. HOWEVER IN SO FAR AS NON COMPETE FEE IS CONCERNED, THE NATURE OF THIS PAYMENT IS NOW COVERED UNDER SECTION 28(VA) OF THE INCOME TAX ACT, 1961 HENCE, IT WOULD BE REVENUE IN NATURE. 47. WE, THEREFORE, DIRECT THE AO TO ALLOW THE DEPRECIATION ON GOODWILL AS PER LAW AND CONSIDER THE PAYMENT OF NON COMPETE FEE, IN TERMS OF SECTION 28(VA), TO CONSIDER TO ALLOW 3,05,40,600/ - AS REVENUE EXPENDITURE. 8. WE HAVE FURTHER NOTED THAT THE ORDER OF ASSE SS MENT YEAR 2006 - 07 WAS FURTHER IN APPEAL FOR ASSESSMENT YEARS 2 007 - 08 TO 2009 - 10. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSMENT YEAR IN 2006 - 07 IN ITA NO.3078/M/2012 DATED 28.3.2014, WHICH WAS SUBSEQUENTLY FOLLOWED IN THE ASSESSMENT YEARS 2007 - 08 TO 2009 - 10, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE R EVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 - 0 6 - 2018 . SD/ - SD/ - ( / RAJENDRA ) ( / PAVAN SINGH ) ( / ACCOUNTANT MEMBER) ( / JUDICIAL MEMBER) , / MUMBAI, DATED: 25 - 06 - 2018 VENU GOPAL/SR.PS 5 ITA NO. 578 /MU M/20 17 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI