DCIT, Circle- 16(2), New Delhi V. Metal One Corporation India Pvt. Ltd., New Delhi

ITA 6101/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7783 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 28-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BARANWAL
• Keywords: Depreciation; Valuation report; Revised return
• Section: 201

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI I-2 B ENCH, NEW DELHI [THROUGH VIDEO CONFERENCE] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEM BER ITA NO. 6101/DEL/2017 [ASSESSMENT YEAR: 2012-13] THE DY.C.I.T VS. METAL ONE CORPORATION INDIA PV T LTD CIRCLE - 16(2) 5 TH FLOOR, BIRLA TOWER, NEW DELHI. 25, BARAKHAMBA ROAD, NEW DELHI PAN : AAFCM 1225 R [APPELLANT] [RESPONDENT] DATE OF HEARING : 27.08.2020 DATE OF PRONOUNCEMENT : 28.08.2020 ASSESSEE BY : SHRI NAGESHWAR RAO, ADV REVENUE BY : SHRI BARANWAL, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 28, NEW DELHI DATED 28.07.2017 PERTAIN ING TO A.Y 2012-13. 2 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE IS TWO- FOLD FIRSTLY, THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LD. CIT (A) IN ALLOWING DEPRECIATION ON GOOD WILL VALUE OF RS. 6.09 CRORES. SECONDLY, THE REVENUE IS AGGRIEVED BY THE DELETION OF DISALLOWANC E OF MARKED TO MARKET FOREIGN EXCHANGE LOSS OF RS.4,10,404/-. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASS ESSEE STATED THAT BOTH THE ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL I N ASSESSEES OWN CASE IN A.Y 2010-11 IN ITA NO. 1761/DEL/2015. COPY OF THE ORDER WAS SUPPLIED. 4. PER CONTRA THE LD. DR COULD NOT BRING ANY DISTI NGUISHING DECISION IN FAVOUR OF THE REVENUE. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW QUA THE QUARREL. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. BOTH THE ISSUES IN THE QUARREL ARE SE TTLED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1761/DEL/2015 FOR A.Y 2010-11. 3 6. THE TRIBUNAL, IN A.Y 2010-11 HAS CONSIDERED THE CLAIM OF DEPRECIATION ON GOODWILL AND ADJUDICATED AS UNDER: NOW, COMING TO THE CORPORATE ISSUES RAISED BY THE ASSESSEE. THE FIRST ISSUE RAISED VIDE GROUND OF APPEAL NOS. 1 0 & 11 IS AGAINST THE DISALLOWANCE OF DEPRECIATION ON GOODWIL L CLAIMED BY THE ASSESSEE PURSUANT TO THE BUSINESS TRANSFER AGREEMENT. THE ASSESSEE HAD MADE NO CLAIM OF DEPREC IATION OF GOODWILL IN ITS RETURN OF INCOME AND THE CLAIM W AS MADE FOR THE FIRST TIME DURING THE COURSE OF ASSESSMENT PROC EEDINGS. THE ASSESSING OFFICER PLACING ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 8 RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN GOETZE (INDIA) LTD. [2006] 284 ITR 323 (SC) REJECTED THE CLAIM OF THE ASSESSEE. THE SA ID CLAIM WAS ALSO REJECTED ON MERITS BY THE ASSESSING OFFICE R. THE ASSESSING OFFICER PROPOSED THE ADDITION IN THE HAND S OF THE ASSESSEE AGAINST WHICH OBJECTIONS WERE FILED BEFORE THE DRP, WHO DID NOT ADJUDICATE THE ISSUE. THE ASSESSING OFF ICER PASSED FINAL ASSESSMENT ORDER, NOT GRANTING DEPRECI ATION ON GOODWILL, AGAINST WHICH THE ASSESSEE IS IN APPEAL B EFORE US. 14. THE LD. AR FOR THE ASSESSEE AFTER POINTING OUT TO T HE FACTUAL ASPECTS REFERRED TO THE ORDER OF THE CIT(A) FOR ASS ESSMENT YEAR 2011-12 AND POINTED OUT THAT AFTER OBTAINING R EMAND REPORT FROM THE ASSESSING OFFICER, THE SAID CLAIM W AS ALLOWED IN THE HANDS OF THE ASSESSEE. THE LD.AR FOR THE ASS ESSEE FURTHER POINTED OUT THAT PURSUANT TO THE AGREEMENT OF SLUM 4 SALE, VIDE AGREEMENT DATED 20.06.2008, SUM OF RS.34 CRORES WAS PAID TO MITSUBISHI AND THE DIFFERENCE BETWEEN S ALE VALUE AND BOOK VALUE OF THE ASSETS WAS BOOKED AND DEPRECI ATION WAS CLAIMED, THOUGH DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. THE LD. AR FOR THE ASSESSEE POINTS OUT THAT THE HON BLE SUPREME COURT IN SMIFS SECURITIES LTD.: (2012) 348 ITR 302 HAS HELD THAT GOODWILL WAS INTANGIBLE ASSET AND DEP RECIATION IS TO BE ALLOWED ON IT. OUR ATTENTION WAS DRAWN TO THE ORDER OF THE CIT(A) IN ASSESSMENT YEAR 2011-12 AND THE REMAN D REPORT OF THE ASSESSING OFFICER WHICH ARE PLACED AT PAGES 25 TO 29 OF THE PAPERBOOK. THE ASSESSEE FURTHER POINTE D OUT THAT THE HONBLE DELHI HIGH COURT IN TRIUNE ENERGY SERVICES (P.) LTD. VS DCIT [2016] 237 TAXMAN 230 (DELHI) OBS ERVED THAT IN VIEW OF ACCOUNTING STANDARD 10, ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 9 CONSIDERAT ION PAID IN EXCESS OF VALUE OF TANGIBLE ASSETS WAS RIGHTLY C LASSIFIED AS GOODWILL AND THEREFORE, FURTHER EXERCISE TO VALUE G OODWILL WAS NOT WARRANTED. 15. THE LD.DR FOR THE REVENUE TOOK U S THROUGH VARIOUS CONVENANTS OF THE BUSINESS TRANSFER AGREEME NT AND POINTED OUT THAT NO DEPRECIATION WAS CLAIMED IN ANY OF THE ASSESSMENT YEARS I.E ASSESSMENT YEAR 2009-10 TO 201 1- 12. HE FURTHER POINTED THAT PAYMENT OF GOODWILL IS NOT DEFINED ANYWHERE IN THE AGREEMENT. FURTHER, NO VALUATION RE PORT OF ANY COMPETENT PERSON WAS AVAILABLE; SO, NO DEPRECIA TION IS TO BE ALLOWED ON GOODWILL. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE IS 5 WHETHER THE CLAIM WHICH HAS NOT BEEN MADE IN THE RE TURN OF INCOME, CAN THE SAME BE ALLOWED IN THE HANDS OF THE ASSESSEE, IF SUBSEQUENTLY RAISED DURING THE ASSESSMENT PROCEE DINGS. THE HONBLE DELHI HIGH COURT IN CIT VS JAI PARABOLI C SPRINGS LTD. 306 ITR 42 (DEL.) AND HONBLE BOMBAY HIGH COUR T IN CIT VS PRUTHVI BROKERS & SHAREHOLDERS PVT.LTD. 349 ITR 336 (BOM.) HAS HELD THAT EVEN IF A CLAIM MADE BY ASSES SEE- COMPANY DOES NOT FORM PART OF ORIGINAL RETURN OR EV EN REVISED RETURN, THE SAME IS TO BE ALLOWED IN ACCORDANCE WI TH LAW. IN SUCH FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW TH AT THE CLAIM OF DEPRECIATION ON GOODWILL NEEDS TO BE CONSI DERED IN THE HANDS OF THE ASSESSEE. THE BUSINESS TRANSFER AG REEMENT IS DATED 20.06.2008 AND NO DEPRECIATION ON GOODWILL WAS CLAIMED IN THE RETURN OF INCOME. THE CASE OF THE AS SESSEE IS THAT THE SAID DEPRECIATION ON GOODWILL IS ALLOWABLE IN THE HANDS OF THE ASSESSEE. ON THE OTHER HAND, THE CASE OF THE REVENUE IS THAT THE ITA NO. 1761/DEL/2015 ASSESSMENT YEAR: 2010-11 10 PAYMENT OF GOODWILL ITSELF IS NOT DEFINED IN THE AGREEMENT AND THERE IS NO VALUATION REPORT FROM ANY COMPETENT AUTHORITIES SO THE SAID CLAIM OF DEPRECIATION ON GO ODWILL IS NOT ALLOWABLE. WE ARE OF THE VIEW THAT THE CLAIM CAN BE CONSIDERED IN THE HANDS OF THE ASSESSEE SUBJECT TO VERIFICATION OF THE FACTUAL ASPECTS IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THA T THE CLAIM WAS NOT ALLOWABLE BECAUSE OF THE DECISION OF HONBLE SUPREME COURT IN GOETZ INDIA LTD. (SUPRA); THOUGH H E HAS 6 MADE SOME REFERENCE TO THE FACTUAL ASPECTS OF THE C ASE. THE DRP HAS NOT ADJUDICATED THIS ISSUE; THOUGH THE CIT( A) HAS ALLOWED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEA R 2011-12. THE PRESENT ASSESSMENT YEAR BEING THE YEAR IN WHICH AGREEMENT WAS ENTERED INTO I.E. DATED 20.06.2008, I T IS CONSIDERED FIT TO REMIT THIS ISSUE OF DETERMINING R ESULTANT AMOUNT OF GOODWILL ON WHICH DEPRECIATION IS ALLOWAB LE IN THE HANDS OF THE ASSESSEE, CONSEQUENT TO THE TERMS AND CONDITIONS OF THE BUSINESS TRANSFER AGREEMENT, BACK TO THE FILE OF ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING. THE ASSESSEE IS ALSO DIRECT ED TO PRODUCE ALL THE FACTS BEFORE THE ASSESSING OFFICER, WHO SHALL DECIDE THE SAME IN ACCORDANCE WITH LAW. 7. ON FINDING PARITY IN THE FACTS, RESPECTFULLY FOLLOW ING THE DECISION OF THE CO-ORDINATE BENCH GROUND NO. 1 WITH ITS SUB GRO UNDS IS DISMISSED. 8. IN SO FAR AS THE ISSUE RELATING TO DELETION OF D ISALLOWANCE OF MARKED TO MARKET FOREIGN EXCHANGE LOSS IS CONCERNED , THE CO-ORDINATE BENCH HAS CONSIDERED THE SAME IN A.Y 2010-11 AND HA S HELD AS UNDER : 7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE ISSUE IS RAISED AGAINST THE DISALLOWANCE OF MAR K TO MARKET FOREIGN EXCHANGE LOSS OF RS. 28,14,307/-. THE ASSESSEE HAS BOOKED THE SAID LOSS ON ACCOUNT OF REINSTATEMENT OF FORWARD CONTRACT. THE A SSESSING OFFICER HAD TREATED IT TO BE NOTIONAL AND ALSO SPEC ULATIVE IN NATURE. THE ISSUE STANDS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS INDUSTRIAL FINANCE CORPO RATION OF INDIA LTD. (SUPRA); FURTHER REVENUES SLP(C).CC NO. 10349 OF 2020 AGAINST THIS DECISION WAS DISMISSED BY HONBLE SUPREME COURT VIDE ORDER DATED 09.07.2020. THE HONBLE BOMB AY HIGH COURT IN PR.CIT VS INTERNATIONAL GOLD COMPANY LTD. TAX APPEAL 1827 OF 2016 ALLOWED MARK TO MARKET LOSS ON REVALUA TION OF FORWARD EXCHANGE CONTRACTS AND ALSO HELD THAT CBDT INSTRUCTION NO.3 OF 2010 DATED 23.03.2010 CANNOT BE APPLIED. FOLLOWING THE SAME PARITY OF REASONING, WE REVERSE THE ORDERS OF ASSESSING OFFICER IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE ON ACCOUNT OF MARK TO MARKET FOREIGN EXCHANGE LOSS. GROUND OF APPEAL N O.12 RAISED BY THE ASSESSEE IS THUS ALLOWED. 8 9. IN LIGHT OF THE AFORESAID FINDINGS OF THE CO-OR DINATE BENCH WE DIRECT THE ASSESSING OFFICER TO ALLOW CLAIM OF LOSS . GROUND NO. 3 WITH ITS RELATED GROUNDS IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 6101/DEL/2017IS DISMISSED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.08 .2020. SD/- SD/- [ KULDIP SINGH ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH AUGUST, 2020 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 9 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER