ACIT , CIRCLE 7(2)(1), MUMBAI V. MAHINDRA LOGISTICS LTD., MUMBAI

ITA 6645/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6460 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Depreciation; Valuation report; TDS
• Section: 115JB; 133(6); 69; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM & SHRI G MANJUNATHA, AM ITA NOS.6645/MUM/2018 FOR ASSESSMENT YEAR : 2009-1 0 ITA NOS.6646/MUM/2018 FOR ASSESSMENT YEAR : 2010-11 ITA NOS.6647/MUM/2018 FOR ASSESSMENT YEAR : 2011-12 ACIT CIRCLE 7(2)(1), MUMBAI. VS. MAHINDRA LOGISTICS LTD., GROUND FLOOR, MAHINDRA TOWERS, P K KURNE CHOWK, WORLI, MUMBAI 400 018. PAN AAFCM 2530H (APPELLANT) RESPONDENT) ITA NOS.6453/MUM/2018 FOR ASSESSMENT YEAR : 2011-12 MAHINDRA LOGISTICS LTD., MUMBAI 400 018. PAN AAFCM 2530H VS. ACIT CIRCLE 7(2)(1), MUMBAI. (APPELLANT) RESPONDENT) FOR THE REVENUE : SHRI KAMAL MANGAL FOR THE ASSESSEE : SHRI DEVENDRA JAIN DATE OF HEARING : 1 6 .01.20 20 DATE OF PRONOUNCEMENT : 0 5 .0 2 .20 20 O R D E R PER BENCH: THIS IS A GROUP OF FOUR APPEALS, THREE BY THE REVE NUE AND ONE BY THE ASSESSEE. FOR ASSESSMENT YEARS 2009-10 AND 2010-11 THE APPEALS ARE BY REVENUE ONLY AND FOR ASSESSMENT YEAR 20011-12 THERE ARE CROSS- APPEALS. ALL THESE APPEALS ARISES OUT OF THREE SEPARATE ORDERS, ALL DATED 21.08.2018, OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)13, MU MBAI. MAHINDRA LOGISTICS LTD. 2 2. ITA NO. 6645/MUM/2018 (REVENUES APPEAL FOR A.Y. 2009-10) : THE DISPUTE IN THIS APPEAL IS CONFINED TO ALLOWANC E OF ASSESSEES CLAIM OF DEPRECIATION ON INTANGIBLES. 3. BRIEFLY FACTS ARE, THE ASSESSEE, A RESIDENT COMP ANY IS A SUBSIDIARY OF MAHINDRA & MAHINDRA LTD. (M&M) AND IS ENGAGED IN LO GISTICS BUSINESS AND RELATED ACTIVITIES. FOR THE ASSESSMENT YEAR UNDE R DISPUTE, ASSESSEE HAD FILED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF RS 9,25,76,090/- UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS 6,89,96,607/- U/S. 115JB OF THE ACT. M/S. M & M I S INTO DIVERSIFIED ACTIVITIES AND IT HAD SET UP ITS LOGISTICS DIVISION IN THE YEA R 1999-2000 TO CATER TO ITS COMPLEX TRANSPORTATION NEEDS. WHEREAS, THE ASSESSEE COMPANY WAS INCORPORATED IN THE YEAR 2007 AND ACQUIRED THE LOGI STICS DIVISION OF M/S. M&M WITH ALL THE ASSETS AND LIABILITIES AS ON 01.04.200 8 FOR A CONSIDERATION OF RS 32 CRORES. M/S. M & M TRANSFERRED ITS LOGISTICS DIVIS ION (BUSINESS) TO THE ASSESSEE ON SLUMP SALE BASIS. THE SALE CONSIDERATI ON OF RS 32 CRORES COMPRISED OF FOLLOWING AMOUNTS: ASSETS & LIABILITIES ACQUIRED AMOUNT (IN CRORES) NET FIXED ASSETS (INCLUDING SOFTWARE) 11.86 NET CURRENT ASSETS 36.01 LOANS -26.14 CONGERIES OF RIGHTS (CUSTOMER DATABASE AND RELATIONSHIPS)- INTANGIBLE ASSETS 9.12 GOODWILL- INTANGIBLE ASSETS 1.15 TOTAL 32.00 AFTER ACQUISITION OF LOGISTICS DIVISION, ASSESSEE M ERGED THE CURRENT ASSETS AND LIABILITIES OF LOGISTICS DIVISION WITH ITS ACCOUNTS AND MADE ADDITION TO THE BLOCK OF INTANGIBLE ASSET AN AMOUNT OF RS 9,21,92,000/- B EING THE CONGERIES OF RIGHTS. ON THE AFORESAID AMOUNT OF RS 9,21,92,000/ - ASSESSEE CLAIMED MAHINDRA LOGISTICS LTD. 3 DEPRECIATION @25% BY TREATING IT AS INTANGIBLE ASSE T. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLE D UPON THE ASSESSEE TO JUSTIFY ITS CLAIM OF DEPRECIATION ON INTANGIBLE ASS ET. IN RESPONSE, THE ASSESSEE FURNISHED THE AGREEMENT AND ALL OTHER SUPPORTING EV IDENCE INCLUDING A VALUATION REPORT TO DEMONSTRATE THAT THE TRANSACTIO N RELATING TO ACQUISITION OF LOGISTICS DIVISION IS A GENUINE TRANSACTION HENCE, DEPRECIATION IS ALLOWABLE. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND THE SU BMISSIONS OF THE ASSESSEE ACCEPTABLE. HE OBSERVED, THE VALUATION REPORT FURN ISHED BY THE ASSESSEE HAS NOT AT ALL BEEN REFERRED TO IN THE SALE AGREEMENT A ND THE PLANT, MACHINERY AND TANGIBLE ASSET APPEARING IN THE SALE AGREEMENT ARE CONSPICUOUSLY ABSENT FROM THE VALUATION REPORT. THE ASSESSING OFFICER O BSERVED, IN REALITY, THE ASSESSEE HAD NOT ACQUIRED ANY VISIBLE ASSET BUT HAS MADE AN ARRANGEMENT TO CLAIM HIGH DEPRECIATION BY CREATING FICTITIOUS ASSE TS. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE ENTIRE VALUE O F THE INTANGIBLES SHOULD NOT BE IGNORED FOR COMPUTING DEPRECIATION BY TAKING RECOURSE TO EXPLANATION 3 TO SECTION 43(1) OF THE ACT. THOUGH THE ASSESSEE OBJECTED TO THE PROPOSED ACTION OF THE ASSESSING OFFICER, HOWEVER, REJECTING THE OBJECTIONS OF THE ASSESSEE THE ASSESSING OFFICER ULTIMATELY CONCLUDED THAT THE ENTIRE TRANSACTION HAS BEEN DESIGNED BY THE ASSESSEE FOR C LAIMING HIGH DEPRECIATION ON FICTITIOUS ASSETS. WITHOUT PREJUDICE, HE OBSERV ED, EVEN IF THE TRANSACTION IS CONSIDERED TO BE GENUINE, THERE IS NO RATIONALE BEH IND CAPITALIZATION OF EXCESS CONSIDERATION PAID BY THE ASSESSEE FOR THE INTANGIB LES OVER AND ABOVE THE VALUE OF GOODWILL. HE OBSERVED, WHEN THE ASSESSEE HAD NOT DONE THE TRANSACTION ON SLUMP SALE AND HAS SIMPLY PURCHASED ASSETS AT AN AMOUNT HIGHER THAN THE VALUE OF THE ASSET, THERE IS NO REQ UIREMENT OF CAPITALIZATION OF THE EXCESS CONSIDERATION PAID OVER THE NET WORTH. THUS, INVOKING EXPLANATION 3 TO SECTION 43(1) OF THE ACT, THE ASSESSING OFFICE R HELD THAT ADDITION TO THE BLOCK OF INTANGIBLE AS MADE BY THE ASSESSEE IN THE SCHEDULE OF FIXED ASSETS FOR THE YEAR UNDER CONSIDERATION HAS TO BE DETERMIN ED AT NIL FOR THE PURPOSE MAHINDRA LOGISTICS LTD. 4 OF DEPRECIATION. ACCORDINGLY, HE DISALLOWED ASSESS EES CLAIM OF DEPRECIATION AMOUNTING TO RS 2,28,80,000/- ON THE AMOUNT OF RS 9 .12 CRORES. THE ASSESSEE CONTESTED THE AFORESAID DISALLOWANCE BEFOR E LEARNED COMMISSIONER (APPEALS). 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, LEARNED COMMISSIONER (APPEALS) FOUND CERTAIN FACTUAL INACCURACIES IN THE OBSERVATIONS OF THE ASS ESSING OFFICER. FIRSTLY, HE FOUND THAT M/S. M & M HAS TREATED THE SALE OF ITS L OGISTICS DIVISION TO THE ASSESSEE AS SLUMP SALE AND HAS OFFERED PROFIT OF RS 10,26,74,997/- AS INCOME FROM LONG TERM CAPITAL GAIN IN THE RETURN ON INCOME FILED FOR A.Y. 2009-10. THUS, HE FOUND THE OBSERVATION OF THE ASSESSING OFF ICER THAT THE TRANSACTION HAS NOT BEEN TREATED AS SLUMP SALE UNACCEPTABLE. F URTHER, HE OBSERVED, BY PURCHASING THE LOGISTIC DIVISION OF M/S. M & M ASSE SSEE HAS NOT ONLY TAKEN OVER THE BUSINESS AS A GOING CONCERN ALONG WITH ASS ETS AND LIABILITIES, BUT, HAS TAKEN OVER VARIOUS OTHER RIGHTS, LICENSES, CUST OMER BASE AND GOODWILL OF THE BUSINESS, WHICH CONSTITUTE CONGERIES OF RIGHTS HENCE, ARE IN THE NATURE OF INTANGIBLE ASSET. TO SUPPORT THE SALE CONSIDERATIO N, THE ASSESSEE HAS ALSO OBTAINED A VALUATION REPORT FROM A TECHNICALLY QUAL IFIED PERSON. HE OBSERVED, THE VALUE ATTACHED TO THE INTANGIBLE ASSET IS AS PE R THE VALUATION REPORT AND THE BALANCING FIGURE OF RS. 1.15 CRORE WAS TAKEN TO WARDS GOODWILL OF THE BUSINESS. WITHOUT PREJUDICE, HE OBSERVED, EVEN IF THE VALUE ATTACHED TO THE INTANGIBLE ASSET AS PER THE VALUATION REPORT IS IGN ORED, THE EXCESS CONSIDERATION PAID OVER AND ABOVE THE NET VALUE OF THE ASSETS HAS TO BE TREATED TO HAVE BEEN PAID TOWARDS GOODWILL, HENCE, ELIGIBLE FOR DEPRECIATION. ACCORDINGLY, HE ALLOWED ASSESSEES CLAIM OF DEPRECI ATION. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGL Y RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER SUBMITTED, TH E BUSINESS TRANSFER AGREEMENT DOES NOT PROVIDE FOR ANY CONSIDERATION TO WARDS CONGERIES OF MAHINDRA LOGISTICS LTD. 5 RIGHTS, THEREFORE, THE SALE CONSIDERATION PAID CANN OT BE BROKEN DOWN TO CREATE INTANGIBLE ASSET, WHEN THERE IS NO SUCH ASSE T IN EXISTENCE. THUS, HE SUBMITTED, LEARNED COMMISSIONER (APPEALS) WAS UNJUS TIFIED IN ALLOWING ASSESSEES CLAIM OF DEPRECATION. REFERRING TO THE PROVISO TO SECTION 32(1) OF THE ACT, HE SUBMITTED THE DEPRECIATION CLAIMED BY T HE ASSESSEE IS NOT ALLOWABLE. 6. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED, THE ACTION OF THE ASSESSING OFFICER IN DETERMINING THE VALUE OF INTAN GIBLE ASSET AT NIL BY TAKING RECOURSE TO EXPLANATION 3 TO SECTION 43(1) OF THE A CT IS WITHOUT AUTHORITY OF LAW HENCE, INVALID. HE SUBMITTED, BEFORE DETERMINI NG THE ACTUAL COST OF THE ASSET UNDER EXPLANATION 3 TO SECTION 43(1), THE ASS ESSING OFFICER HAS TO OBTAIN PRIOR APPROVAL OF THE JOINT COMMISSIONER. W HEREAS, THE ASSESSING OFFICER HAS NOT DONE SO IN THE PRESENT CASE. THERE FORE, FOR THIS REASON ALONE THE ACTION OF THE ASSESSING OFFICER CANNOT BE SUPPO RTED. WITHOUT PREJUDICE, HE SUBMITTED, THE TRANSACTION BETWEEN THE ASSESSEE AND M/S. M & M LTD IS A GENUINE TRANSACTION AND M & M LTD. HAS OFFERED CAPI TAL GAIN ARISING OUT OF SUCH TRANSACTION TO TAX. HE SUBMITTED, THOUGH, THE VALUATION REPORT MAY NOT HAVE BEEN REFERRED TO IN THE SALE AGREEMENT, HOWEVE R, THE ASSESSEE HAS OBTAINED THE VALUATION REPORT TO VALUE THE ASSETS O F THE TRANSFERRED BUSINESS. HE SUBMITTED, SINCE THE VALUER HAD VALUED THE ASSET S ON A SCIENTIFIC BASIS, THE ASSESSING OFFICER CANNOT DISREGARD VERACITY OF SUCH VALUATION. LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED, WHILE ACQUIRIN G THE TRANSPORTATION BUSINESS OF THE HOLDING COMPANY, THE ASSESSEE HAS A CQUIRED VARIOUS RIGHTS AND CONTRACTS, WHICH CERTAINLY ARE IN THE NATURE OF INTANGIBLE ASSETS. THEREFORE, THE AMOUNT PAID FOR ACQUIRING SUCH RIGHT IS CAPITAL ASSET ON WHICH THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION. HE SUBMITTED, PROVISION TO SECTION 32(1) WOULD NOT BE APPLICABLE AS IT IS NOT A CASE OF AMALGAMATION BUT A CASE OF SLUMP SALE. THUS, HE SUBMITTED LEARNED C OMMISSIONER (APPEALS) WAS JUSTIFIED IN ALLOWING ASSESSEES CLAIM OF DEPRE CIATION. IN SUPPORT OF HIS MAHINDRA LOGISTICS LTD. 6 CONTENTION, HE RELIED UPON THE DECISION OF ITAT CHE NNAI BENCH IN THE CASE OF ACIT VS. DROMA INDIA PVT. LTD. IN ITA NOS. 1664 TO 1666/CHNY/2019 DATED 20.11.2019. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGH T OF THE DECISIONS RELIED UPON AND PERUSED MATERIAL ON RECORD. UNDISPUTED FA CTS ARE, DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD ACQUIRED LOGISTICS DIVISION OF M & M LTD. BY BUSINESS TRANSFER AGREEMENT DATED 11.09.2008 FOR A TOTAL SALE CONSIDERATION OF RS 32 CRORE. ON A PERUSAL OF THE BUSINESS TRANS FER AGREEMENT, A COPY OF WHICH HAS BEEN SUBMITTED BEFORE US, IT IS NOTED THA T THE SALE IS ON AS IS WHERE IS BASIS AND THE ASSESSEE HAS ACQUIRED THE BU SINESS AS A GOING CONCERN WITH ALL ITS ASSETS AND LIABILITIES. THE ASSETS TR ANSFERRED ALSO INCLUDED ALL CONTRACTS, DEEDS, BONDS, AGREEMENTS AND ALL OTHER I NSTRUMENTS. FURTHER, ALL EMPLOYEES OF LOGISTICS BUSINESS WERE ALSO TRANSFERR ED TO THE ASSESSEE. THUS, AS COULD BE SEEN, THE ENTIRE LOGISTICS BUSINESS WAS TRANSFERRED TO THE ASSESSEE ON A SLUMP SALE BASIS. THOUGH, IT MAY BE A FACT TH AT IN THE BUSINESS TRANSFER AGREEMENT THE SALE CONSIDERATION OF RS 32 CRORE HAS NOT BEEN ALLOCATED TO VARIOUS ASSETS, HOWEVER, IT IS A FACT THAT THE ASSE SSEE HAS GOT THE ASSETS VALUED BY A TECHNICALLY QUALIFIED PERSON AND AS PER SUCH VALUATION CONGERIES OF RIGHTS TRANSFERRED TO THE ASSESSEE WAS VALUED AT RS 9,12,00,000/-. THE FIRST ISSUE WHICH ARISES FOR CONSIDERATION IS, WHET HER THE ASSESSING OFFICER CAN DETERMINE THE VALUE OF THE AFORESAID RIGHT AT NIL BY INVOKING EXPLANATION 3 TO SECTION 43(1) OF THE ACT. ON A CAREFUL READING OF THE AFORESAID PROVISION IT IS NOTICED, EXPLANATION 3 TO SECTION 43(1) EMPOWERS TH E ASSESSING OFFICER TO DETERMINE THE ACTUAL COST OF A PARTICULAR ASSET IF HE IS OF THE OPINION THAT THE ASSESSEE FOR THE PURPOSE OF CLAIMING HIGHER DEPRECI ATION HAS ENHANCED THE COST OF THE ASSET. HOWEVER, BEFORE SO DETERMINING HE HAS TO OBTAIN PRIOR APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX. IN THE FACTS OF THE PRESENT CASE, THE ASSESSING OFFICER APPARENTLY HAS NOT OBTAINED SUCH APPROVAL OF THE JOINT COMMISSIONER BEFORE DETERMINI NG THE VALUE OF THE ASSET MAHINDRA LOGISTICS LTD. 7 AT NIL. ATLEAST, NO SUCH MATERIAL HAS BEEN PLACE D BEFORE US BY THE REVENUE TO SHOW THAT THE ASSESSING OFFICER HAS OBTAINED ANY APPROVAL OF JOINT COMMISSIONER OF INCOME TAX. EVEN, A READING OF PAR AGRAPH 3.3 OF THE ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER BY REFERRING TO A WRONG/INCOMPLETE PROVISION HAS PROCEEDED TO EXERCIS E HIS POWER IN DETERMINING THE VALUE OF THE ASSET AT NIL. FOR T HIS REASON ALONE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT B E SUSTAINED. 8. BE THAT AS IT MAY, AS RIGHTLY OBSERVED BY LEARNE D COMMISSIONER (APPEALS), THERE CANNOT BE ANY DOUBT WITH REGARD TO THE GENUINENESS OF THE TRANSACTION AS M & M LTD. HAS TREATED THE SALE AS S LUMP SALE AND OFFERED PROFIT DERIVED THEREFROM AS LONG TERM CAPITAL GAIN IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR. EVEN, THE BUSINESS TRANSFER AGREEMENT ALSO CLEARLY SPEAKS OF TRANSFERRING NOT O NLY THE PHYSICAL ASSETS BUT VARIOUS OTHER INTANGIBLE ASSETS SUCH AS CONTRACTUAL RIGHTS, LICENSES, CUSTOMER BASE ETC. CERTAINLY, ALL THESE INTANGIBLE ASSETS T RANSFERRED TO THE ASSESSEE HAVE A COMMERCIAL VALUE AND A PART OF SALE CONSIDER ATION HAS TO BE ALLOCATED TO SUCH ASSETS. FOR THE PURPOSE OF SUCH ALLOCATION THE ASSESSEE HAS OBTAINED VALUATION REPORT FROM A TECHNICALLY QUALIFIED PERSO N. IF THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE VALUATION REPORT, HE SHO ULD HAVE GOT THE ASSETS VALUED THROUGH ANOTHER TECHNICALLY QUALIFIED PERSON INSTEAD OF REJECTING THE VALUATION REPORT PURELY ON THE BASIS OF CONJECTURES AND SURMISES. FURTHER, THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS DESIGNED THE TRANSACTION IN A MANNER TO CREATE FICTITIOUS ASSET IS WITHOUT ANY MATERIAL BASIS. IN FACT, IN THE CASE OF ACIT VS. DORMA INDIA PVT. L TD. (SUPRA), THE CO-ORDINATE BENCH WHILE CONSIDERING A DISPUTE OF SIMILAR NATURE HAS OBSERVED, A CONSOLIDATED PAYMENT MADE BY THE ASSESSEE OVER AND ABOVE NET ASSETS ACQUIRED BY IT UNDER A COMPOSITE CONTRACT IS TO BE VIEWED AS TOWARDS GOODWILL AND HAS TO BE TREATED AS INTANGIBLE ASSET ON WHICH DEPRECIATION IS ALLOWABLE. SUFFICE TO SAY TRIBUNALS DECISION IN THE CASE OF U NITED BREWERIES LTD. VS. MAHINDRA LOGISTICS LTD. 8 ADDITIONAL CIT IN ITA NO. 722/BANG/2014 WOULD NOT B E APPLICABLE AS IN THE SAID CASE THE TRIBUNAL WAS CONSIDERING A CASE OF AM ALGAMATION. THUS, KEEPING IN VIEW THE RELEVANT FACTS WE ARE OF THE CO NSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION ON THE I NTANGIBLE ASSETS ACQUIRED BY WAY OF CONGERIES OF RIGHTS. THEREFORE, THE ORDER O F LEARNED COMMISSIONER (APPEALS) ON THE ISSUE IS UPHELD. THE GROUND RAISE D IS DISMISSED. 9. THE NEXT ISSUE RAISED BY THE REVENUE RELATES TO ALLOWANCE OF DEPRECIATION ON GOODWILL. AS DISCUSSED EARLIER, TH E SALE CONSIDERATION PAID OF RS 32 CRORE TOWARDS ACQUISITION OF THE LOGISTICS DI VISION INCLUDED RS 1.15 CRORE TOWARDS GOODWILL. HOWEVER, BEING UNSURE OF ALLOWAB ILITY OF DEPRECIATION ON SUCH ASSET, ASSESSEE DID NOT CLAIM ANY DEPRECIATION INITIALLY. IN THE APPEAL FILED AGAINST THE ASSESSMENT ORDER BEFORE LEARNED C OMMISSIONER (APPEALS), ASSESSEE TOOK AN ADDITIONAL GROUND CLAIMING DEPRECI ATION ON GOODWILL RELYING UPON THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF CIT VS. SMIF SECURITIES LTD. [2012] 348 ITR 302 (SC). THE LEARN ED COMMISSIONER (APPEALS) NOT ONLY ADMITTED THE ADDITIONAL GROUND B UT ALSO DIRECTED THE ASSESSING OFFICER TO ALLOW ASSESSEES CLAM OF DEPRE CIATION ON GOODWILL. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIAL ON RECORD. UNDISPUTEDLY, THE DEPRECIATION CLAIMED BY THE ASSES SEE IS ON GOODWILL. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CI T VS. SMIF SECURITIES LTD. (SUPRA), GOODWILL IS AN INTANGIBLE ASSET AS DEFINED U/S. 32(1)(II) OF THE ACT, HENCE, ELIGIBLE FOR DEPRECIATION. IN VIEW OF THE R ATIO LAID DOWN BY THE HONBLE SUPREME COURT AS DISCUSSED ABOVE, ASSESSEES CLAIM OF DEPRECIATION HAS BEEN RIGHTLY ALLOWED BY LEARNED COMMISSIONER (APPEALS). HENCE, NO INTERFERENCE IS CALLED FOR. THIS GROUND IS ALSO DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. MAHINDRA LOGISTICS LTD. 9 11. ITA NO. 6646/MUM/2018 (REVENUES APPEAL FOR A.Y . 2010-11) : GROUND NOS. 1 AND 2 ARE IDENTICAL TO GROUND NOS. 1 AND 2 IN ITA NO. 6645/MUM/2018 DEALT WITH HEREINABOVE. THEREFORE, O UR DECISION THEREIN WOULD APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL . ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 12. IN GROUND NO.3 THE REVENUE HAS CHALLENGED ALLOW ANCE OF FEES PAID TOWARDS VALUATION REPORT. BRIEFLY FACTS ARE, DURIN G THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS 2,24,720/- TOWARDS CHARGES PAID F OR VALUATION OF THE BUSINESS PURCHASED BY THE ASSESSEE FROM M/S. M & M LTD. STATING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE, THE ASSESSIN G OFFICER DISALLOWED THE SAME. WHILE CONSIDERING ASSESSEES APPEAL ON THIS ISSUE, LEARNED COMMISSIONER (APPEALS) ALLOWED THIS APPEAL. 13. WE HAVE HEARD THE PARTIES AND PERUSED MATERIAL ON RECORD. THOUGH, IT MAY BE A FACT THAT EXPENDITURE INCURRED BY THE ASSE SSEE WAS FOR VALUATION OF THE ASSETS, HOWEVER, SUCH EXPENDITURE, PER SE, IS N OT FOR ACQUIRING ANY CAPITAL ASSET. THEREFORE, IN OUR CONSIDERED VIEW, LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN ALLOWING ASSESSEES CLAIM. THIS G ROUND IS DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. 14. ITA NO. 6647/MUM/2018 (REVENUES APPEAL FOR A.Y . 2011-12) : GROUND NOS. 1 AND 2 ARE IDENTICAL TO GROUND NOS. 1 AND 2 IN ITA NO. 6645/MUM/2018 DEALT WITH HEREINABOVE. THEREFORE, O UR DECISION THEREIN WOULD APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL . ACCORDINGLY, THESE GROUNDS ARE DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. MAHINDRA LOGISTICS LTD. 10 15. ITA NO. 6453MUM/2018 (ASSESSEES APPEAL FOR A.Y . 2011-12) : THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS WIT H REGARD TO DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS 25,81,0 00/-. 16. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AM OUNT OF RS 104,157.27 LACS AS EXPENDITURE UNDER THE HEAD SERVICES/OPERATI ONS. AFTER CALLING UPON THE ASSESSEE TO FURNISH THE DETAILS OF THE PARTIES TO WHOM SUCH PAYMENTS HAVE BEEN MADE AND VERIFYING THEM THE ASSESSING OFF ICER FOUND THAT SUCH PAYMENTS HAVE BEEN MADE TO MORE THAN TWO THOUSAND P ARTIES. ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE ALONG WITH ADDRESS, THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) OF THE ACT TO FE W PARTIES ON RANDOM BASIS FOR VERIFYING THE CORRECTNESS OF THE TRANSACTIONS. AS OBSERVED BY THE ASSESSING OFFICER, IN RESPONSE TO NOTICES ISSUED U/ S. 133(6), ONLY FOUR PARTIES RESPONDED WHILE MOST OF THE NOTICES RETURNED BACK U NSERVED. FURTHER, HE OBSERVED, THOUGH THE ASSESSEE WAS REQUESTED TO OBTA IN CONFIRMATION FROM THE PARTIES, HOWEVER, THE ASSESSEE ALSO DID NOT FUR NISH THE SAME FROM THE PARTIES. AS PER THE ASSESSING OFFICER, SUCH PARTIE S ARE TEN IN NUMBER REPRESENTING AGGREGATING PAYMENT OF RS 27.81 LACS. HOLDING THAT DUE TO NON- RESPONSE TO NOTICES ISSUED U/S. 133(6) OF THE ACT, THE TRANSACTION CANNOT BE CONSIDERED AS GENUINE, THE ASSESSING OFFICER TREATE D THE AMOUNT OF RS 27,81,000/- AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THOUGH THE ASSESSEE CONTESTED THE AFORESAID ADDITION BEFORE LEARNED COMMISSIONER (APPEALS), HOW EVER, IT DID NOT SUCCEED. 17. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , THE ENTIRE PAYMENTS HAS BEEN MADE IN CHEQUE AND ASSESSEE HAS FURNISHED ALL DETAILS SUCH AS NAME, ADDRESS, PAN ETC., TO PROVE THE GENUINENESS OF THE TRANSACTIONS. HE SUBMITTED, WHEREVER APPLICABLE THE ASSESSEE HAS ALS O DEDUCTED TAX AT SOURCE WHILE MAKING SUCH PAYMENTS. HE SUBMITTED, MERELY B ECAUSE NOTICES ISSUED MAHINDRA LOGISTICS LTD. 11 U/S. 133(6) OF THE ACT ISSUED TO THE PARTIES HAVE R ETURNED BACK UN-SERVED, THE TRANSACTIONS CANNOT BE HELD AS NON-GENUINE. HE SUB MITTED, CONSIDERING THE VOLUME OF TURNOVER AND THE PAYMENTS MADE, THE ASSES SEE WOULD CERTAINLY NOT INDULGE IN ANY NON-GENUINE ACTIVITY. THUS, HE SUBM ITTED, THE DISALLOWANCE MADE SHOULD BE DELETED. 18. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE OBSERVATIONS OF THE ASSESSING OFFICER. 19. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIAL ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF THAT THE EXPENDITURE INCURRED TOWARDS SERVICES/OPERATIONS INVOLVE PAYMENTS MADE T O MORE THAN TWO THOUSAND PARTIES. TO TEST CHECK THE GENUINENESS OF SAID EXPENDITURE, THE ASSESSING OFFICER HAD ISSUED NOTICES U/S. 133(6) OF THE ACT TO SOME OF THE PARTIES ON RANDOM BASIS. HOWEVER, IN RESPECT OF SO ME OF THE PARTIES THE NOTICES ISSUED U/S. 133(6) HAVE RETURNED BACK UN-SE RVED. AS IT APPEARS FROM THE ORDERS OF THE ASSESSING OFFICER AS WELL AS LEAR NED COMMISSIONER (APPEALS) DUE TO NON-RESPONSE TO THE NOTICES ISSUED U/S. 133( 6) OF THE ACT, A PART OF THE EXPENDITURE HAS BEEN DISALLOWED AND ADDED BACK. HOWEVER, IT IS A FACT ON RECORD THAT ALL PAYMENTS HAVE BEEN MADE BY THE A SSESSEE IN CHEQUE AND THE ASSESSEE HAS FURNISHED THE NAME, ADDRESS, PAN E TC., OF ALL PAYEES. IN FACT, THE ASSESSEE HAS ALSO DEDUCTED TAX IN APPLICA BLE CASES, WHICH IS EVIDENT FROM THE TDS CERTIFICATES FILED IN THE PAPER-BOOK. NON-RESPONSE TO THE NOTICES ISSUED U/S. 133(6) OF THE ACT COULD BE FOR VARIOUS REASONS. HOWEVER, THAT ITSELF WOULD NOT LEAD TO THE CONCLUSION THAT THE PA YMENTS MADE ARE NON- GENUINE, PARTICULARLY, WHEN THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. MOREOVER, CONSIDERING THE NATURE OF BUSI NESS AND THE TURNOVER INVOLVED, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE IS NOT JUSTIFIED. ACCORDINGLY, WE DELETE THE SAME. THIS GROUND IS AL LOWED. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. MAHINDRA LOGISTICS LTD. 12 20. TO SUM UP, REVENUES APPEALS ARE DISMISSED AND ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 5 TH FEBRUARY 2020. SD/- SD/- (G MANJUNATHA) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 5 TH FEBRUARY, 2020. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI