HUNTSMAN INTERNATIONAL (INDIA) P. LTD, NAVI MUMBAI V. ACIT 10(3), MUMBAI

ITA 675/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4457 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MEHTA
• Assessee Lawyers: R C JAIN
• Keywords: Depreciation; Valuation report

Judgement Text

1 ITA 675/M/10, HUNTS MAN INTERNATIONAL (I) P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI N.V. VASUDEV AN, JM ITA NO. 675/MUM/10 ASSESSMENT YEAR 2005-06 HUNTSMAN INTERNATIONAL (I) PVT. LTD., NO. 12, KOPARKHAIRANE, THANE-BELAPUR ROAD, NAVI MUMBAI 400 709. PAN AAACH9149J VS. A.C.I.T. 10(3), AAYAKAR BHAWAN, M.K. MARG, MUMBAI. 20 APPELLANT RESPONDENT APPELLANT BY SHRI R.C.JAIN RESPONDENT BY SHRI A.K. MEHTA ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) 22, MUMBAI DATED 3.11.09 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF ` 1,57,71,930/- MADE BY THE A.O. AND CONFIRMED BY TH E LD. CIT(A) ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THE EXCESS AMOUNT PAID OVER AND ABOVE THE VALUE OF ASSETS ACQUIRED IN RELATION TO POLYUERATHANE BUS INESS FROM ICI LTD. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF CHEMICALS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.10.05 DECLARING A TOTAL INCOME OF ` 20,00,30,176/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE COMPANY IN THE FIRST YEAR OF ITS OPERATION I.E. TH E PREVIOUS YEAR RELEVANT TO A.Y. 2002-03 HAD PURCHASED THE POLYUERATHANE BUSINESS FROM M/S I CI LIMITED AS A GOING CONCERN AS PER BUSINESS TRANSFER AGREEMENT. HE ALSO NOTICED T HAT IN THE SAID YEAR, THE DIFFERENCE 2 ITA 675/M/10, HUNTS MAN INTERNATIONAL (I) P. LTD. BETWEEN THE PRICE PAID AND VALUE ADOPTED AS PER THE VALUATION REPORT WAS CAPITALIZED BY THE ASSESSEE COMPANY AS GOODWILL BEEN RESIDUARY BU SINESS AND COMMERCIAL RIGHTS OF AN INTANGIBLE NATURE AND DEPRECIATION THEREON WAS CLAI MED. HE FOUND THAT IN THE EARLIER YEAR INCLUDING A.Y. 2002-03, THE DEPRECIATION SO CLAIMED BY THE ASSESSEE WAS DISALLOWED IN THE ASSESSMENT AND THE SAID DISALLOWANCE WAS CONFIR MED EVEN BY THE LD. CIT(A). CONSISTENT WITH THE SAID STAND TAKEN BY THE REVENUE IN THE EARLIER YEAR ON THE SIMILAR ISSUE, THE CLAIM OF THE ASSESSEE FOR DEPRECIATION O N GOODWILL WAS DISALLOWED BY THE A.O. IN THE YEAR UNDER CONSIDERATION. ON APPEAL, THE LD . CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE A.O. FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR A.Y. 2002-03 AND 2003-04 DATED 27.2.09 PASSED IN ITA NO. 4262 & 4263/MUM/06 WHEREIN A SIMILAR DISALLOWANCE MADE ON ACCOUNT OF ASSESSEES CLAIM FOR DEPRECIATION ON GOODWILL WAS CONFIRMED BY THE TRIBUNAL. AGGRIEVED BY THE OR DER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE RELATING TO THE ASSESSEES CLAIM FOR DEPRECIATION ON GOODWILL BEING THE EXCESS AMOUNT PA ID OVER AND ABOVE THE VALUE OF ASSETS CLAIMED IN RELATION TO POLYUERATHANE BUSINESS FROM ICI LTD. HAS BEEN DECIDED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL AGAINST THE ASSESSE E VIDE ITS COMMON ORDER DATED 27.2.09 IN ITA NO. 4262 & 4263/M/06. A COPY OF THE SAID IS PLACED ON RECORD BEFORE US AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARA NO . 5 OF ITS ORDER. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PA RTIES AND PERUSED. WE NOTICED THAT THE CIT(A) AFTER EXAMINING AGREEMENT CLEARLY N OTED THE FACTS ALSO EVIDENT FROM FACTS NOTED BY THE ASSESSING OFFICER AND THE SAME I S REPRODUCED ABOVE, THAT INTANGIBLE ASSETS WERE SEPARATELY VALUED BY THE CON SULTANTS AT ` 8,47,17,729/-. THE CIT(A) DID NOT ACCEPT THE ARGUMENT OF THE ASSESSEE THAT EXCESS SHOULD BE ASSIGNED TO NON-COMPETE FEE PAYABLE TO THE ICI LTD. THOUGH EXCE SS ASSIGNED TO INTANGIBLE ASSETS PURCHASED. THE ASSESSEE FAILED TO PRODUCE ANY MATE RIAL/EVIDENCES POINTING OUT THAT WHICH INTANGIBLE ASSETS INCLUDE IN THE VALUE OF GOO DWILL. WHEN THE TOTAL CONSIDERATION HAS BEEN BIFURCATED ON THE BASIS OF T HE CERTIFICATE OF VALUER/CONSULTANT WHEREIN INTANGIBLES AND GOODWILL HAVE BEEN CLEARLY SEPARATELY STATED. IT IS SETTLED 3 ITA 675/M/10, HUNTS MAN INTERNATIONAL (I) P. LTD. LAW THAT NO DEPRECIATION IS ALLOWABLE ON GOODWILL. UNDER THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF CIT(A). 4. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AND ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2002-03 AND 20 03-04, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL DATED 27.2.09 FOR A.Y. 2002- 03 & 2003-04 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE DIS ALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ASSESSEES CLAIM FOR DEPRECIATION ON GOO DWILL BEING THE EXCESS AMOUNT PAID OVER AND ABOVE THE VALUE OF ASSETS ACQUIRED IN RELA TION TO POLYUERATHANE BUSINESS FROM ICI LTD. 5. IN THE RESULT, THE APPEAL OF THE ASSESESEE IS DI SMISSED. ORDER PRONOUNCED ON 6 TH OCTOBER, 2010. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED 6 TH OCTOBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 22 - MUMBAI 4. THE CIT- 8, MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA 675/M/10, HUNTS MAN INTERNATIONAL (I) P. LTD. DATE INITIALS 1. DRAFT DICTATED 30.9.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 4.10.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. 5 ITA 675/M/10, HUNTS MAN INTERNATIONAL (I) P. LTD.