The DCIT, Circle-5, Ahmedabad V. Net Vision Web Technologies Ltd., Ahmedabad

ITA 790/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80578 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 11-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Depreciation; Valuation report
• Section: 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA NOS. 757, 789 & 790/AHD/2011 (ASSESSMENT YEAR:2006-07, 2003-04 & 2004-05) DCIT, CIRCLE-5, AHMEDABAD APPELLANT VS. NETVISION WEB TECHNOLOGIES LTD. 401/402 S.K. HOUSE, OPP. DRIVE-IN CINEMA, THALTEJ, AHMEDABAD RESPONDENT PAN: AABCN6164G / BY REVENUE :SHRI DINESH SINGH, SR. D.R. / BY ASSESSEE : SHRI S. N. DIVETIA, A.R. /DATE OF HEARING :31.12.2014 !'# /DATE OF PRONOUNCEMENT : 31.12.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: ALL THESE APPEALS FILED BY REVENUE ARE PERTAINED TO SAME ASSESSEE FOR A.Y. 2006-07, 2003-04 & 2004-05, ARISI NG OUT FORM THE ORDER OF CIT(A)-XI, AHMEDABAD, DATED 24.01 .2011 ON I.T.A. NOS. 757, 789 & 790/AHD/2011 FOR A.Y. 06-07, 03-04 & 04-05 (DCIT VS. NETVISION WEB TECHNOLOGIES LTD.) PAGE 2 SIMILAR GROUNDS. SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 757/AHD/2011 FOR A.Y. 2006-07, REVENU E HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION ON GOODWILL OF RS.1,20,28,592/-. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.3,54,433/- MADE U/S. 14A. 3. IN I.T.A. NO. 789/AHD/2011 FOR A.Y. 2003-04, REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ANNULLING THE ASSESSMENT ORDER HOLDING THAT RE- OPENING OF THE ASSESSMENT WAS BAD IN LAW, AND THE ASSESSMENT ORDER IS AB-INITIO VOID. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION ON GOODWILL OF RS.2,85,12,218/-. 3. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,28,161/- MADE U/S. 14A. 4. IN I.T.A. NO. 790/AHD/2011 FOR A.Y. 2004-05, REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ANNULLING THE ASSESSMENT ORDER HOLDING THAT RE- OPENING OF THE ASSESSMENT WAS BAD IN LAW, AND THE ASSESSMENT ORDER IS AB-INITIO VOID. I.T.A. NOS. 757, 789 & 790/AHD/2011 FOR A.Y. 06-07, 03-04 & 04-05 (DCIT VS. NETVISION WEB TECHNOLOGIES LTD.) PAGE 3 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION ON GOODWILL OF RS.2,13,84,164/-. 3. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,95,888/- MADE U/S. 14A. 5. FIRST ISSUE IN A.Y. 2006-07 AND GROUND NO.2 IN A .YS. 03- 04 & 04-05 IS WITH REGARDS TO DISALLOWANCE OF DEPRE CIATION ON GOODWILL. AT THE OUTSET OF HEARING, LD. AUTHORIZED REPRESENTATIVE POINTED OUT THAT ITAT IN ASSESSEES OWN APPEAL FOR A.Y. 2005-06 FOLLOWING THE SIMILAR ISSUE FOR A. Y. 2007-08 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSE RVING AS UNDER: 2. THE FIRST ISSUE IS WITH REGARDS TO DISALLOWANCE OF ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL. IDEN TICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.Y.07-08 WHEREIN ITAT HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. IN FACT T RIBUNAL HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE, FO LLOWING DECISION IN REVENUES APPEAL IN ITA NO. 1186/AHD/20 11 BY OBSERVING AS UNDER: 7 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, DULY PERUSED THE RELEVANT CASE RECORDS , BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALSO THE CASE LAWS RELIED BY THE LEARNED AR. 8. ON PERUSAL OF THE RECORDS, WE FIND THAT ITAT AHMEDABAD 'B' BENCH HAS RECENTLY DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REV ENUE WHILE ADJUDICATING REVENUE'S APPEAL IN ITA NO.1186/AHD/2011 ETC. IN THE CASE OF NET 4 NUT LTD. DATED 21-09-2012 . THE RELEVANT PORTION OF THE ABOV E ORDER OF THE TRIBUNAL IS EXTRACTED HEREIN UNDER FOR REFERENCE: '5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE I.T.A. NOS. 757, 789 & 790/AHD/2011 FOR A.Y. 06-07, 03-04 & 04-05 (DCIT VS. NETVISION WEB TECHNOLOGIES LTD.) PAGE 4 MATERIAL ON RECORD. THE LEARNED CIT(A) HAS GIVEN CATEGORICAL FINDINGS THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 1,87,81,830/- ON DEVELOPMENT OF 'AVTAAR' AND THE SAID SOFTWARE WAS REGISTERED AS TRADE MARK UNDER THE TRADE-MARK ACT,1999 IN THE NAME OF THE ASSESSEE AND THE SAME WAS UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS AND IN VIEW OF THIS FACT, DEPRECIATION ON THIS SOFTWARE SHOULD BE ALLOWED. FURTHER, SECTION 32 OF THE ACT CLEARLY SPECIFIES THAT DEPRECIATION SHALL BE ALLOWA BLE ON ANY INTANGIBLE ASSETS. THE LEARNED AR HAS ALSO PLACED RELIANCE IN THE DECISION OF ITAT AHMEDABAD 'A' BENCH IN THE CASE OF DICT VS M/S. BHAGAWATI BANGUETS AND HOTELS LTD. IN ITA NO. 1312/AHD/2002 FOR AY 2007-08 ORDER DATED 28-02- 2012. IN THIS CASE THE TRIBUNAL HAD DECIDED THE ISSUE OF CLAIM OF DEPRECIATION ON INTANGIBLE ASSET IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT PORTION OF THE AFORESAID ORDER OF THE TRIBUNAL IS REPRODUCED HEREIN BELOW: '5.7. IN A NUT-SHELL, THE ASSESSEE, WITHOUT INTANGIBLE ASSETS IN THE SHAPE OF RIGHTS AND ENTITLEMENT OF COMMERCIAL RIGHTS OF THE ERSTWHILE ENTITIES, WOULD NOT HAVE PROSPERED OR IN A POSITION TO CARRY ON THE CATERING BUSINESS ONLY BY ACQUIRING TANGIBLE ASSETS. BY ACQUIRING TANGIBLE AND INTANGIBLE ASSETS OF THE ERSTWHILE CONCERNS CITED SUPRA, THE ASSESSES HAD PROSPERED IN ITS BUSINESS BY POSTING SUBSTANTIAL TURNOVER AND PROFITS WHICH IMPLICITLY EXHIBITS THAT THE ASSESSEE HAD, IN FACT, ACQUIRED INTANGIBLE ASSETS [BUSINESS AND COMMERCIAL RIGHTS] IN THE FORM OF 'GOODWILL'. IN ESSENCE, THE INTANGIBLE ASSETS WERE IN THE NATURE OF VALUABLE COMMERCIAL AND BUSINESS RIGHTS WHICH WERE TO BE USED IN EXPANDING THE ASSESSEE'S BUSINESS, RESULTING IN, -HUGE TURNOVER AND PROFITS AS POINTED OUT SUPRA. 5.9. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE- I.T.A. NOS. 757, 789 & 790/AHD/2011 FOR A.Y. 06-07, 03-04 & 04-05 (DCIT VS. NETVISION WEB TECHNOLOGIES LTD.) PAGE 5 GOING PARAGRAPHS AND ALSO IN CONFORMITY WITH THE RULING OF VARIOUS JUDICIARIES, CHIEFLY, THE RULING OF THE HON'BLE HIGH COURT OF KERALA REFERRED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION ON INTANGIBLE ASSETS ACQUIRED BY IT. IT IS ORDERED ACCORDINGLY. WE MAKE IT VERY CLEAR THAT WE HAVE ARRIVED AT THIS ABOVE CONCLUSION FROM THE FACTS OF THIS CASE AS THE VALUATION REPORT SUBMITTED BY THE APPELLANT HAS NOT BEEN SUCCESSFULLY CHALLENGED BY THE REVENUE TO ESTABLISH THE TRANSACTION TO BE SHAM. THEREFORE, WE CONSIDER THE PAYMENT MADE ON ACCOUNT OF GOODWILL IS GENUINE AND REASONABLE SINCE IT IS ARRIVED BASED ON A REASONABLE VALUATION AND COMPUTATION.' 5.2 IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIN D ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF TH E LEARNED CIT(A). THEREFORE, THIS GROUND RAISED BY TH E REVENUE IS DISMISSED.' 9. CONSIDERING THE ABOVE DISCUSSIONS AND IN VIEW OF THE FACT THAT THE LEARNED DR COULD NOT CONTROVERT T HE SUBMISSION OF THE LEARNED AR BY ANY COGENT MATERIAL EVIDENCE, WE ARE OF THE OPINION THAT THE LEARNED CI T(A) WAS RIGHT IN ALLOWING ASSESSEE'S CLAIM OF DEPRECIAT ION ON GOOD WILL AMOUNTING TO RS.90,21,444/- AND HIS ORDER REQUIRES NO INTERFERENCE BY US. ACCORDINGLY, WE HEREBY DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS APPEAL. 2.1. NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWL EDGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO F OLLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFER E IN THE FINDING OF CIT(A) WHO HAS DELETED THE DISALLOWANCE OF CLAIM OF DEPRECIATION ON GOODWILL AMOUNTING TO RS.1,60,38 ,123/-. THE SAME IS UPHELD. I.T.A. NOS. 757, 789 & 790/AHD/2011 FOR A.Y. 06-07, 03-04 & 04-05 (DCIT VS. NETVISION WEB TECHNOLOGIES LTD.) PAGE 6 5.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWI NG THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS DELETED THE DISALLOWANCE IN ALL YEAR S. SAME IS UPHELD. 6. SECOND ISSUE IN A.Y. 2006-07 AND GROUND NO.3 IN A.YS. 03-04 & 04-05 IS WITH REGARDS TO DISALLOWANCE MADE U/S. 14A. AT THE OUTSET OF HEARING, LD. AUTHORIZED REPRESENTA TIVE POINTED OUT THAT ITAT IN ASSESSEES OWN APPEAL FOR A.Y. 200 5-06 FOLLOWING THE SIMILAR ISSUE FOR A.Y. 2007-08 HAS SE T ASIDE THE ISSUE TO ASSESSING OFFICER BY OBSERVING AS UNDER: 3. NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE U/S. 14A OF RS.3,88,847/- OF INTEREST EXPENSES MADE BY ASSESSIN G OFFICER. IN APPEAL, CIT(A) FOLLOWING SIMILAR MATTE R FOR ASSESSEES OWN CASE FOR A.Y. 2003-04 DIRECTED TO DE LETE THE DISALLOWANCE MADE BY ASSESSING OFFICER U/S. 14A. T HERE IS NOTHING ON RECORD TO SUGGEST FINALITY ON THE ISSUE IN ASSESSEES OWN CASE FOR A.Y. 03-04. IT WAS POINTED OUT BY LD. A.R. THAT NO SUCH GROUND WAS TAKEN BY REVENUE I N A.Y. 07-08 WHILE THIS SIMILAR GROUND WAS RESTORED TO ASS ESSING OFFICER IN ITA NO. 3304/AHD/2008 DATED 23.01.2009 F OR A.Y. 06-07. LD. A.R. ALSO RELIED ON THE DECISION O F CIT VS. CORRTECH ENERGY PVT. LTD. IN TAX APPEAL NO. 239 OF 2014 DATED 24//03/2014 BUT LD. D.R. WAS NOT IN POSITION TO TELL ABOUT THE FINALITY OF THE ISSUE IN A.Y. 03-04. SO, LD. A.R. AGREED TO ON THE PROPOSITION THAT LET THE ISSUE BE RESTORED TO ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE SAME AS PER FACTS AND LAW AFTER PROVIDING DUE OPPORTUNITY O F HEARING TO THE ASSESSEE. 3.1 FINDING FORCE IN THE CONTENTION OF LD. A.R., WE RESTORE THE MATTER TO ASSESSING OFFICER WITH THE DIRECTIONS TO DECIDE THE SAME AS PER FACTS AND LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. I.T.A. NOS. 757, 789 & 790/AHD/2011 FOR A.Y. 06-07, 03-04 & 04-05 (DCIT VS. NETVISION WEB TECHNOLOGIES LTD.) PAGE 7 6.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWI NG THE SAME REASONING, WE RESTORE THIS ISSUE TO ASSESSING OFFIC ER. THE NEXT ISSUE REMAINS IN A.Y. 03-04 & 04-05 ON THE POINT OF REOPENING. IN VIEW OF ABOVE OBSERVATIONS ON MERIT, THE ISSUE O F REOPENING GOES ACADEMIC. HOWEVER, IN THE INTEREST OF JUSTICE , REVENUE IS AT LIBERTY TO RAISE THIS ISSUE AS AND WHEN SITUATIO N ARISES FOR THE SAME. 7. IN RESULT, REVENUES APPEALS IN ALL THREE YEARS ARE PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF DECEMBER, 2014. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA $ $ $ $ &' &' &' &' ('# ('# ('# ('# / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. -- . / CONCERNED CIT 4. .- / CIT (A) 5. '23 &, , / DR, ITAT, AHMEDABAD 6. 367 89 / GUARD FILE. BY ORDER / $ , :/ - , <