The ACIT,(OSD)Circle-5, Ahmedabad V. Parle International Pvt. Ltd., Ahmedabad

MA 38/AHD/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7328 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1994-1995
• Appeal Filed On: 30-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K VORA
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI MUKUL KUMAR SHRAWAT, JM AND SHRI A. K. GARODIA, AM) MA NO. 38/AHD/2011 (IN ITA NO.1211/AHD/2007: A.Y.: 1994-95) THE A. C. I. T.(OSD), CIRCLE 5, AHMEDABAD VS PARLE INTERNATIONAL LTD., 101, GIDC ESTATE, VATVA, AHMEDABAD PA NO. AAACP 8416 G (APPLICANT) (RESPONDENT) APPLICANT BY SHRI R. K. VORA, SR. DR RESPONDENT BY SHRI S. N. SOPARKAR WITH SHRI P. M. MEHTA, AR DATE OF HEARING : 09-12-2011 DATE OF PRONOUNCEMENT: 21-12-2011 O R D E R PER MUKUL KUMAR SHRAWAT: THIS MISC. PETITION DATED 10-02- 2011 FILED ON 30-03-2011 OF THE REVENUE IS ARISING FROM THE ORDER OF THE TRIBUNAL DATED 28.3.2008 AS MENTIONED IN THE NOMENC LATURE HEREINABOVE. 2. IN THIS PETITION THERE WAS A REFERENCE OF AN EAR LIER ORDER OF THE TRIBUNAL TITLED AS THE CIT AHMEDABAD-III VS. M/S.PARLE INTE RNATIONAL LTD., AHMEDABAD IN MA NO.212/AHD/2008 (ARISING OUT OF ITA NO.1211/AHD/2007 FOR A.Y. 1994-95) DATED 13-08- 2010 THROUGH WHICH THE PETITION OF THE REVENUE U/S 254(2) OF THE IT AC T, I.E. MISC. APPLICATION, WAS DISMISSED BECAUSE OF A TECHNICAL REASON THAT TH E SAME WAS NOT SIGNED BY THE APPROPRIATE PERSON. HOWEVER, IT WAS MENTIONED THAT THE REVENUE COULD 2 BE AT LIBERTY TO FILE A PROPER MISC. PETITION. ACCO RDINGLY, THIS MISC. PETITION IS NOW FILED BY THE REVENUE. 2.1 ANOTHER FACT HAS ALSO BEEN BROUGHT TO OUR NOTIC E THAT IN THE PAST FOR THIS VERY ASSESSMENT YEAR I.E. AY 1994-95, ITAT D BENCH VIDE ORDER DATED 04-02-2005 IN THE CASE OF THE ASSESSEE IN ITA NO.3307/AHD/1997 TITLED AS DY. CIT, SR I, AHMEDABAD VS. PARLE INTER NATIONAL LTD., AHMEDABAD AND CO NO.41/AHD/2001 (ARISING OUT OF IT A NO.3307/AHD/1997 FOR A.Y. 1994-95) TITLED AS PAR LE INTERNATIONAL LTD. VS. THE DY.CIT HAS RESTORED THE ISSUE FOR RECONSIDERA TION OF THE GOODWILL TO THE FILE OF THE LEARNED CIT(A). THEREAFTER, IN THE SECOND ROUND OF APPELLATE PROCEEDINGS VIDE IMPUGNED ORDER DATED 28-03-2008 TH E TRIBUNAL HAS DECIDED THE ISSUE OF THE GOODWILL. THE OBJECTION OF THE RE VENUE IS THAT THE TRIBUNAL HAS NOT CONFINED TO THE DIRECTIONS EARLIER MADE BY THE TRIBUNAL AND THEREFORE EXCEED THE JURISDICTION WHICH ACCORDING TO THE REVE NUE SHOULD BE LIMITED TO THE EARLIER DIRECTIONS. THE GRIEVANCE OF THE REVENU E AS PER THE IMPUGNED MISC. PETITION IS REPRODUCED BELOW: 3.. . ORDER IN THE CASE OF M/S. PARLE INTER NATIONAL LTD., 101, GIDC ESTATE, AHMEDABAD VS. ACIT CIRCLE AHMEDABAD WA S PASSED BY THE ITAT, AHMEDABAD BENCH, BENCH A IN ITA NOS. 12 11/AHD/2007 AND 1330/AHD/2007 VIDE THEIR ORDER DATED 28.03.2008 . THIS APPEAL AROSE OUT OF ORIGINAL ORDER OF ITAT IN ITA NO.3307/ AHD/1997 FOR THE A. Y. 1994-95 WHEREIN AFTER CONSIDERING THE ARGUMEN TS OF BOTH THE SIDES, THE WORTHY ITAT SET ASIDE THE ISSUE OF TAXAB ILITY OF GOODWILL WITH THE FOLLOWING OBSERVATIONS: WE FIND THAT THERE ARE VARIOUS PREVAILING METHODS OF VALUATION OF GOODWILL. BUT THE ASSESSEE HAS FAILED TO POINT O UT THE METHOD OF VALUATION OF GOODWILL OR BASIS OF VALUATION OF G OODWILL TAKEN 3 IN THE AGREEMENT. IT IS NOT SO SIMPLE ISSUE, SO AS TO FACTS OF THE CASE THAT THE VALUE OF GOODWILL MOTIONED IN AGREEME NT IS TO BE ACCEPTED. SUCH AGREEMENT IS ACCEPTABLE IF IT IS SUP PORTED BY PROPER BASIS AND METHOD OF VALUATION OF GOODWILL. W E FIND HAT COMPLETE FACTS ARE REQUIRED TO BE EXAMINED AND RECO RDED. IT HAS ALSO BEEN NOTICED THAT THE CIT(A) DECIDED THE ISSUE WITHOUT PROPER APPRECIATION OF THE FACTS RECORDED BY THE AS SESSING OFFICER. HE HAS NOT GIVEN ANY FINDING ABOUT THE APP LICABILITY OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF MCDOW ELL & CO. (SUPRA) WHEREAS BEFORE US THE LD. AR SUBMITTED THAT THE SAID JUDGMENT IS NOT APPLICABLE TO THE FACTS OF THE CASE AND IN VIEW OF LATEST JUDGMENT OF HONBLE SUPREME COURT IN TH4E CA SE OF 263 ITR 706 (SC). IN RESPECT OF THE OTHER DECISION CITE D BY THE LD. AR WE ARE OF THE VIEW THAT EVERY JUDGMENT IS TO BE SEEN IN THE LIGHT OF THE FACTS OF THE CASE. IN THE CASE OF UNDE R CONSIDERATION THE CONTROVERSY IS RATHER FACTUAL THAN LEGAL ONE. T HE CIT(A) INSTEAD OF QUASHING THE ORDER OF ASSESSING OFFICER, SHOULD HAVE EXAMINED THE METHOD OF VALUATION OF GOODWILL ADOPT4 ED BY THE ASSESSEE. AS IT HAS BEEN SAID ABOVE THAT THERE ARE VARIOUS PREVAILING METHODS OF VALUATION OF GOODWILL. SINCE THIS FACT HAS NOT BEEN PROPERLY EXAMINED UNDER THE CIRCUMSTANCES WE SET ASIDE THE ORDER OF THE CIT(A) TO DECIDE THE SAME. IT IS CLEAR FROM THE DIRECTION GIVEN BY THE ITAT RE PRODUCED ABOVE THAT: 1. THE HONBLE ITAT WAS OF THE OPINION THAT THE GOODWI LL HAD TO BE TAXED. 2. THEY WERE ALSO OF THE OPINION THAT THE CONTROVERSY IS FACTUAL RATHER THAN LEGAL. 3. THEY SET-ASIDE ORDER O F THE CIT(A) ON THE GROUNDS THAT THERE ARE A NUMBER OF METHOD OF VALUATION OF GOODWI LL AND THE CIT(A) MAY FOLLOW ONE OF THE RECOGNIZED VALUATION METHOD TO DETERMINE ACTUAL VALUE OF GOOD WILL. IT WAS ON THE LIMITED QUESTION OF THE METHOD TO BE FOLLOWED FOR VALUATION OF GOODWILL THAT THE SAID ISSUE WAS SET A SIDE TO THE FILE OF HT4E CIT(A). IT IS ESTABLISHED LAW THAT NO AUTHORIT Y CAN TRAVEL BEYOND THE ISSUE ON WHICH AN ORDER HAS BEEN SET ASIDE. 4 THE CIT(A) DUTIFULLY FOLLOWED THE DIRECTIONS OF THE HONBLE TRIBUNAL DTD. 04.02.2005 AND VALUED THE GOODWILL AC CORDINGLY. THEREFORE, THE ONLY ISSUE TO BE DECIDED BY THE ITAT , AHMEDABAD BENCH A IN APPEAL NO.1330/AHD/2007 WAS WHETHER THE METHOD ADOPTED FOR VALUATION OF THE GOODWILL BY THE CIT(A) WAS CORRECT OR NOT. UNFORTUNATELY, IN THEIR ORDER DATED 28.03.2008, THE HONOURABLE ITAT BENCH A HAS TRAVELED BEYOND THE LIMITED ISSU E BEFORE THEM AND HAS DECIDED THE APPEAL ON LEGAL ISSUE OF WHETHE R THE AGREEMENT ENTERED INTO COULD BE CHALLENGED OR NOT. THEIR CONC LUSION IN PARA 9 PAGE 476 OF THEIR ORDER ALSO REVOLVES AROUND WHETHE R THE REVENUE COULD DOUBT THE GENUINENESS OF THE AGREEMENT OR NOT BY WHICH THE SAID GOODWILL AND OTHER INTANGIBLES WERE TRANSFERRED. THEREFORE, IT IS CLEAR THAT THE ORDER OF THE ITAT A HMEDABAD BENCH A SUFFERS FROM THE LEGAL INFIRMITY THAT THE DECISION IS BASED ON AN ISSUE WHICH WAS NOT BEFORE THE ITAT AND THAT THERE IS NO DECISION ON THE ACTUAL ISSUE BEFORE T4HE ITAT. FOR THE SAKE OF EMPHASIS IT MAY BE REPEATED THAT IN A SET-ASIDE PRO CEEDINGS ONLY THE ISSUE WHICH HAS BEEN SET ASIDE CAN BE ADJUDICATED U PON. IN VIEW OF THE ABOVE, IT IS REQUESTED THROUGH THIS M.A. THAT THE ORDER OF THE ITAT, AHMEDABAD BENCH A IN ITA NO.12 11/AHD/2007 AND 1330/AHD/2007 IN THE CASE OF M/S. PARLE INTERNA TIONAL LTD. MAY BE WITHDRAWN AND CANCELLED AND THE ISSUE BEFORE THE HONBLE TRIBUNAL AS DELINEATED ON PAGE NO.1 OF THIS MISCELL ANEOUS APPLICATION MAY BE ADJUDICATE UPON AFRESH AFTER HEA RING BOTH THE PARTIES. 3. FROM THE SIDE OF THE REVENUE LEARNED DR MR. B.L. YADEV AND MR. R. K. VORA REPRESENTED THE PETITIONER AND ARGUED THAT IN THE SECOND ROUND OF APPEAL THE AUTHORITIES SHOULD HAVE CONFINED THEIR J UDGMENT ON THE LINES ON WHICH THE MATTER HAD BEEN RESTORED FOR RECONSIDERAT ION. THE LEARNED DRS HAVE ARGUED THAT IN THE IMPUGNED ORDER THE TRIBUNAL HAS TRAVELED BEYOND THE 5 LIMITED ISSUE AND HAS DECIDED WHETHER THE AGREEMENT FOR THE PURPOSE OF GOODWILL COULD BE CHALLENGED AND THAT THE REVENUE C ANNOT DOUBT THE GENUINENESS OF THE AGREEMENT THROUGH WHICH THE GOOD WILL WAS TRANSFERRED. 4. ON THE OTHER HAND, FROM THE SIDE OF THE RESPONDE NT ASSESSEE MR. S. N. SOPARKAR AND MR. P. M. MEHTA, LEARNED ARS APPEARED AND PLACED BEFORE US THE FIRST ORDER OF THE TRIBUNAL DATED 04-02-2005 AL ONG WITH THE CONSEQUENTIAL ORDER OF THE LEARNED CIT(A). IT HAS ALSO BEEN MENTI ONED THAT THE DEPARTMENT HAD ALREADY GONE IN APPEAL BEFORE THE HONBLE HIGH COURT. 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A T THE OUTSET, WE ARE OF THE VIEW THAT WHILE RESTORING THE ISSUE IN THE FIRS T FOUND OF APPEAL VIDE ORDER DATED 04-02-2005, THE TRIBUNAL HAS STATED THAT THE AGREEMENT IN QUESTION COULD BE ACCEPTED IF SUPPORTED BY PROPER BASIS. IT WAS ALSO OPINED BY THE TRIBUNAL THAT THE ISSUE WAS NOT SO SIMPLE AND, THER EFORE, THE VALUE OF THE GOODWILL AS MENTIONED IN THE AGREEMENT IS TO BE EXA MINED. IT WAS SPECIFICALLY MENTIONED THAT THE COMPLETE FACTS WERE REQUIRED TO BE EXAMINED AND TO BE RECORDED. 5.1 IN THE SECOND ROUND OF APPEAL FACTS WERE CONSID ERED AND FINALLY IT WAS HELD AS UNDER: 9. AFTER CAREFUL CONSIDERATION OF THE AFORESAID DE CISIONS, WE ARE OF THE OPINION THAT SO FAR AS TRANSACTIONS UNDE R APPEAL BEFORE US AND OTHER GROUP CASES WERE CONCERNED, THE SAME BEING SUPPORTED BY DULY EXECUTED LAWFUL AGREEMENTS AND THE AGREEMENTS HAVING BEEN ACTED BY BOTH THE PARTIES, T HE REVENUE 6 HAS NO RIGHT OR LEGAL JURISDICTION TO DOUBT THE GEN UINENESS OF THE SAME AND SPECIALLY WHEN THERE WAS NO MATERIAL O N RECORD TO SUPPORT THE REVENUES STAND. TO DOUBT THE GENUINENE SS OF THE TRANSACTION ENTERED INTO UNDER LAWFUL AGREEMENT BY THE PARTIES ON THE BASIS OF CONJECTURES AND SURMISES OR WITHOUT THERE BEING ANY MATERIAL EVEN TO ENTERTAINED SUCH DOUBT IS NOT PERMISSIBLE UNDER ANY LAW OF THE LAND WHAT TO SAY OF THE INCO ME TAX LAW. OUR AFORESAID VIEW IS FORTIFIED BY TH4E DECISION OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF MOHIT MARKETING LTD . (SUPRA), WHERE THE HONBLE HIGH COURT HAS SPECIFICALLY OBSER VED THAT THE PARTIES TO THE AGREEMENT ARE BOUND BY THE TERMS OF THE CONTRACT AND IT IS NOT OPEN TO ANY THIRD PARTY INCL UDING TH4E REVENUE TO RE-WRITE OR DISTURB OR DOUBT THE TERMS O F CONTRACT. 5.2. THEREFORE, WE ARE OF THE VIEW THAT NO MISTAKE WAS COMMITTED BY THE TRIBUNAL IN APPRECIATING THE FACTS PERTAINING TO TH E AGREEMENT IN QUESTION AND SO HELD THAT THE REVENUE HAD NO RIGHT OR LEGAL JURI SDICTION TO DOUBT THE GENUINENESS OF THE AGREEMENT, SPECIALLY WHEN THERE WAS NO MATERIAL ON RECORD TO SUPPORT THE STAND OF THE REVENUE. THIS OB SERVATION CAN BE SAID TO BE IN LINE WITH THE OBSERVATION MADE EARLIER. THE GRIE VANCE OF THE REVENUE IS, THEREFORE, NOT PROPER AND DESERVES TO BE DISMISSED. 6. OTHERWISE ALSO, WE ARE NOT GOING TO ENTERTAIN TH IS MISC. PETITION OF THE REVENUE BECAUSE THE ISSUE RAISED IN RESPECT OF THE GOODWILL IS NOW SUBJUDICE BEFORE THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.1905/2008 WITH TAX APPEAL NO.1906/2008 ORDER DATED 19-01-2010 WHER EIN THE APPEALS FILED BY THE REVENUE DEPARTMENT WERE ADMITTED AND THE QUE STION OF GOODWILL AS RAISED BY THE REVENUE DEPARTMENT WERE FORMULATED FO R CONSIDERATION. ONCE THE SAID ISSUE OF GOODWILL IS NOW UNDER CONSIDERATI ON OF THE HONBLE HIGH COURT, THEREFORE, THE SAME IS BEYOND THE SCOPE OF T HE PROVISIONS OF SECTION 7 254(2) OF THE IT ACT. ON THIS GROUND AS WELL, WE HE REBY DISMISS THIS MISC. APPLICATION OF THE REVENUE 7. IN THE RESULT, THIS MISC. PETITION OF THE REVEN UE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/12/2011 SD/- SD/- (A. K. GARODIA ) ACCOUNTANT MEMBER (MUKUL KR. SHRAWAT) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER // TRUE COPY // D Y. REGISTRAR, ITAT, AHMEDABAD