The DCIT, Circle-4(1)(1), Ahmedabad V. Urmin Marketing Pvt. Ltd, Ahmedabad

MA 8/AHD/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7868 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 03-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L. P. JAIN
• Keywords: Depreciation; Scheme of amalgamation; Set aside
• Section: 254(2)

Judgement Text

PAGE 1 OF 6 , IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT) BEFORE, SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER M.A NO.8/AHD/2021 IN ./ ITA NO.1806/AHD/2019 / ASSTT. YEAR: 2015-2016 D.C.I.T, CIRCLE-3(1)(1), AHMEDABAD. VS. M/S URMI MARKETING PVT. LTD., (NOW KNOWN AS UNICORN PACKAGING LLP), URMI HOUSE, B/S. HOF LIVING SINDHU, BHAVAN ROAD, BODAKDEV, AHMEDABAD. PAN: AAACU9197R (APPLICANT) (RESPONDENT) REVENUE BY : SHRI L.P. JAIN, SR.D.R ASSESSEE BY : SHRI ASEEM THAKKAR, A.R / DATE OF HEARING : 06/08/2021 / DATE OF PRONOUNCEMENT: 24/08/2021 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE REVENUE BY WAY OF THIS MISCELLANEOUS APPLICATION IS PLEADING TO RECALL THE ORDER PASSED BY THE ITAT IN ITA NO. 1806/AHD2019 FOR A.Y. 2015-16 ON THE REASONING THAT THERE IS A MISTAKE APPARENT FROM RECORD. M.A NO.8/AHD/2021 IN ITA NO.1806/AHD/2019 ASSTT. YEAR 2015-16 PAGE 2 OF 6 2. THE REVENUE IN THE MISCELLANEOUS APPLICATION SUBMITS THAT THE ASSESSEE FOLLOWED THE POOLING OF INTEREST METHOD IN THE SCHEME OF AMALGAMATION. UNDER THE POOLING OF INTEREST METHOD THE QUESTION OF GOODWILL DOES NOT ARISE. THE DIFFERENCE, IF ANY ARISES BETWEEN THE ASSETS & LIABILITIES WHICH WERE ACQUIRED AT THE BOOK VALUE AND CONSIDERATION PAID BY THE AMALGAMATED COMPANY, IS ADJUSTED AGAINST THE RESERVE. THE FACT OF FOLLOWING THE POOLING OF INTEREST METHOD BY THE ASSESSEE IN THE SCHEME OF AMALGAMATION WAS HIGHLIGHTED BY THE AO IN HIS ORDER AFTER MAKING A REFERENCE TO AS 14 AND IND AS-103. LIKEWISE THE ASSESSEE ALSO ADMITTED BEFORE THE ITAT THAT THE ASSESSEE FOLLOWED POOLING OF INTEREST METHOD IN THE SCHEME OF AMALGAMATION AND THE ITAT HAS ALSO TAKEN THE COGNIZANCE OF THE SAME IN ITS ORDER. ACCORDINGLY, ONCE IT HAS BEEN ADMITTED BY THE ITAT THAT THE ASSESSEE IS FOLLOWING POOLING OF INTEREST METHOD IN THE SCHEME OF AMALGAMATION, THEN THE QUESTION OF GOODWILL DOES NOT ARISE. HOWEVER, THE ITAT IN ITS ORDER HAS ALLOWED THE DEPRECIATION ON THE GOODWILL WHICH IS CONTRARY TO THE FACTS AVAILABLE ON RECORD. THE REASONING GIVEN BY THE ITAT FOR RECOGNIZING THE GOODWILL WAS THAT THE SCHEME OF AMALGAMATION HAS BEEN APPROVED BY THE HONBLE GUJARAT HIGH COURT WHEREIN THE CLAUSE WITH RESPECT TO THE GOODWILL WAS APPEARING IN THE SCHEME OF AMALGAMATION. HOWEVER, THE ASSESSEE IN THE SCHEME OF AMALGAMATION DID NOT SPECIFY WHETHER IT WAS FOLLOWING POOLING OF INTEREST METHOD OR PURCHASE METHOD OF AMALGAMATION. IN THE CASE OF PURCHASE METHOD, IN THE SCHEME OF AMALGAMATION, THE ACCOUNTING STANDARD RECOGNIZES THE GOODWILL BUT IT IS NO IN THE CASE OF POOLING OF INTEREST METHOD. AS SUCH THE ASSESSEE HAS JUST MENTIONED IN THE SCHEME OF AMALGAMATION THAT IF ANY DIFFERENCE ARISES BETWEEN THE NET ASSETS ACQUIRED BY IT AND THE PURCHASE CONSIDERATION, THE SAME SHALL BE ADJUSTED EITHER TO CAPITAL RESERVE OR GOODWILL AS THE CASE MAY BE IN THE BOOKS OF TRANSFEREE COMPANY. IN THIS CONNECTION, THE RELEVANT CONTENTION OF THE REVENUE STANDS AS UNDER: 13. IT WAS NOWHERE DECLARED BY THE ASSESSEE IN THIS SCHEME THAT IT COULD BE FOLLOWING POOLING OF INTEREST METHOD OR PURCHASE METHOD OF AMALGAMATION. IT WAS ALSO NOT SPECIFICALLY POINTED OUT BY THE ASSESSEE THAT THERE WOULD BE GOODWILL ARISING ON ACCOUNT OF SUCH AMALGAMATION. IT WAS MERELY MENTIONED THAT CREATION OF GOODWILL WAS ONE OF THE POSSIBLE ALTERNATIVES IN THIS SCHEME. THE HON'BLE COURT HAD ACCEPTED THE SCHEME WITH THIS GENERAL PROVISIONS. AT THAT STAGE NEITHER THE HON'BLE COURT CONDUCTED ANY DETAILED INQUIRY IN TO THE QUESTION OF THE METHOD WHICH WOULD BE FOLLOWED BY THE ASSESSEE NOR WAS ANY FINDING WITH REGARD TO THIS FACT GIVEN BY THE HON'BLE COURT. THE ASSESSING OFFICER ALSO DID NOT HAVE ANY M.A NO.8/AHD/2021 IN ITA NO.1806/AHD/2019 ASSTT. YEAR 2015-16 PAGE 3 OF 6 ACCESS TO THE MINDS OF THE ASSESSEE AS TO WHICH SCHEME WOULD HE FOLLOW AND WHETHER SUCH SCHEME WOULD INVOLVE THE CREATION OF GOODWILL. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER COULD NOT BE BARRED FROM EXAMINING THIS ISSUE AT THE STAGE OF ASSESSMENT WHEN THE ASSESSEE HAD CLAIMED THE CREATION OF GOODWILL AND DEPRECIATION THEREON. 3. THE REVENUE IN ITS APPLICATION FURTHER SUBMITTED THAT THE ITAT HAS ALLOWED THE DEPRECIATION ON THE GOODWILL AFTER MAKING RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES REPORTED IN [2012] 348 ITR 302 (SC). HOWEVER, THERE WAS NO QUESTION BEFORE THE HONBLE SUPREME COURT WHETHER THE GOODWILL CAN ARISE IN THE SCHEME OF AMALGAMATION. FURTHERMORE THERE WAS NO ISSUE RAISED BEFORE THE HONBLE SUPREME COURT FOR THE APPLICABILITY OF THE PROVISIONS OF AS 14 AND AS 103 BEFORE IT. ACCORDINGLY THERE IS NO QUESTION OF ALLOWING THE DEPRECIATION AFTER HAVING RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT. 3.1 THE REVENUE IN THE LIGHT OF THE ABOVE STATED DISCUSSION FRAMED THE FOLLOWING QUESTIONS: '1. WHETHER THE HON'BLE ITAT HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSES WAS JUSTIFIED IN RECORDING THE EXCESS AMOUNT OF PURCHASE CONSIDERATION AS GOODWILL IN ITS BOOKS OF ACCOUNTS ALTHOUGH THE ASSESSES HAD ADMITTEDLY FOLLOWED POOLING OF INTEREST METHOD AS POINTED OUT IN PARA 26.6 OF THE ITAT ORDER IN WHICH METHOD THERE IS NO CONCEPT OFGOODWILL AS PER AS -14.' 2. WHETHER THE HON'BLE ITAT HAS ERRED ON FACTS BY HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR CLAIM OF DEPRECIATION IN SPITE OF THE FACT THAT THE HON'BLE ITAT HAS SPECIFICALLY POINTED OUT IN PARA 31.7 THAT THE ASSESSEE HAS FOLLOWED POOLING OF INTEREST METHOD AND FURTHER POINTED OUT IN PARA 23.6 THAT THERE IS NO CONCEPT OF GOODWILL IN POOLING OF INTEREST METHOD. 3. WHETHER IN VIEW OF THE AFORESAID FACTS THE ORDER PASSED BY THE HON'BLE ITAT IS SELF CONTRADICTORY AND PERVERSE AND NEEDS TO BE SET ASIDE.' 4. THE LEARNED DR IN VIEW OF THE ABOVE BEFORE US CONTENDED THAT THERE IS A MISTAKE IN THE ORDER OF THE ITAT WITHIN THE MEANING OF THE PROVISIONS OF SECTION 254(2) OF THE ACT. THUS THE ORDER PASSED BY THE ITAT SHOULD BE RECALLED. 5. ON THE OTHER HAND THE LEARNED AR BEFORE US SUBMITTED THAT THE HONBLE ITAT HAS RECOGNIZED THE GOODWILL AND ALLOWED THE DEPRECIATION AFTER MAKING THE REFERENCE TO THE SCHEME OF AMALGAMATION WHICH WAS APPROVED BY THE HONBLE GUJARAT HIGH M.A NO.8/AHD/2021 IN ITA NO.1806/AHD/2019 ASSTT. YEAR 2015-16 PAGE 4 OF 6 COURT. FURTHERMORE, THE COMMENT WERE ALSO INVITED FROM THE INCOME TAX DEPARTMENT WITH RESPECT TO SUCH SCHEME OF AMALGAMATION BUT THERE WAS NO ADVERSE REMARK FILED/SUBMITTED FROM THE SIDE OF THE REVENUE. THUS, IT WAS IMPLIED THAT THE REVENUE CANNOT RAISE ANY OBJECTION AT THE TIME OF HEARING. THE LD. AR VEHEMENTLY SUPPORTED THE ORDER OF THE ITAT. 6. WE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE PROVISIONS OF SECTION 254(2) OF THE ACT EMPOWERS THE ITAT TO RECTIFY THE MISTAKE COMMITTED BY IT. BUT SUCH A MISTAKE HAS TO BE APPARENT FROM RECORD. THERE ARE VARIOUS JUDICIAL PRECEDENTS ON THE CONCEPT WHAT A MISTAKE APPARENT FROM RECORD IS. GENERALLY, WHEREVER TWO VIEWS ARE POSSIBLE WITH RESPECT TO ANY ISSUE/QUESTION, IT IS IMPLIED THAT THE MISTAKE CANNOT BE SAID AS APPARENT. IN THIS RESPECT WE FIND SUPPORT AND GUIDANCE FROM THE OBSERVATION OF HONBLE APEX COURT IN THE CASE OF ACIT-RAJKOT VS. SAURASHTRA KUTCH STOCK EXCHANGE LTD. REPORTED IN [2008] 305 ITR 227 (SC), WHERE THE HONBLE APEX COURT DEFINED THE TERM APPARENT MISTAKE IN CONTEXT OF SECTION 254(2) OF THE ACT WHICH READS AS UNDER: THE MAIN QUESTION, THEREFORE, IS WHAT IS A 'MISTAKE APPARENT FROM THE RECORD'? IN VIEW OF VARIOUS DECISIONS OF THE SUPREME COURT, A PATENT, MANIFEST AND SELF-EVIDENT ERROR, WHICH DOES NOT REQUIRE ELABORATE DISCUSSION OF EVIDENCE OR ARGUMENT TO ESTABLISH IT, CAN BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD AND CAN BE CORRECTED WHILE EXERCISING CERTIORARI JURISDICTION. AN ERROR CANNOT BE SAID TO BE APPARENT ON THE FACE OF THE RECORD IF ONE HAS TO TRAVEL BEYOND THE RECORD TO SEE WHETHER THE JUDGMENT IS CORRECT OR NOT. AN ERROR APPARENT ON THE FACE OF THE RECORD MEANS AN ERROR WHICH STRIKES THE EYE ON MERELY LOOKING AT IT AND DOES NOT NEED LONG-DRAWN-OUT PROCESS OF REASONING ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO OPINIONS. SUCH AN ERROR SHOULD NOT REQUIRE ANY EXTRANEOUS MATTER TO SHOW ITS INCORRECTNESS. TO PUT IT DIFFERENTLY, IT SHOULD BE SO MANIFEST AND CLEAR THAT NO COURT WOULD PERMIT IT TO REMAIN ON RECORD. IF THE VIEW ACCEPTED BY THE COURT IN THE ORIGINAL JUDGMENT IS ONE OF THE POSSIBLE VIEWS, THE CASE CANNOT BE SAID TO BE COVERED BY AN ERROR APPARENT ON THE FACE OF THE RECORD. [PARA 37] 6.1 IN THE CASE ON HAND, ADMITTEDLY THE AO HAS DISCUSSED VARIOUS METHODS OF ACCOUNTING AND HELD THAT THE ASSESSEE WAS FOLLOWING POOLING OF INTEREST METHOD IN THE SCHEME OF AMALGAMATION. LIKEWISE THIS FACT WAS ALSO ADMITTED BY THE ASSESSEE BEFORE THE ITAT. HOWEVER, WE FIND THAT ONE OF THE THRUST OF THE ITAT FOR RECOGNIZING THE GOODWILL IN THE BOOKS OF ACCOUNTS WAS BASED ON THE REASONING THAT THE SCHEME M.A NO.8/AHD/2021 IN ITA NO.1806/AHD/2019 ASSTT. YEAR 2015-16 PAGE 5 OF 6 OF AMALGAMATION WAS DULY APPROVED BY THE HONBLE GUJARAT HIGH COURT VIDE ORDER DATED 27-07-2015. IT WAS ALSO HIGHLIGHTED BY THE ITAT THAT THE ASSESSEE HAS DULY DISCLOSED THE PURCHASE CONSIDERATION PAID BY THE TRANSFEROR COMPANY TO THE TRANSFEREE COMPANY IN PARAGRAPH NUMBER 31.7 AND 31.8 OF ITS ORDER. LIKEWISE, THE ITAT ALSO MADE A REFERENCE TO THE SCHEME OF AMALGAMATION WHEREIN CREATION OF THE GOODWILL OR THE RESERVE AS THE CASE MAY BE WAS SPECIFIED IN CLAUSE 6.4 IN THE SCHEME OF AMALGAMATION. 6.2 IT WAS ALSO RECORDED BY THE ITAT THAT THERE WAS NO OBJECTION RAISED BY THE REVENUE IN THE SCHEME OF AMALGAMATION WHEN THE REPRESENTATION WAS INVITED BY THE HONBLE GUJARAT HIGH COURT DURING THE PROCESS OF APPROVING AMALGAMATION SCHEME. THIS FINDING OF THE ITAT IS RECORDED ON PARA 31.11 TO 31.15 OF THE ITAT ORDER. 6.3 WITHOUT PREJUDICE TO THE ABOVE, THE ITAT IN ITS ORDER HAS ALSO RECORDED A FINDING THAT THE AMALGAMATED COMPANY/TRANSFEREE COMPANY HAS INCURRED A COST AMOUNTING TO RS. 555.75 CRORES BY WAY OF ISSUING SHARES FOR ACQUIRING THE NET ASSETS OF THE TRANSFEROR /AMALGAMATING COMPANY. THIS FACT HAS NOT BEEN DISPUTED. THE RELEVANT FINDING OF THE ITAT IS ON PARA 31.7 TO 31.9 OF THE ORDER. IT WAS ALSO RECORDED THAT THERE IS NO DISPUTE QUA THE FACT OF MAKING THE PAYMENT BY WAY OF ISSUING THE SHARES WHICH IS A VALID MODE OF PAYMENT AS HELD BY THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. MIRA EXIM LTD REPORTED IN 359 ITR 70 . ACCORDINGLY, THE ITAT AFTER CONSIDERING ALL THESE FACTS HAVE RECOGNIZED THE GOODWILL IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 6.4 HOWEVER, THE REVENUE HAS NOT POINTED OUT ANY MISTAKES WITH RESPECT TO THE ABOVE FINDING OF THE ITAT. THEREFORE IT CANNOT BE SAID THAT THERE IS A MISTAKE APPARENT FROM RECORD ARISING FROM THE ORDER OF THE ITAT. M.A NO.8/AHD/2021 IN ITA NO.1806/AHD/2019 ASSTT. YEAR 2015-16 PAGE 6 OF 6 6.5 WITH RESPECT TO THE 2 ND ALLEGATION THAT THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD (SUPRA) ARE NOT APPLICABLE IN THE CASE ON HAND. IN THIS REGARD, WE NOTE THAT ONCE THE ITAT HAS RECOGNIZED THE GOODWILL IN THE BOOKS OF THE ASSESSEE WHICH IS A TANGIBLE ASSETS AS HELD BY THE HONBLE SUPREME COURT. THEREFORE THE REFERENCE MADE TO THE ABOVE JUDGMENT OF THE HONBLE SUPREME COURT WAS NOT MADE IN THE CONTEXT OF AS 14 AND AS 103. BUT IT WAS REFERRED TO HOLD THAT THE GOODWILL BEING INTANGIBLE ASSET IS ELIGIBLE FOR THE DEPRECIATION. 6.6 IN VIEW OF THE ABOVE, WE DO NOT FIND THAT THERE IS ANY MISTAKE IN THE ORDER OF THE ITAT WHICH IS APPARENT FROM RECORD. HENCE, WE DISAGREE WITH THE CONTENTION OF THE LEARNED DR. THUS THE MA FILED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 24/08/2021 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (TRUE COPY) AHMEDABAD; DATED 24/08/2021 MANISH