TaxTMI 
TaxTMI 
2019 (1) TMI 1349
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....961( hereinafter called "the Act") which was in pursuance to the order dated 29.10.2010 passed by Transfer Pricing Officer(hereinafter called "the TPO") u/s 92CA(3) of the 1961 Act. 2. First , we shall dispose of Revenue's appeal in ITA no. 4154/Mum/2015 for AY 2007-08 and Cross Objections in C.O.No. 147/Mum/2015 arising out of Revenue's appeal in ITA no. 4154/Mum/2015 , filed by the assessee. against aforesaid Revenue's appeal. This appeal filed by the Revenue in ITA No. 4154/Mum/2015 and C.O.No. 147/Mum/2015 filed by the assessee, both for AY 2007-08 are disposed of because the tax effect in the Revenue's appeal is less than Rs. 20 lacs as per the CBDT Circular No. 3/2018, F. No. 279/Misc.142/2007-ITJ (Pt) dated 11th July, 2018 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India. 3. The Ld. DR submitted that this appeal filed by Revenue is not maintainable as tax effect is less than Rs. 20 lacs being a low tax effect appeal covered by CBDT circular no. 3/2018 dated 11.07.2018 and this appeal of the Revenue is also not covered by any of exceptions as notified by CBDT circular and this appeal is thus not maintainable as tax....
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....chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. 5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves m....
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....ssment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. 8. In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value and also bring to the notice of the Tribunal/ Court the provisions of sub section (4) of section 268A of the Income-tax A....
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....hese limits may not be considered henceforth. 13. This Circular will apply to SLPs/appeals/cross objections/references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed. 14. The above may be brought to the notice of all concerned. 15. This issues under Section 268A of the Income-tax Act 1961. 16. Hindi version will follow. Sd/- (Neetika Bansal) Director (ITJ), CBDT, New Delhi. Copy to: 1. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary and above. 2. All Pr. Chief Commissioners of Income Tax and All Directors General of Income Tax with a request to bring to the attention of all officers. 3. ADG (PR, PP& OL)t Mayur Bhawan, New Delhi for printing in the quarterly Tax Bulletin and for circulation as per usual mailing list. 4. The Comptroller and Auditor General of India. 5. ADG (Vigilance), Mayur Bhawan, New Delhi. 6. The Joint Secretary & Legal Advisor, Ministry of Law & Justice, New Delhi. 7. All Dir....
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....ordance with the clauses as are contained in the afore-stated circular number 3/2018 dated 11.07.2018, the Revenue is hereby granted liberty to file miscellaneous application praying for recall of this order in accordance with law. Since, the Revenue is dismissed due to low tax effect vide CBDT circular dated 11.07.2018 , the corresponding C.O. filed by the assessee arising out of Revenue's appeal has now become infructuos which also stood dismissed. Thus, both Revenue's appeal in ITA No. 4154/Mum/2015 and assessee's C.O.No. 147/Mum/2015 arising out of Revenue's appeal , for AY 2007-08 stood dismissed. We order accordingly. 4.In the result, the appeal filed by the Revenue in ITA no. 4154/Mum/2015 as well Cross Objections filed by the assessee being C.O.No. 147/Mum/2015 arising out of Revenue's both for AY 2007-08 , are dismissed as indicated above. ITA NO. 4337/Mum/2015-AY 2007-08-Assessee's Appeeal 5. The assessee has raised following grounds of appeal in memo of appeal filed with the tribunal in ITA no. 4337/Mum/2015 for AY 2007-08, as under:- 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the entire goo....
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.... Denmark as its JV partners. However, in the year 2005 , the JV was discontinued and the entire stake of L & T in the assessee company was taken over by Niro A/s, Denmark. Thereafter, name of the assessee company was changed and it became the wholly owned subsidiary of Niro A/s, Denmark. The assessee had acquired Food and Pharma division of L&T vide agreement dated 26.05.2005. The assessee vide this agreement dated 26.05.2005 took over assets and liabilities of Food and Pharma division of L&T. The net assets of this division of L&T was at the time of acquisition by the assessee was a negative figure of Rs. 26.49 crores, whereas the sale consideration paid by the assessee to L&T for aforesaid acquisition of its Food and Pharma division was Rs. 22.74 crores. The differential between the two or the balancing figure of Rs. 49.22 crores being difference between sale consideration paid by the assessee to L&T for acquisition of its Food and Pharma division T and the net asset value of the said divisions as on the date of takeover , was recognized in the books of accounts of the assessee, after the takeover , as goodwill. The assessee also submitted valuation list dated 20.12.2010 to quant....
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....he case of Hinduja Foundries limited v. ACIT reported in (2016) 178 TTJ 88(Chennai-trib.). The courts/tribunal in the aforesaid decisions cited by the assessee has taken a consistent stand of allowing depreciation on Goodwill being excess of consideration paid over and above net asset value on the date of takeover. The learned DR on the other hand has relied upon order of authorities below and has prayed that denial of depreciation on goodwill and intangibles be upheld. 9. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee company is engaged in the business of Engineering, Procurement and Construction(EPC) of Food, Diary, Chemical and Pharma Plants. The assessee company was incorporated in the year 1992 as an joint venture with L&T Limited , India and Niro A/s, Denmark. However, in the year 2005 , the JV was discontinued and the entire stake of L & T in the assessee company was taken over by Niro A/s, Denmark. Thereafter, name of the assessee company was changed and it became the wholly owned subsidiary of Niro A/s, Denmark. The assessee had acquired Food and Pharma division of L&T vide agreeme....
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....s that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 5. In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 6. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) ['CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and li....
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....ding of the words "any other business or commercial rights of similar nature" in clause (b) of Explanation 3 indicates that goodwill would fall under the expression "any other business or commercial right of a similar nature". The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 11. In the circumstances, we are of the view that "goodwill" is an asset under Explanation 3(b) to section 32(1) of the Act.' 12. In the present case the 'Business Identification Schedule' appended to the Agreement specified the business of TPPL, which was sold to the Assessee. Apart from the tangible assets the said Schedule also included the following:- "(3) TPPL Contracts: The benefits and liabilities of TPPL's ongoing contracts as well as any other letters of intent/contracts/orders related to the Business up to the 22nd September 2006 and any revenue to be still received on 22nd September 2006. The ongoing TPPL contracts are listed in Appendix 4 to this Schedule. A copy of each of the contracts listed in Appendix 4 as well as any other letters of intent/contracts/o....
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....r connected with the premises in which the business was previously carried on or with the name of the old firm, or with any other matter carrying with it the benefit of the business." The Court had further explained that: "A variety of elements goes into its making, and its composition varies in different trades and in different businesses in the same trade, and while one element may preponderate in one business, another may dominate in another business. And yet, because of its intangible nature, it remains insubstantial in form and nebulous in character. Those features prompted Lord Macnaghten to remark in IRC v. Muller and Co.'s Margarine Limited [1901] AC 217 (HL) that although goodwill was easy to describe, it was nonetheless difficult to define. In a progressing business goodwill tends to show progressive increase. And in a failing business it may begin to wane. Its value may fluctuate from one moment to another depending on changes in the reputation of the business. It is affected by everything relating to the business, the personality and business rectitude of the owners, the nature and character of the business, its name and reputation, its location, i....
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....tandard 10 as issued by the Institute of Chartered Accountants of India. The relevant extract of which reads as under:- "16.1 Goodwill, in general, is recorded in the books only when some consideration in money or money's worth has been paid for it. Whenever a business id acquired for a price (payable either in cash or in shares or otherwise) which is in excess of the value of the net assets of the business taken over, the excess id termed as 'goodwill'. Goodwill arises from business connections, trade name or reputation of an enterprise or from other intangible benefits enjoyed by an enterprise." 18. It is also relevant to note that Smifs Securities Ltd. (supra) was a case where assets of company - YSN shares and Securities (P.) Ltd. were transferred to Smifs Securities Ltd. under a scheme of amalgamation. And, the excess consideration paid by the Assessee therein over the value of net assets of YSN Shares and Securities (P.) Ltd. acquired by the Assessee, was accounted as goodwill. 19. In view of the above, we are inclined to accept the contention advanced on behalf of the Assessee that the consideration paid by the Assessee in excess of its....