TaxTMI 
TaxTMI 
2019 (9) TMI 720
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....ital gain on transfer of land under the scheme of succession u/s.47 (xiii) of the I.T. Act. 3. The learned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs. 16,16,310/- on account of payment made to sister concerns u/s.49A(2) of the I.T. Act. 4. On the facts and circumstances of the case the ''''Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 5. It is therefore prayed that the order of the learned CIT(Appeals) may be set aside and that of the A.O be restored to the above extent. 1st we take up the issue raised by the Revenue in the ground No. 2. The issue raised by the assessee in ground No. 2 is that the Ld. CIT-A erred in deleting the addition of Rs. 16,78,636/- representing the capital gain on the transfer of land treating the impugned transaction covered under the scheme of succession under section 47(xiii) of the Act. 2. The facts, in brief, are that the assessee in the present case is the limited company and engaged in the activity of Manufacturing of Machinery on a turn-key basis. There were two partnership firms namely M/s Neptune Equipment & M/s Neptune Engineering Co., which we....
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....land acquired by it from the impugned partnership firms and added to the total income of the assessee. The aggrieved assessee preferred an appeal to the Ld. CIT-A. 3. The assessee before the Ld. CIT-A submitted that it had satisfied all the conditions as specified under the provisions of section 47(xiii) of the Act. i. All the assets and liabilities of the partnership firms as stood immediately before the date of succession have been transferred to the assessee. ii. Similarly, all the partners of the firm have become the shareholder of the company in the same proportion of their capital in the firm as stood immediately before the date of succession. iii. The partners of the firm received the consideration only in the form of allotment of shares. There was no other benefit directly or indirectly received by the partners of the firm from the company. iv. Similarly, the aggregate shareholding of the partners in the company is not less than 50% of the total voting power of the company, which was continued as such for five years from the date of succession. 3.1 There is no requirement under the provisions of section 47(xiii) of the Act that t....
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....of the capital in the firm as stood immediately before succession as specified under section 47(xiii) of the Act. 5.3 We also note that there is no prohibition for the introduction of new partners in the partnership firms before the date of succession. As such, the introductions of the partners in the firm before the date of succession does not act as an estoppel on the operation of the exemption provided under section 47(xiii) of the Act. In view of the above, we hold that there was no violation of the provisions of section 47(xiii) of the Act and accordingly conclude that there cannot be any income on account of transfer of the impugned land to the assessee. Hence we uphold the finding of the Ld. CIT-A. The 1st issue raised by the Revenue is that the Ld. CIT-A erred in deleting the addition made by the AO for Rs. 1,98,37,500/- on account of the depreciation on technical know-how and trademark. 6. The assessee has acquired two partnership firms in the year under consideration in the manner as provided under section 47(xiii) of the Act. The assessee has also acquired technical know-how and the trademark from both the partnership firm aggregating to Rs. 7,93,50,000/-. Th....
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....cause the same word is used by the assessee as well. Moreover, the same word is commonly used in the market. In view of the above, the AO treated the value of the technical knowhow and trademark of both the partnership firms at nil. Accordingly, he disallowed the depreciation claimed by the assessee amounting to Rs. 1,98,37,500.00 and added to the total income of the assessee. The aggrieved assessee preferred an appeal to the Ld. CIT-A. 7. The assessee before the Ld. CIT-A submitted that it had incurred a cost of Rs. 7,93,50,000/- on the acquisition of impugned technical know-how and trademark from both the partnership firms. The assessee against the acquisition of such intangible assets has paid the consideration by issuing shares to the partners of both the firms. 7.1 There was no violation of the provisions of section 47(xiii) of the Act. Therefore the assessee has acquired such intangible assets from the partnership firms as reflected in the respective balance sheets before the date of succession. 7.2 The assessee also claimed that the valuation of the intangible assets is based on the report furnished by the qualified chartered accountant. 8. The Ld. CIT-A af....
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..../trademark. 11. Both the parties before us relied on the order of the respective authorities below as favourable to them. 12. We have heard the rival contentions of both the parties and perused the materials available on record. In the instant case, the assessee has acquired certain intangible assets from the partnership firms in the manner provided under section 47(xiii) of the Act. However, the AO was of the view that the valuation of such intangible assets represents at nil value. Accordingly, he disallowed the depreciation claimed by the assessee on such intangible assets. However, the Ld. CIT-A deleted the disallowance made by the AO by observing that the assessee has complied the conditions as specified under section 47(xiii) of the Act and the assessee has incurred the cost on the acquisition of such intangible assets. Therefore he was of the view that the AO cannot determine the value of such intangible assets at nil without referring to the departmental valuation Officer. 12.1 Now the issue before us, arises as to whether the assessee is entitled to the depreciation on the intangible assets acquired by it in the given facts and circumstances. There is no dispute q....
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....the claim of depreciation, the decision of Supreme Court in case of Smifs Securities Ltd. (supra) would squarely apply. There is no material referred to by the Assessing Officer to hold that the claim of depreciation was fictitious. If we read his entire expression in this respect, he seems to be suggesting that being an intangible asset acquisition thereof would not qualify for depreciation. If that be so, the view of the Assessing Officer was opposed to the decision of the Supreme Court in case of Smifs Securities Ltd. (supra). On the other hand, if the observations of the Assessing Officer can be seen as his findings that the claim itself was baseless, there was no discussion or reference to any material to enable him to come to such a conclusion. 7. In the result, tax appeal is dismissed." 6. The Coordinate Bench of this Tribunal in ITA No.80/Ahd/2016 for AY 2012- 13, dated 01.02.2018 while rejecting the appeal preferred by the Revenue in assessee's own case observed as follows:- "4. Before us, the ld.counsel for the assessee has placed on record copy of the Hon'ble Gujarat High Court order in the case of assessee reported in Pr.CIT Vs. Zydus Wellness....
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....are of the view that the assessee cannot be denied for the amount of depreciation claimed by it. Hence, we do not find any reason to interfere in the finding of the Ld. CIT-A. The last issue raised by the Revenue in the ground No. 3 is that the Ld. CIT-A erred in deleting the addition made by the AO for Rs. 16,16,310/- on account of payment made to the persons specified under section 40A(2) of the Act. 13. The assessee in the year under consideration has made a payment towards certain expenses amounting to Rs. 80,81,548.00 to the parties as specified under section 40A(2) of the Act. The details of the expenses and the associated parties/sister concerns are available on page 23 of the AO order. The AO during the assessment proceedings found that the expenses are excessive and unreasonable, and accordingly he invoked the provisions of under section 40A(2) of the Act and made the disallowance at the rate of 20% of such expenses amounting to Rs. 16,16,310/- and added to the total income of the assessee. The aggrieved assessee preferred an appeal to the Ld. CIT-A. 14. The Ld. CIT-A deleted the addition made by the AO by observing as under: 4.4 Having regard to the-f....