AI Drafter 
TaxTMI 
TaxTMI 
2020 (2) TMI 505
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....dispute, assessee had filed its return of income on 30.09.2009 declaring total income of Rs. 9,25,76,090/- under the normal provisions and book profit of Rs. 6,89,96,607/- u/s. 115JB of the Act. M/s. M & M is into diversified activities and it had set up its logistics division in the year 1999-2000 to cater to its complex transportation needs. Whereas, the assessee company was incorporated in the year 2007 and acquired the logistics division of M/s. M&M with all the assets and liabilities as on 01.04.2008 for a consideration of Rs. 32 crores. M/s. M & M transferred its logistics division (business) to the assessee on slump sale basis. The sale consideration of Rs. 32 crores comprised of following amounts: Assets & Liabilities acquired Amount (in crores) Net Fixed Assets (Including software) 11.86 Net Current Assets 36.01 Loans -26.14 Congeries of rights (Customer Database and Relationships)- Intangible Assets 9.12 Goodwill- Intangible Assets 1.15 Total 32.00 After acquisition of logistics division, assessee merged the current assets and liabilities of logistics division with its accounts and made addition to the block of intangible asse....
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....n amounting to Rs. 2,28,80,000/- on the amount of Rs. 9.12 crores. The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). 4. After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) found certain factual inaccuracies in the observations of the Assessing Officer. Firstly, he found that M/s. M & M has treated the sale of its logistics division to the assessee as slump sale and has offered profit of Rs. 10,26,74,997/- as income from Long term capital gain in the return on income filed for A.Y. 2009-10. Thus, he found the observation of the Assessing Officer that the transaction has not been treated as slump sale unacceptable. Further, he observed, by purchasing the logistic division of M/s. M & M assessee has not only taken over the business as a going concern along with assets and liabilities, but, has taken over various other rights, licenses, customer base and goodwill of the business, which constitute congeries of rights hence, are in the nature of intangible asset. To support the sale consideration, the assessee has also obtained a valuation report from a technically q....
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....s rights and contracts, which certainly are in the nature of intangible assets. Therefore, the amount paid for acquiring such right is capital asset on which the assessee is eligible to claim depreciation. He submitted, provision to section 32(1) would not be applicable as it is not a case of amalgamation but a case of slump sale. Thus, he submitted learned Commissioner (Appeals) was justified in allowing assessee's claim of depreciation. In support of his contention, he relied upon the decision of ITAT Chennai Bench in the case of ACIT vs. Droma India Pvt. Ltd. in ITA Nos. 1664 to 1666/Chny/2019 dated 20.11.2019. 7. We have considered rival submissions in the light of the decisions relied upon and perused material on record. Undisputed facts are, during the year under consideration assessee had acquired logistics division of M & M Ltd. by business transfer agreement dated 11.09.2008 for a total sale consideration of Rs. 32 crore. On a perusal of the business transfer agreement, a copy of which has been submitted before us, it is noted that the sale is on as is where is basis and the assessee has acquired the business as a going concern with all its assets and liabilities. Th....
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....censes, customer base etc. Certainly, all these intangible assets transferred to the assessee have a commercial value and a part of sale consideration has to be allocated to such assets. For the purpose of such allocation the assessee has obtained valuation report from a technically qualified person. If the Assessing Officer was not satisfied with the valuation report, he should have got the assets valued through another technically qualified person instead of rejecting the valuation report purely on the basis of conjectures and surmises. Further, the observations of the Assessing Officer that the assessee has designed the transaction in a manner to create fictitious asset is without any material basis. In fact, in the case of ACIT vs. Dorma India Pvt. Ltd. (supra), the co-ordinate Bench while considering a dispute of similar nature has observed, a consolidated payment made by the assessee over and above net assets acquired by it under a composite contract is to be viewed as towards goodwill and has to be treated as intangible asset on which depreciation is allowable. Suffice to say Tribunal's decision in the case of United Breweries Ltd. vs. Additional CIT in ITA No. 722/Ban....
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....ds charges paid for valuation of the business purchased by the assessee from M/s. M & M Ltd. Stating that the said expenditure is capital in nature, the Assessing Officer disallowed the same. While considering assessee's appeal on this issue, learned Commissioner (Appeals) allowed this appeal. 13. We have heard the parties and perused material on record. Though, it may be a fact that expenditure incurred by the assessee was for valuation of the assets, however, such expenditure, per se, is not for acquiring any capital asset. Therefore, in our considered view, learned Commissioner (Appeals) was justified in allowing assessee's claim. This ground is dismissed. In the result, the appeal is dismissed. 14. ITA No. 6647/Mum/2018 (Revenue's appeal for A.Y. 2011-12): Ground nos. 1 and 2 are identical to ground nos. 1 and 2 in ITA No. 6645/Mum/2018 dealt with hereinabove. Therefore, our decision therein would apply mutatis mutandis to this appeal as well. Accordingly, these grounds are dismissed. In the result, the appeal is dismissed. 15. ITA No. 6453Mum/2018 (assessee's appeal for A.Y. 2011-12): The only issue raised in the present appeal is with regard to disallowan....