TaxTMI 
TaxTMI 
2017 (11) TMI 1914
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....now property. 2.2 The Learned CIT(A) failed to note that the property was obtained by the assessee only in lieu of surrendering its tenancy rights over another property. 3. The Learned CIT(A) erred in directing the Assessing Officer to allow depreciation on noncompete fee. 3.1. Having regard to the following decisions of the ITAT, Chennai Bench, the Learned CIT(A) ought to have upheld the decision of the Assessing Officer. A.B.Mauri India Pvt. Ltd. ITA No.1293/Mds/2006 - dated 23.11.2007 Pentasoft Technologies Ltd. ITA No.1325/Mds/2006 - dated 06.02.2008 4. The learned CIT(A) erred in deleting the addition made by the Assessing Officer towards the amount taken to general reserve by the assessee on a sum of Rs. 54,26,56,000/- representing the difference between the value of assets over the value of liabilities of the transferor companies, after adjusting the aggregate face value of new shares issued was added to General Reserve. 4.1. The Learned CIT(A) failed to note that the amount taken to General Reserve by the assessee was due to net asset value consequent to amalgamations scheme. The amalgamation was completed as per business expediency and in the course of ongoin....
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....that the issue was against the action of the Ld.CIT(A) in directing the AO to allow depreciation on non-compete fee paid. It was a submission that M/s.Areva T&D Instrument Transformers Pvt. Ltd., had paid a sum of Rs. 16.00 Cr. in the nature of the non-compete fee at the time of acquisition of running business from M/s.WS Industries and M/s.SSB Industries. It was a submission that the AO had disallowed the depreciation on non-compete fee on the ground that it was not a business or commercial right, which the assessee had received. It was a submission that on appeal the Ld.CIT(A) had allowed the assessee's claim by following the decision of the Co-ordinate Bench of this Tribunal in the case of M/s.Medicorp Technologies India Ltd., in 2009-TIOL-203-ITAT MAD dated 16.01.2009 wherein it has been held that the non-compete right acquired by the assessee company was eligible for depreciation. It was a submission that the order of the AO was liable to be restored. 6.1 In reply, the Ld.AR drew our attention to the decision of the Hon'ble Jurisdictional High Court in the case of M/s.Pentasoft Technologies Ltd., reported in [2014] 41 taxmann.com 120 (Mad) wherein it has been held that the no....
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....ess of the amalgamation amount was brought to tax under the head 'profits & gains' of business by invoking the provisions of Sec.28(1)(iv) of the Act. On appeal, the Ld.CIT(A) had held that the assessee having taken over the assets & liabilities of the three companies and paid a consideration, which was a lower than net book value of those entities, the assessee had reflected the book value of the assets & liabilities of the three merger entities in its book and credit the difference between the net book value of the assets and the value of the shares allotted to them to its reserve. The Ld.CIT(A) had held that the assessee has only purchased three entities and therefore, there was no question of making any profit on the said transaction. Consequently, the Ld.CIT(A) had deleted the addition. The Ld.DR vehemently supported the order of AO. 7.1 In reply, the Ld.AR submitted that the AO had held that the excess of the net book value of the three entities as against the consideration paid as income in the Revenue field. It was a submission that the assessee having acquired the three companies, the excess of the net book value over the consideration paid was, in effect, a capital recei....
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....dents in favour of the appellant. 6. The learned officer has erred in disallowing the following provisions that was transferred to the Buyer Company as part of Business Purchase Agreement. He should have appreciated that these provisions were disallowed in the hands of the appellant in the earlier years. a. Provision for Bad Debts amounting to Rs. 6,90,00,001/-. b. Provision for unamortized portion of Voluntary Retirement Scheme - Rs. 44,22,000/- c. Provision for Warranties - Rs. 4,02,21,000/- d. Provision for Contract Losses Rs. 36,84,000/- e. Provision for Vacation Pay - Rs. 66,28,000/- 7. The learned officer has erred in not appreciating the fact that by transferring the above said provisions & by accepting a lower consideration, the appellant had in fact discharged its liabilities & should be entitled to full deduction. 8. The learned officer has erred in taxing under capital gains, the excess consideration received on transfer of business ignoring the submissions of the appellant that the transfer of business under a Scheme of Arrangement did not attract capital gains u/s.50B. 9. The learned officer has erred in not granting deduction for Excise duty paid on ....
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.... fund 1,70,880/- Total 6,45,541/- The Assessing Officer held that these contributions were not allowable as they were specifically barred by the provisions of Sec.40A(9) of the Act. The Commissioner (Appeals), relying on the earlier decision, deleted the addition. Copy of the earlier decision was not placed before us. The learned Departmental Representative relied on the decision of the Tribunal rendered in assessee's own case for the assessment year 1998-99 in ITA No.154(Mds)/2003 dated 28-3-2005. In that case, the assessee did not produce the settlement deed and the agreement entered into with the labour union and has also not demonstrated that the payment was in accordance with the Industrial Disputes Act and was for the discharge of statutory obligation. As such the appeal was dismissed. The learned counsel for the assessee submitted that in the present case all the documents were produced and as such the earlier order should not be applied to adjudicate the issue involved in the present case. Having heard both the parties on the point we find that there is no sufficient discussion on the point. The nature of the payment needs to be examined. It is not clear ....
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....goodwill by the assessee in its book. The assessee had claimed depreciation and the same had been disallowed on the ground that the depreciation was not a business or commercial right of similar nature specified in Sec.32(1)(ii) of the Act. It was a submission that the issue had been held against the assessee in ITAT Delhi Benches. It was a submission that on appeal the Hon'ble Delhi High Court in the assessee's own case in ITA No.315/2010 dated 30.03.2012 had held that the depreciation was an intangible asset acquired under slump sale agreement and was in the nature of business or commercial right of similar nature specified in Sec.32(1)(ii) of the Act and was accordingly eligible for depreciation. It was a submission that in view of the decision of the Hon'ble Delhi High Court in the assessee's own case for the AY 2005-06, the assessee was entitled to the claim of the depreciation. 11.1 In reply, the Ld.DR vehemently supported the order of the AO and the Ld.CIT(A). 11.2 We have considered the rival submissions. A perusal of the decision of the Hon'ble Delhi High Court in the assessee's own case for the AY 2005-06 in ITA No.315/2010 dated 30.03.2012 shows that the Hon'ble Delhi ....
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....e Supreme Court had clearly held in Techno Shares and Stocks Ltd.(supra) that "Our judgment should not be understood to mean that every business or commercial right would constitute a "licence" or a "franchise" in terms of section 32(1)(ii) of 1961 Act". 13. In the present case, applying the principle of ejusdem generis, which provides that where there are general words following particular and specific words, the meaning of the latter words shall be confined to things of the same kind, as specified for interpreting the expression "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act, it is seen that such rights need not answer the description of "knowhow, patents, trademarks, licenses or franchises" but must be of similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred in Section 32(1)(ii) of the Act preceding the term "business or commercial rights of similar nature", it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words "business or commercial rights ....
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....n behalf of the assessee that goodwill per se is eligible for depreciation under Section 32(1)(ii) of the Act. In the circumstances, the substantial question of law is decided in the affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside. 11.3 As it is noticed that the Hon'ble Delhi High Court has decided this issue in favour of the assessee for the AY 2005-06, respectfully following the decision of the Hon'ble Delhi High Court, the findings of the Ld.CIT(A) on this issue stands reversed. The AO is directed to grant the assessee the benefit of depreciation on the goodwill as claimed. In the result, Ground No.5 of the assessee's appeal stands allowed. 12. In regard to Ground Nos.6 & 7, it was submitted by the Ld.AR that the issue was against the action of the Ld.CIT(A) in confirming the disallowance of various provisions which had been claimed as an expenditure in respect of the non-transmission and distribution business. It was submitted by the Ld.AR that the assessee had a business of transmission and distribution of power as also non-T&D business. The non-T&D business was transferred to its subsidiary M/s.ALS....
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....being so, we find that the order of the Ld.CIT(A) and the AO on this issue to be on a right footing. Further, it is noticed that the Ld.CIT(A) has accepted the claim of the assessee that the sale of the nonT&D business was on a slump sale by applying the provisions of Sec.50B and the liabilities which have been claimed for deduction now have also not crystallized during the year as also the issue that the claim of the assessee is in respect of the provisions and mere provisions cannot be allowed as a deduction. This being so, the finding of the Ld.CIT(A) & the AO on this issue stands confirmed. In the result, Ground Nos.6 & 7 of the assessee's appeal stands dismissed. 13. In regard to Ground No.8, it was submitted by the Ld.AR that the issue was against the action of the Ld.CIT(A) in taxing under capital gains, the excess consideration received on the transfer of the non-T&D business. It was a submission that the transfer of non-T&D business of the assessee to M/s.ALSTOM Industrial Products Ltd., could not be considered as a slump sale giving rise to capital gains u/s.50B in so far as there was no sale consideration in monetary terms but the whole transaction was one of exchange w....
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....? Nor the assessee has been able to explain as to why the additional sum of Rs. 10.00 Crs. has been paid. If at all, it can be considered as an exchange, the question that arises is when the total net assets only Rs. 31.30 Crs. why the shares of the value of Rs. 41.30 Crs. has been allotted. Though, the assessee has mentioned that the valuation is as per the valuation done by the Accountants still the valuation arrived at by the Accountants is to an extent of Rs. 41.70 Crs. and even that is not the consideration of the transfer because as per the Scheme, the consideration for the transfer is shown at Rs. 41.30 Crs. Even otherwise, a perusal of the Scheme clearly shows that the term used is 'consideration for the transfer', the words are not 'exchange'. This being so, we find no error in the findings of the AO and the Ld.CIT(A) on this issue and the same stands confirmed. In the result, the Ground No.8 of the assessee's appeal stands dismissed. 14. In regard to Ground No.9, it was submitted that the Ld.CIT(A) erred in not granting the deduction on Excise Duty paid on the Closing Stock. The Ld.AR placed before us that the decision of the Hon'ble Special Bench of the ITAT Delhi 'B' B....