TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 759
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the facts and in the circumstances of the case and in law, was Ld. CIT(A) right in deleting the disallowance made by the AO on account of depreciation on goodwill? 2. Whether on the facts and in circumstances of the case and in law, was Ld. CIT(A) in not appreciating the fact that goodwill acquired by the assessee enhances the value of entire FedEx brand?' 2. Briefly stated, the assessee company which is a courier and express service provider and logistics service provider had e-filed its return of income for A.Y. 2014-15 on 26.11.2014, declaring a loss of Rs. 187,32,67,010/-. The return of income filed by the assessee was initially processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee had acquired a warehouse transportation service and express delivery undertaking of AFL Pvt. Limited., and also the transportation services undertaking of Unifreight India Pvt. Ltd. as a going concern on slump sale basis during the financial year 2010-11 relevant to A.Y. 2011-12. As observed by the A.O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quired to be reasonably apportioned and only part of the same would be relatable to the assessee company. Accordingly, the A.O adopting the reasoning given in the assessment order passed by his predecessor under Sec. 143(3) r.w.s 263, dated 30.12.2016 for A.Y. 2011-12, therein concluded that the goodwill claimed was liable to be apportioned between the assessee company and its ultimate parent company viz. FedEx Corporation including its global affiliates and subsidiaries in the ratio of 25% and 75%, respectively. As such, following the same rationale and reasoning as in A.Y. 2011-12, the A.O apportioned and therein attributed to the assessee company 25% of the goodwill shown in its books of account for the year in question. Resultantly, a sum of Rs. 36,54,55,562/- being 75% of the total claim of depreciation on goodwill amounting to Rs. 48,72,74,082/- was disallowed by the A.O and added back to the total income of the assessee. 4. Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). It was observed by the CIT(A) that the Tribunal while disposing off the assesse's appeal for A.Y. 2011-12 in ITA No. 3621/Mum/2016, dated 17.11.2017 had held that the Pr.C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ower authorities. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. As is discernible from the orders of the lower authorities, the A.O relying on the order passed by the Pr. CIT under Sec. 263 of the Act, dated 21.02.2016, wherein the latter had observed that if some goodwill had been acquired by the assessee then, partially such goodwill was for the business of the international affiliates of the assessee company and only a reasonable part of the same would be relatable to the assessee company, had thus, adopting the same line of action attributed 25 % of the value of goodwill to the assessee and disallowed the balance 75% of its value. Admittedly, the order passed by the Pr. CIT under Sec. 263, for A.Y. 2011-12, dated 21.02.2016 had been quashed by the Tribunal vide its order passed in ITA No. 3621/Mum/2016, dated 17.11.2017 . As observed by us hereinabove, the Tribunal while quashing the order passed by the Pr.CIT under Sec. 263 had categorically observed that as the agreement for acquiring the business of AFL and UFL was between the assessee and AFL/UFL and none of the affili....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e tax on standalone basis irrespective of their actual degree of economic independence and regardless of whether profits are reserved or distributed to shareholders. 13. The Hon'ble Delhi High Court in the case of Maruti Suzuki reported in 381 ITR 117 while dealing with transfer pricing adjustment on AMP expenses incurred by Indian company has negative the contention that such expenses, in the absence of any understanding with AE empower the revenue to make adjustment. It is also important to note that if there are any transactions between the assessee and its affiliates that would be a subject matter of transfer pricing regulation. In our view, the CIT was not justified in giving a direction for apportionment of goodwill and the said direction is without any material or any basis and therefore the directions given by the CIT on apportionment of goodwill between the assessee compan y and its affiliates are contrary to law and hence such a finding is quashed." Observing, that the controversy in hand had its genesis in A.Y. 2011-12, we find, that the CIT(A) had rightly, observed that now when the order of the Pr.CIT under Sec. 263, dated 21.02.2016 had been quashed by the Tribunal....