TaxTMI 
TaxTMI 
2021 (11) TMI 238
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....w-how & non-compete fees without appreciating the fact that the value assigned to the individual assets including goodwill, Technical Know-how & non-compete fees has not been done in fair and reasonable manner. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in allowing depreciation on goodwill, Technical Know-how and non-compete fees without appreciating the fact that if fair value of Rs. 174.35 crores of the year 2002 is assigned as per letter dated 04/03/2011 of Kanpur Development Authority to the leasehold rights acquired in 279.30 acres land at Panki (Kanpur) as against Rs. One Lakh assigned by the assessee, then no value out of total consideration of Rs. 153 crore is left to be assigned toward goodwill, Technical Know-how & non-compete fees and accordingly the consequential depreciation on these assets would be Nil. 4. On the facts and in the circumstances of the case, an in law, the Ld. CIT(A) has erred in allowing depreciation on goodwill, Technical Know-how & non-compete fees without appreciating the fact that on final transfer of 279.30 acres of land at. Panki (Kanpur) in December 2015 no additional consideration ab....
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....ble entity in rendering such services? 9. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in ignoring that there is no direct benefit derived by the assessee in paying the intra services cost to the AEs as the emails, correspondences does not suffice to show that the expenditure is incurred for the specific benefit of an individual member but as a group? 10. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not considering the OECD Guidelines on the issue of intra group services wherein there should be existence of a service which is provided and the charge towards such services and that the non-beneficial services identified are that of shareholder activities, duplicative services, services that provide incidental benefits, passive association benefits and on call services, which are being replicated by the assessee under the guise of CCR divisional cost, IT support services and Royalty payment? 11. Whether on the facts and in the circumstances of the case and in law, the Ld. ClT(A) has erred in allowing the Royalty payment in spite of the failure of th....
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....other issue relates to TP adjustment and determination of ALP with regard to CCR divisional cost on "strategy, Finance, Human resources and other along with "IT support expenses". There is a provision of royalty created by the assessee and the assessee has bench-marked the transaction on payment of royalty by aggregating transactions with other international transactions of purchase of raw materials within the manufacturing segments. These grounds are determined from Ground Nos. 5 to 14. 4. Ground Nos. 15 and 16 are general in nature and hence, no adjudication is required. 5. First we would take up grounds pertaining to the issue of depreciation for adjudication and the brief facts on the issue are that the Assessing Officer observed that the assessee had claimed depreciation on goodwill, patents and copyrights and non-compete fees in its P & L account as under: Sr. No. Particulars Amount (in Rs.) 1 Goodwill 19,10,242/- 2 Non-compete fees 6,24,704/- 3 Trademarks, patents and knowhow 1,68,49,209/- 4 Other assets 20,66,411/- Total 2,14,50,647/- The facts on records spells out that the depreciation in respect of afo....
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....may also point out that as per the Toll Conversion Agreement, the value of Panki assets was taken at Rs. 1 lakh. However, the CIT(A) had worked out the cost of 279.30 acres i.e. total landholding of ICI India Ltd. at Rs. 174 crores; in case the same rate is applied to 27.52 acres, which was the portion of land on which catalyst business was carried on, then the same would work to Rs. 17.37 crores. The learned Authorized Representative for the assessee fairly admitted that the value of Rs. 17.37 crores be attributed to Panki assets. However, revised allocation value of land at Panki would be Rs. 13 crores, out of total slump price of Rs. 153 crores. Accordingly, we direct the Assessing Officer to recompute the value of both tangible and intangible assets, accordingly. Following the same proposition, we hold that the assessee is entitled to claim the depreciation on the value of tangible assets and further on know-how, trademarks and patents and also on the goodwill. The assessee has also claimed depreciation on non-compete fees. The Assessing Officer is also directed to allow depreciation on non-compete fees of Rs. 3.51 crores." 5. From this order, it is clear that the Trib....
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....tangible assets but only after giving effect to the directions as contained at Para 69 of the Tribunal's order (supra.). 9. Both the parties agreed that there is no change in facts and circumstances in this case before us and following the same parity of reasoning after hearing the submissions of the parties, we restore this issue to the file of the Assessing Officer following same directions given in our earlier order as afore-stated. 10. Now coming to the depreciation on other assets, the same was discussed by the Tribunal in assessee's own case for the assessment year 2012-13 in ITA No. 725/PUN/2017 dated 30.08.2021 vide Paras 13, 14 & 15 of its order. Herein, the Tribunal followed the decision in assessee's own case for assessment year 2004-05 where depreciation on other assets and technical know-how were granted to the assessee and following the same parity of reasoning provided relief to the assessee. The relevant extracts of the findings reads as follows: "13. Ground No. 10 raised by the assessee regarding the disallowance of depreciation on technical know-how and other assets. 14. We note that in assessee's own case for A.Y. 2004-05 i....
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....arilal and Co. (supra) had covered the said decision. He concluded by saying that whether after allocation of value to assets, the balance is taken is know-how or goodwill, there is no difference as the depreciation on same is allowable in the hands of assessee, in view of the decision of the Hon'ble Supreme Court in CIT Vs. Smifs Securities Ltd. (supra). 37. We have heard the rival contentions and perused the record. The assessee was carrying on the manufacturing and sale of catalysts. The worldwide catalysts business of ICI India Ltd. was purchased by Johnson Matheys, consequent to which Business Transfer Agreement (BTA) was entered into on 02.12.2002 for the purchase of catalysts business from ICI India Ltd. as going concern. The assessee claimed that it had acquired goodwill of Rs. 10.73 crores from ICI India Ltd. Further, the assessee had also entered into non-compete agreement with ICI India Ltd., under which sum of Rs. 3.51 crores was paid. The assessee had claimed depreciation on both the said items on the ground that the same were capital assets. The first such claim was made in assessment year 2003-04. The Assessing Officer denied depreciation claimed on both....
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....ied out, hence cost of intangible assets was not correctly shown. The explanation of assessee vis-a-vis. allocation of no value to the land at Taloja and Panki, as the same were not transferred by ICI India Ltd. and hence, adoption of Nil value, was not accepted by the CIT(A). The CIT(A) elaborately considered the takeover of assets both movable and immovable and the intangible assets and also the trademarks, patents and know-how and held that slump price paid by the assessee at best would take care of the value of the land at Taloja and Panki and hence, no part of it could be attributed to any other asset. Another linked aspect which was taken note of by the CIT(A) was the failure of assessee to file evidences to show that know-how, patents and trademarks, etc. were used for the purpose of business. In this regard, the first plank of observation of CIT(A) was that where the assessee was not new in the line of business of manufacturing catalysts and also where the parent company of assessee was speciality chemical company with its core focus on precious metal, catalyst and fine chemicals, there was no merit in the plea that the purpose for acquiring ICI India Ltd.'s business wa....
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.... been accounted for in the books as goodwill, on which the assessee was not entitled to claim of depreciation. Hence, he directed the Assessing Officer to disallow the depreciation on all the assets acquired in slump sale. In this regard, since depreciation on goodwill at Rs. 1.59 crores and on non-compete fees at Rs. 81,45,129/- was already disallowed by the Assessing Officer, the CIT(A) enhanced the assessment by Rs. 24.83 crores in this account. However, since the income was already enhanced by Rs. 21.93 crores by disallowing depreciation on know-how, patents and trademarks, further enhancement of assessment was restricted to Rs. 2.90 crores. 15. In the light of the orders of this Tribunal in assessee's own case for A.Y. 2004-05 it is clear that the allowance of depreciation on technical know-how and other assets is granted. There was no contrary view placed by the ld. DR before us. Thus, the ground No. 10 raised by the assessee is allowed." 11. Therefore, as per our orders in the earlier assessment years in respect of the assessee, the issue of depreciation on intangible assets is allowed for statistical purposes whereas the issue of depreciation on other assets....
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.... for technology license received from AE amounting to Rs. 45,59,641/-. The TPO gave comments that the assessee failed to provide any benchmarking regarding payment of royalty and that no agreement for payment royalty was provided. Accordingly, this amount was also disallowed and added to the income of the assessee. 14. The Ld. Counsel for the assessee submitted that the copy of agreement for group consultancy services has been placed before the Department which is annexed at page 821 onwards of the paper book filed before us. Similarly from Page 845 onwards the assessee had furnished documentary evidences in respect of services received from AEs. 15. We have also perused the order of Ld. CIT(Appeals)'s on this issue and vide Para 2.9 onwards up to 2.11, the Ld. CIT(Appeals) has accepted the services availed by the assessee from its AEs. However, the Ld. CIT(Appeals) has not given his reasoning specifically while providing relief to the assessee but has only mentioned that the Assessing Officer/TPO has not given any categorical findings and has summarily disposed of the matter of the assessee. The Ld. CIT(Appeals) has also accepted the bench-marking of the international tr....