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2023 (3) TMI 83 - AT - Income TaxNature of expenditure - acquiring customer contracts and assembled workforce - Revenue or capital expenditure - HELD THAT:- On perusal of materials placed before us, we are convinced that there is nothing therein which could even remotely suggest that the assessee, at any point of time, before acquiring the debt collection services business, was in the same line of business. It is a fact on record that the assessee has made payment for acquiring the customer contracts and assembled workforce, which are nothing but capital assets and would give enduring benefits to the assessee. In sum and substance, by incurring the expenditure, the assessee has acquired a completely new business set up, which is nothing but an income generation tool. Therefore, in our view, the expenditure incurred is in the nature of capital expenditure. To that extent, we agree with the view expressed by the departmental authorities. Enhancement of income by FAA - whether FAA was justified in reducing the value of customer related contracts and goodwill by tinkering with the value determined by registered valuer? - As observed assessee has paid the consideration for acquiring the business on the basis of value determined by an independent valuer. It is a fact that the assessee has paid the consideration as determined by the Valuer for acquiring the business. There is nothing on record to suggest that the payment claimed to have been made for acquiring the business is either non-genuine or doubtful. At least, no such view, either express or implied, can be found either in the observations of the Assessing or learned first appellate authority. Thus, when the payment made by the assessee is not disputed and is in terms of an agreement between two parties, learned Commissioner (Appeals) cannot arbitrarily and unitarily reduce a part of the payment made for computing depreciation. In any case of the matter, the consideration paid by the assessee is supported by valuation report of an independent Valuer, who is an expert in the field. In case, learned first appellate authority had any doubt regarding valuation report, he should have referred the valuation to an expert, instead assuming the role of Valuer himself and tinkering with valuation of certain assets made in the valuation report, viz., customer and contract goodwill. Thus, action of Commissioner (Appeals) in reducing the value of customer contract and goodwill, as determined by the independent Valuer is wholly inappropriate, hence, unsustainable. Accordingly, we reverse the decision of Commissioner (Appeals) on the issue of valuation. Consequently, the computation of the Assessing Officer in allowing depreciation at 25% is upheld. Grounds are partly allowed.
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