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2020 (2) TMI 156 - AT - Income TaxTP Adjustment - rendition of services by the AE to the appellant company - HELD THAT:- Lower authorities erred in questioning the need and benefit arrived by the assessee from payment in respect of availing of services from its AE. All that is required to be seen is as to whether there was actual rendition of services or not. We have carefully gone through the emails and invoices placed in the paper book vis a vis TSA Agreement. In our considered opinion, these documentary evidences clearly show the rendition of services by the AE to the appellant company. Moreover, the TPO himself has accepted the fees received by the assessee from rendering these services. We fail to understand why the payments have been subjected to different treatments. Hon'ble High Court of Delhi in the case of EKL Appliances [2012 (4) TMI 346 - DELHI HIGH COURT] has held that the TPO does not have power to adjudicate the allowance/disallowance of expenditure incurred by the assessee thereby demolishing the need and benefit derived by the assessee.- Decided in favour of assessee Disallowance of depreciation on goodwill - main reason for dismissing the claim of depreciation by the Assessing Officer is that in none of the valuation reports, good will has been separately mentioned - HELD THAT:- Carefully gone through the valuation reports mentioned elsewhere, which are part of the paper book filed before us. It is true that in none of the valuation reports, goodwill has been separately valued. But it is equally true that the assessee has paid consideration over and above the fair value of the assets of Amex. In our considered opinion, differential amount represents payment towards goodwill. We do not concur with the observations of the DRP that the assessee, with the motive of reducing profits in form of depreciation, had entered into this transaction. In our considered view, no prudent business man would pay a sum of ₹ 45.48 crores to claim depreciation of ₹ 10.93 crores over a period of five years, not to mention that the Amex have confirmed that they have paid capital gain tax on the consideration paid by the assessee to acquire Corporate Travel Division. Assessing Officer has confused himself with the valuation report of the independent valuer with another report wherein the value of the transferred business had been determined at negative value of ₹ 1.9 million. We find that this valuation report was prepared only for FEMA purposes to justify the determination of price of shares issued by the assessee to its share holders. In so far as the depreciation of goodwill issue is by now well settled by the decision of the Hon'ble Supreme Court in the case of Smifs Securities Ltd [2012 (8) TMI 713 - SUPREME COURT] wherein the Hon'ble Apex Court has held that good will acquired on amalgamation [being the difference between cost of assets and consideration paid] is a capital right and thus eligible for depreciation u/s 32 of the Act. We direct the Assessing Officer to allow claim of depreciation. This ground is, accordingly, allowed. Claim of bad debts - Out of the receivables the assessee was unable to recover ₹ 2.25 crores from certain parties - HELD THAT:- There is no dispute that on the acquisition of Corporate Travel Division, the appellant company also acquired receivables. It is also not in dispute that out of the receivables, the receivables amounting to ₹ 2.25 crores from certain parties could not be recovered. It is a settled proposition of law that to claim bad debt, all that is required for the assessee is to actually write off the debts in his books of account. The receivables written off by the appellant company were erstwhile receivables to Amex duly reflected in their balance sheet and, therefore, it can be safely presumed that the receivables were part of business profits of the Amex. Assessee has successfully discharged its onus and has fulfilled the conditions laid down u/s 36 of the Act. We, therefore, do not find any reason why the write off of bad debts should not be allowed.
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