TMI Blog2011 (3) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the authorities show that the adverse inference drawn by them while doubting or disputing the valuation report was mainly based on assumption and surmises without there being any evidence/material to support and substantiate the same - Hence, the Income-tax Appellate Tribunal has rightly held that the depreciation was allowable and answer the question in favour of the assessee - 149 of 2008 - - - Dated:- 25-3-2011 - SIKRI A. K., MEHTA M. L., JJ. JUDGMENT A. K. Sikri J.- 1. On February 21, 2011 when the arguments in this case were heard at the after notice stage and orders reserved, the following order was passed : "Two issues are involved in this appeal, one pertains to the deletion of the additions made by the Income-tax Appellate Tribunal on account of Modvat credit receivable and its addition to the value of the closing stock. It could not be disputed by the learned counsel for the Revenue that this issue is covered by a judgment of the Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 261 ITR 275. In fact, in the case of the assessee only on this aspect, earlier appeal I. T. A. No. 291 of 2008 filed by the Revenue which per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets although the assessee had purchased five companies as running business. The Assessing Officer noticed that the assessee had purchased the running plant of the abovementioned franchisees and the purchase was made to eliminate these companies from the market for future competition to establish the monopoly of the assessee in competition with other soft drinks manufacturers like Coco-Cola. The Assessing Officer further held that the land value has been suppressed by the assessee and the price of plant and machinery was inflated to claim excess depreciation and that the agreement between the assessee and the franchisees for sale and purchase of the assets was a collusive agreement. The Assessing Officer had increased the value of the land by 50 per cent. on estimated basis and the value of bottles and crates was reduced by 50 per cent. and transferred the cost of non-competition. Taking over of a running business, cost of the retrenchment compensation to the plant and equipment and reduced the cost of acquisition by 25 per cent. 5. As mentioned above, we are not taking note of other additions made by the Assessing Officer as they are not relevant to the present appeal. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was reached between the assessee-company and the said five companies whereby the assessee acquired manufacturing assets and other assets such as land and building situated at various locations. For acquisition of these assets, the assessee paid due consideration. In order to show the value of the fixed assets, namely plant and machinery as well as land and building and to claim deprecation thereupon, the assessee filed valuation reports in respect of these assets before the Assessing Officer. These valuation reports were given by the registered valuers and on that basis, the assessee had declared the value of different assets and claimed depreciation thereupon. The Assessing Officer dug certain holes in the said valuation reports and found some shortcomings therein to reject the valuation as given by the registered valuers. He also found that the plastic crates and glass bottles had been valued on the basis of the condition and quality of the plastic crates and glass bottles at the plants and, therefore, the basis adopted by the assessee for valuation of the assets was not correct. According to him, the valuer had not given any reference of purchase price of the plant and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not the ongoing business of these business and consolidated price for acquisition of the assets specified in the agreement was paid. This price was supported by the valuation report of the registered valuers. It was thus not a case where running business of the companies were taken over, as wrongly held by the Assessing Officer and Commissioner of Income-tax (Appeals). (ii) There was no question of acquiring any goodwill as those companies were the franchisees of the assessee only and were bottling the products in the brand names of the assessee. Therefore, the question of goodwill does not arise as the goodwill in any case from the very beginning belongs to the assessee itself. (iii) The valuation report which was submitted by the registered valuers gave the basis for valuing different assets as well as the bifurcation. No significant defect was pointed out by the Assessing Officer in these valuation reports. (iv) The method of valuation adopted by the registered valuers was the well accepted method. (v) There was no basis for the Assessing Officer to inflate the value of the land by 50 per cent. than agreed to be paid as per the agreement and at the same time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of present replacement cost after consideration depreciation and average life of the assets. The learned Commissioner of Income-tax (Appeals) while supporting the action of the Assessing Officer on this count further noted in his impugned order that no reference was made by the valuer to original purchase price of plant and machinery book value of land and building and also the original cost of assets to the bottlers. He also noted that method of replacement value taken by the valuer had not been linked with the original cost to the seller. In our opinion, when the valuation of machinery was done by the valuer on the basis of the present valuation cost after taking into consideration the depreciation of the said machinery as well as average life thereof the original cost of the said machinery to the seller was hardly of any relevance and therefore, there was no reason to refer to such original cost as well as the book value thereof. What was relevant for the purpose of valuation as adopted by the valuer was the present replacement cost of the machinery and there was nothing brought on record either by the Assessing Officer or by the learned Commissioner of Income-tax (Appeals) to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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