9911796707
TMI Blog2015 (6) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. In this appeal, assessee has raised the following Grounds of Appeal :- "Ground 1: The Ld. Commissioner of Income Tax (Appeals)- V, Pune {Ld. 'CIT(A)'} has erred in upholding the reopening of assessment under section 148 of the Income-tax Act, 1961 for the following reasons: i. The Ld. CIT(A) erred in upholding the reassessment proceedings initiated by the Assessing Officer without appreciating the fact that the appellant had made a full and true disclosure of the material facts before the Assessing Officer at the time of original assessment under section 143(3). ii. The Ld. CIT(A) erred in upholding the initiation of reassessment proceedings which was based on mere change of opinion; iii. The Ld. CIT(A) erred in upholding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer has also been sustained by the CIT(A). 4. Brief facts with respect to the impugned dispute can be understood as follows. In the preceding assessment year of 2004-05, assessee had acquired the mining and construction business of Kennametal Widia India Limited (KWIL) for a consideration of Rs. 64.40 crores. The said acquisition was in terms of a Business Purchase Agreement dated 20.02.2004 and it was a slump sale whereby assessee paid a lump-sum of Rs. 64.40 crores without values being assigned to individual assets and liabilities. In the assessment year 2004-05, the lump-sum consideration of Rs. 64.40 crores was allocated by assessee to various assets on the basis of the Valuation Report from independent valuers and the excess o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a capital receipt. 6. However, the Assessing Officer noted from the settlement agreement dated 09.03.2005 that assessee company had raised the dispute on the following items of the Business Purchase agreement :- "Stock obsolescence (INR) 5,625,000 Doubtful A/c receivable (INR) 3,363,000 EMI (INR) 3,396,877 Export incentive (INR) 25,884,348 Export duty claim (INR) 14,631,201 Warranty reserve (INR) 29,185,888 Immovable property (not usable) (INR) 740,000" 7. The Assessing Officer was of the view that the compensation received by the assessee i.e. Rs. 2,11,38,400/- represented reduction in the purchase consideration was a revenue receipt and that the action of the assessee in reducing it from the amount of Goodwill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee vehemently pointed out that the settlement agreement was entered into on the basis of clause 2.2.2 of the original Business Purchase agreement. The said clause provided that the assessee could review and raise objections with the seller on the purchase consideration within a specified period. In terms of the said clause, assessee had pointed out to the seller i.e. KWIL, its objection with regard to the various items and sought a reduction in the purchase consideration. As a consequence, by settlement agreement dated 09.03.2005, both the parties agreed that the originally agreed purchase price of Rs. 64.40 crores was liable to be adjusted on account of the objection raised by the assessee and as a consequence assessee received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Subsequently, in the current assessment year, assessee received a sum of Rs. 2,11,38,400/- as a partial refund of the business purchase consideration on account of certain objections raised by the assessee. The aforesaid amount was accordingly reduced by the assessee from the amount of Goodwill recorded in the books of account. The Assessing Officer and the CIT(A) have differed with the assessee as according to them the said refund was revenue in nature and therefore it was to be assessed as a revenue receipt. We are unable to appreciate the aforesaid stand of the income-tax authorities. It is quite clear that upon acquisition of the mining and construction business of KWIL, the total consideration paid was capitalized. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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