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2016 (5) TMI 329

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..... undisputedly entitled to. We are, therefore, of the considered opinion that the finding of the ld.CIT(A) and that of the AO are not correct on facts and are without any basis. Further addition made under the provisions of section 69C of the Act is also not correct as section 69C can only be invoked only when the source of any investment was not explained which is clear from the language used in the section 69C reproduced above. Thus, the order of ld.CIT(A) suffers from serious factual and legal infirmity and cannot be sustained. Accordingly, the AO is directed to delete the addition - Decided in favour of assessee - I.T.A. No.2350 and 2810/Mum/2015 - - - Dated:- 23-3-2016 - SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri A V Sonde For The Respondent : Shri Dayasagar ORDER PER RAJESH KUMAR, AM : These two appeals are filed by the assessee against the separate orders of ld. CIT(A) dated 27.2.2015 for AY 2009-10 and dated 11.3.2014 for AY 2010-11. Since issue involved in these cases is common and therefore, these appeals are heard together and are being disposed of by this consolidated order for the sake of convenience. 2. Since .....

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..... /s 143(2) and 142(1) were issued and served upon the assessee. The assessee company was engaged in the business of business process outsourcing services/IT enabled services (ITES). During the year, the assessee having four operating units of IT enabled outsourcing services in respect of which the assessee had claimed exemption u/s 10A of the Act. These units were located at 5th floor, Logitech Park, Tower-I, Phase-II, M V Road, Saki Naka, Andheri-(E), Mumbai-400072. During the year the company had acquired business undertaking PPMS pertaining to activity of customer contact centre services and back office services for matured life and pensions business at a total purchase consideration of ₹ 86.69 crores which was duly stated by way of note in the Schedule-16 Notes to Accounts to the balance sheet. As per the agreement, the assessee acquired net assets of ₹ 20,11,63,000/- against the purchase price of ₹ 86,69,18,000/- and consequently the difference between the purchase consideration and asset so acquired of ₹ 66,87,55,000/- was treated as goodwill . In para 1 and 13 of the Schedule 16 of notes to the account of the balance-sheet, the company stated t .....

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..... ly to the objections raised by the AO simply because the fact that the goodwill acquired by the appellant company has been written off by declaring it as impaired on 31.3.2009 which makes it a colourable transaction. Hence, the addition made by the AO is confirmed an the ground of appeal No.1 is dismissed 5. The ld. AR submitted before us that the assessee during the year, acquired the business of the company pertaining to the activity and customer contact centre services and back office services for a consideration of ₹ 86,69,18,000/- in slump sale. The book value of the asset so acquired was ₹ 20,11,63,000/- and the difference between the purchase consideration and the book value of the net assets was treated as goodwill on acquisition. Since the said value of goodwill had no value, the assessee after duly disclosing the fact of impairment of goodwill in para 1 and 13 of the Schedule 16 of notes to the account of the balance-sheet wrote off the said amount by charging the same to the profit and loss account. While computing the total income of the assessee in respect of Vikhroli Unit(2), the goodwill written off of ₹ 66,87,55,000/- was added back to the .....

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..... ity of customer contact centre services and back office services for matured life and pensions business and the assets acquired are detailed below : Description Amount (INR, 000) Fixed Assets 261,678 Current assets, loans and advances 21,013 Deferred tax assets 5,805 Sub-total 288,496 Current liabilities and provisions (86,531) Secured loans (802) Sub-total (87,333) Net assets acquired 201,163 Purchase consideration 866,918 Goodwill on acquisition 668755 Thus, the difference between the net assets acquired and the purchase consideration was treated as goodwill . The payment for the purchase of existing business was made by cheque vide agreement dated 20.12.2007 and copy the bank statement and acknowledge receipt have also seen is placed in the paper bo .....

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..... Act. The AO added the same under section 69C of the Act by suspecting the transaction in colourable device used to siphon off the money from the company. A provisions of section 69C of the Act is reproduced below: 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income Now the question before us is, as to whether the writing off the goodwill has resulted in the siphoning of funds of the company and covered u/s 69C of the Act. Our answer is negative. We are in agreement with the submissions of ld.AR that writing off the goodwill during the year has not resulted in any kind of tax evasion as it .....

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