TMI Blog2017 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... demark - the plea of assessee has been that the valuation has been carried out by an expert and the weightage has been assigned on the basis of variety of considerations, inter-alia, including the potential of generating business in future - Held that:- In our considered opinion, the assessee has explained the basis of arriving at the consideration and the basis is not alien to the theories of valuation. So however, in contrast, if we were to examine the stand of TPO, same is quite adhoc and unscientific, and is only a guesstimate. The TPO observed that “assessee has paid almost 25% extra” for the acquisition, which is devoid of any rationale or scientific methodology. Therefore, in our considered opinion, the TPO has not rejected the valuation of assessee on the basis of any objective reasoning. At the time of hearing, the learned representative also pointed out that the result of valuation carried out by TPO is minimal inasmuch as it would result in the reduction in claim of depreciation by a sum of ₹ 2,32,874/-, which is quite insignificant. Be that as it may, after having considered the entire conspectus of facts and circumstances of the case, we do not find any justifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of its arm s length price. The TPO considered the submissions and evidence put forth by the assessee and held that the stated value of consideration was not at arm s length price and observed that assessee had paid almost 25% extra for the acquisition of intangibles - Goodwill, Trademark and Customer lists. Therefore, as against the stated value of consideration of ₹ 27.64 crores, the arm s length price was determined at ₹ 22.11 crores thereby the TPO worked out the adjustment of ₹ 5.53 crores on account of purchase of intangibles in his order passed u/s 92CA(3) of the Act dated 29.10.2010. The Assessing Officer passed an order u/s 143(3) of the Act dated 28.2.2011 making addition of ₹ 5.53 crores to the returned income on account of determination of arm s length price in conformity with the order passed by TPO u/s 92CA(3) of the Act. The aforesaid addition was carried in appeal before the CIT(A), who has since affirmed the stand of Assessing Officer/TPO and hence the present appeal of assessee is before us. 4. Before us, the rival counsels have made their submissions and we have perused the relevant record. The brief background is that assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed any deduction on account of such payments either as a revenue expenditure or by way of depreciation. The learned representative pointed out that the aforesaid fact-situation is not disputed and, therefore, where the amount has not been considered while computing the taxable income, no adjustment on account of arm s length price can be made. In this context, reliance has been placed on the decision of Pune Bench of Tribunal in the case of Eaton Technologies (P.) Ltd., 32 taxmann.com 103 (Pune Trib.) . In support of the said proposition, reliance has also been placed on the judgment of Hon'ble Bombay High Court in the case of Vodafone India Service Pvt. Ltd. in Writ Petition No. 871 of 2014 dated 10.10.2014 , copy of which has been placed on record. 7. On the first issue relating to acquisition of Customer lists and Goodwill, the ld. CIT-DR has reiterated the stand of CIT(A) on this aspect, which reads as under :- vi. It has been contended by the appellant that it has not claimed such costs allocated of intangibles in its P L account and accordingly even if the ALP determined is different than what has been recorded in the books of accounts of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. In the present case, qua the cost of acquisition of Goodwill and Customer lists, the plea of assessee is that such international transaction is not in the nature of giving rise to any income and, therefore, the question of determination of its arm s length price does not arise. This is based on the plea that no deduction whatsoever has been claimed while computing taxable income qua the consideration paid for acquiring Goodwill and Customer lists. Per contra , the claim of Revenue is that so long as a person has undertaken an international transaction within the meaning of Sec. 92B of the Act, the same is to be treated as an additional and separate source of income and, therefore, income from such a transaction is to be determined having regard to the arm s length principle. In our considered opinion, the aforesaid controversy is no longer res integra and is settled by the judgment of the Hon'ble Bombay High Court in the case of Vodafone India Service Pvt. Ltd. (supra). The following discussion in the order of Hon ble Court is worthy of notice :- 37. The learned Solicitor General next contended that the issue is no long res intergra as the issue stands cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be invoked. Sections 4 and 5 of the Act brings /charges to tax total income of the previous year. This would take us to the meaning of the word income under the Act as defined in Section 2(24) of the Act. The amounts received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2) (viib) of the Act. Thus such capital account transaction not falling within a statutory exception cannot be brought to tax as already discussed herein above while considering the challenge to the grounds as mentioned in the impugned order. 39 In tax jurisprudence, it is well settled that following four factors are essential ingredients to a taxing statute:- (a) subject of tax; (b) person liable to pay the tax; (c) rate at which tax is to be paid, and (d) measure or value on which the rate is to be applied. Thus, there is difference between a charge to tax and the measure of tax (a) (d) above. This distinction is brought out by the Supreme Court in Bombay Tyres India Ltd. Vs. Union of India reported in 1984 (1) SCC 467 wherein it was held that the charge of exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee sought to justify its valuation on the basis of Valuation report of an independent Valuer. On the point of allotting weightage to the different territories for which the credit card business was acquired from HSBC, assessee explained that higher weightage was given to India territory as the credit card penetration was low in comparison to other countries, which showed that there was more scope to increase the business in India. In this context, we find that the entire discussion in the order of TPO revolves around the fact that the credit card business of HSBC was acquired in India as well as non-Indian territories and that in other countries the credit card business was much more advanced and, therefore, the valuation of intangibles ought to have been given a higher weightage in those countries and a lower weightage to the India business. On the contrary, the plea of assessee has been that the valuation has been carried out by an expert and the weightage has been assigned on the basis of variety of considerations, inter-alia , including the potential of generating business in future. In our considered opinion, the assessee has explained the basis of arriving at the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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