TMI Blog2018 (5) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... uction Co. respectively. The assessee’s name does not figure as a member of the AOP in the Audit Report. The action of the authorities below in disallowing the share of the profit of the AOP claimed by the assessee is correct. Hence, we affirm the order of the authorities below. - I.T.A. No.666/Mum/2016 - - - Dated:- 2-5-2018 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI JUDICIAL MEMBER For The Appellant : Shri Pheroze Andhyarjuna For The Respondent : Shri V.Justin-DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER: This appeal by the revenue is directed against the order of ld. Commissioner of Income tax(Appeals) -22, Mumbai dated 19/11/2015. It pertains to assessment year 2010-11. The Grounds of appeal read as under :- 1. On the facts and in the circumstances of the case and in law the learned CIT (A) erred in sustaining the order of the AO. The learned CIT (A) ought to have granted the claim of depreciation on intangibles for ₹ 1,58,75,000/-- and accepted the share of profit of ₹ 9,24,154/-from SNB-RCC(JV) as exempt income. 2. On the facts and in the circumstances of the case and in law the learned CIT (A) under a mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case and in law the learned CIT (A) denied the claim of exempt income to the share of profit of R.9,24,154/- on the specious ground of capital Investment. The learned CIT (A) ought to have examined the schedules for appreciation of the same. 10. All the above grounds are independent and without prejudice to each another. 11. The appellant craves leave to add, amend, alter, substitute modify any or all grounds of appeal at the time of hearing. 2. Although the assessee has raised may Grounds there are basically two issues. The First issue relates to depreciation on tangibles and the Second issue relates to claim of exempt profit from SNA RCC (JV). 2.1. Apropos the first issue the brief facts of this issue are as under :- 2.2. The assessee company during the year had entered into Succession Agreement with M/s. Shyam Narayan Bros., a registered Partnership Firm. On perusal of the succession agreement and records it was evident that the partners of M/s. Shyam Narayan Bros and Directors of the assessee company were the same and there was no other party involved in the said transaction. It was observed that subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain transactions which though are transfer within the meaning of transfer under 2(47) are not treated as transfer for the purposes of determination of capital gains. We submit ^ that one such clause is (xiii) section 47. The said section relates to the transfer of partnership business and succeeded by a private limited company. We submit that under the said provision the business of erstwhile partnership firm Shyam Narayan Bros was succeeded by the appellant Company. We submit that in pursuance of such transfer the assets and liabilities relating to business stood transferred under the provisions of section 47 (xiii). We submit that there is also an express reference to the intangible assets in the said section which indicates that the possibility of intangibles being a part of assets and liabilities was envisaged by the legislature. We submit that the express provision of intangibles covers the transfer of intangibles which in our case are that of commercial rights and registrations along with goodwill. We submit that the legislature having provided the mechanism of the transfer without it being considered as a transfer for the purposes of capital gains cannot go against in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered on the intangibles. We therefore request your honour to allow the claim of depreciation on the intangibles. We shall be highly obliged for the same.We submit that direct ruling, on the issue of claim of depreciation such transferred assets are not available in public domain. We submit that there have been cases, however, on the issue of transfer under Section 47(xiv) with regard to the creation of intangibles at the time of transfer. We submit that no fault has been found on such intangibles arising on the eve of transfer under 47(xiv). We therefore submit that the acceptance of the intangibles in such transfer affirms that the same is within the tenets of the legal provisions. We rely on one such ruling of Mumbai Tribunal wherein the Hon'bte ITAT in the case of Asst.CIT v. Nayan L Mepani (MumO (2012) 49 SOT 641 (Mumbai) for the proposition that the intangibles arising on the transfer under 47(xiv) doesn't violate the provisions and resultantly the amounts considered under the transfer needs to be taken as the cost of acquisition for the purposes of depreciation. We also rely on one more case on the same issue in the case of ACIT vs. Joe Marcelinho Mathias (2013-TIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and resultantly the amounts considered under the transfer needs to be tak^n -3 the cost of acquisition for the purposes of depreciation. The judgement relied upon by the appellant is also not applicable in the instant case. It is precisely because of the fact that no consideration was paid for the intangible assets which were created on succession that depreciation was disallowed as there was no cost of acquisition. In view of all these facts and observations, the appellant's grounds of appeal on the issue of depreciation on intangible assets are dismissed. 2.4. Against above order assessee is in appeal before us. 2.5. We have heard both the Counsel and perused the records. The ld. Counsel of the assessee reiterated the submissions made before the Ld. Commissioner of Income tax(Appeals). He submitted that the assessee company has duly taken over the partnership firm. The goodwill and commercial rights were duly taken over from the partnership firm .Assessee is very much eligible as per law to claim depreciation their upon. In this regard he referred to the paper book filed by the assessee. Per contra Ld. Departmental Representative relied upon the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- each. This schedule is an unsigned document as against the main balance sheet which contains a signature of Chartered Accountant and a partner of the firm. We find it is strange that when the firm has been taken over on the balances of existing as on 30.09.2009, how on 01.10.2009 in the balance sheet of the same firm, balances as on 30.09.2009 are existing and surprisingly there is a existence of unsigned Schedule E and F which were absent in the earlier balance sheet. 3. We further note that in the succession agreement produced before us there is no mention of existence of any goodwill and similar right which is being taken over. The said agreement only mentions that the balance sheet of the firm drawn on 30.09.2009 will be taken over and the consideration shall be discharged by way of allotment of equity shares to the partners of the said firm in ratio of capital balance. In the paper book submitted, the assessee has produced Form No.2 submitted before the Registrar of Companies pursuant to section 75(1) of the Companies Act. The said Form No.2 runs of 4 pages running from PB pgs. 64 to 67. In the said Form of allotment the property and asset acquired have been shown at & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee company had reduced ₹ 9,24,154/- from business income as exempt share of income from A.O.P. The Assessing Officer observed that during the course of scrutiny proceedings the representative did not furnish any details/supporting evidences to justify the same and that in the absence of details and evidences the genuineness of the claim was not verifiable. Therefore, the claim of reduction of exempt share of income from A.O.P. from business income made in the computation of income was disallowed. 8. Before the Ld. Commissioner of Income tax(Appeals) assessee s submission were as under :- During appellate proceedings, the appellant submitted as under:- The share of income from AOP being SNB-RCC JV of ₹ 9,24,154/- has been not considered alleging the details have not been furnished. We submit that the details were duly furnished during the assessment proceeding which perhaps through inadvertence has missed the attention of the learned AO. We also enclosed the copy of return and the annual accounts of the AOP. The claim of exemption was made under section 86 read with section 67A. We therefore submit that the share of income from SNB-R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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