TMI Blog2020 (2) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... gned assessment year. Even, the business transfer agreement also clearly speaks of transferring not only the physical assets but various other intangible assets such as contractual rights, licenses, customer base etc. All these intangible assets transferred to the assessee have a commercial value and a part of sale consideration has to be allocated to such assets. For the purpose of such allocation the assessee has obtained valuation report from a technically qualified person. If the Assessing Officer was not satisfied with the valuation report, he should have got the assets valued through another technically qualified person instead of rejecting the valuation report purely on the basis of conjectures and surmises. Further, the observations of the Assessing Officer that the assessee has designed the transaction in a manner to create fictitious asset is without any material basis. In the case of ACIT vs. Dorma India Pvt. Ltd. (2019 (11) TMI 1139 - ITAT CHENNAI) , the co-ordinate Bench while considering a dispute of similar nature has observed, a consolidated payment made by the assessee over and above net assets acquired by it under a composite contract is to be viewed as tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Nos.6646/Mum/2018, ITA Nos.6647/Mum/2018, ITA Nos.6453/Mum/2018 - - - Dated:- 5-2-2020 - Shri Saktijit Dey, JM And Shri G Manjunatha, AM For the Assessee : Shri Devendra Jain For the Revenue : Shri Kamal Mangal ORDER PER BENCH: This is a group of four appeals, three by the Revenue and one by the assessee. For assessment years 2009-10 and 2010-11 the appeals are by Revenue only and for assessment year 20011-12 there are cross- appeals. All these appeals arises out of three separate orders, all dated 21.08.2018, of learned Commissioner of Income Tax (Appeals) 13, Mumbai. 2. ITA No. 6645/Mum/2018 (Revenue s appeal for A.Y. 2009-10): The dispute in this appeal is confined to allowance of assessee s claim of depreciation on intangibles. 3. Briefly facts are, the assessee, a resident company is a subsidiary of Mahindra Mahindra Ltd. (M M) and is engaged in logistics business and related activities. For the assessment year under dispute, assessee had filed its return of income on 30.09.2009 declaring total income of ₹ 9,25,76,090/- under the normal provisions and book profit of ₹ 6,89,96,607/- u/s. 115JB of the Act. M/s. M M is into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value of the intangibles should not be ignored for computing depreciation by taking recourse to Explanation 3 to section 43(1) of the Act. Though the assessee objected to the proposed action of the Assessing Officer, however, rejecting the objections of the assessee the Assessing Officer ultimately concluded that the entire transaction has been designed by the assessee for claiming high depreciation on fictitious assets. Without prejudice, he observed, even if the transaction is considered to be genuine, there is no rationale behind capitalization of excess consideration paid by the assessee for the intangibles over and above the value of goodwill. He observed, when the assessee had not done the transaction on slump sale and has simply purchased assets at an amount higher than the value of the asset, there is no requirement of capitalization of the excess consideration paid over the net worth. Thus, invoking Explanation 3 to section 43(1) of the Act, the Assessing Officer held that addition to the block of intangible as made by the assessee in the Schedule of Fixed Assets for the year under consideration has to be determined at Nil for the purpose of depreciation. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Authorized Representative submitted, the action of the Assessing Officer in determining the value of intangible asset at nil by taking recourse to Explanation 3 to section 43(1) of the Act is without authority of law hence, invalid. He submitted, before determining the actual cost of the asset under Explanation 3 to section 43(1), the Assessing Officer has to obtain prior approval of the Joint Commissioner. Whereas, the Assessing Officer has not done so in the present case. Therefore, for this reason alone the action of the Assessing Officer cannot be supported. Without prejudice, he submitted, the transaction between the assessee and M/s. M M Ltd is a genuine transaction and M M Ltd. has offered capital gain arising out of such transaction to tax. He submitted, though, the valuation report may not have been referred to in the sale agreement, however, the assessee has obtained the valuation report to value the assets of the transferred business. He submitted, since the valuer had valued the assets on a scientific basis, the Assessing Officer cannot disregard veracity of such valuation. Learned Authorized Representative submitted, while acquiring the transportation busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the asset. However, before so determining he has to obtain prior approval of the Joint Commissioner of Income tax. In the facts of the present case, the Assessing Officer apparently has not obtained such approval of the Joint Commissioner before determining the value of the asset at Nil . Atleast, no such material has been placed before us by the Revenue to show that the Assessing Officer has obtained any approval of Joint Commissioner of Income tax. Even, a reading of paragraph 3.3 of the assessment order reveals that the Assessing Officer by referring to a wrong/incomplete provision has proceeded to exercise his power in determining the value of the asset at Nil . For this reason alone, the disallowance made by the Assessing Officer cannot be sustained. 8. Be that as it may, as rightly observed by learned Commissioner (Appeals), there cannot be any doubt with regard to the genuineness of the transaction as M M Ltd. has treated the sale as slump sale and offered profit derived therefrom as Long term capital gain in the return of income filed for the impugned assessment year. Even, the business transfer agreement also clearly speaks of transferring not only the physical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round but also directed the Assessing Officer to allow assessee s clam of depreciation on goodwill. 10. We have considered rival submissions and perused material on record. Undisputedly, the depreciation claimed by the assessee is on goodwill. As held by the Hon ble Supreme Court in the case of CIT vs. Smif Securities Ltd. (supra), goodwill is an intangible asset as defined u/s. 32(1)(ii) of the Act, hence, eligible for depreciation. In view of the ratio laid down by the Hon ble Supreme Court as discussed above, assessee s claim of depreciation has been rightly allowed by learned Commissioner (Appeals). Hence, no interference is called for. This ground is also dismissed. In the result, the appeal is dismissed. 11. ITA No. 6646/Mum/2018 (Revenue s appeal for A.Y. 2010-11): Ground nos. 1 and 2 are identical to ground nos. 1 and 2 in ITA No. 6645/Mum/2018 dealt with hereinabove. Therefore, our decision therein would apply mutatis mutandis to this appeal as well. Accordingly, these grounds are dismissed. 12. In ground no.3 the Revenue has challenged allowance of fees paid towards valuation report. Briefly facts are, during the assessment proceedings, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egating payment of ₹ 27.81 lacs. Holding that due to non-response to notices issued u/s. 133(6) of the Act, the transaction cannot be considered as genuine, the Assessing Officer treated the amount of ₹ 27,81,000/- as unexplained investment u/s. 69 of the Act and added back to the income of the assessee. Though the assessee contested the aforesaid addition before learned Commissioner (Appeals), however, it did not succeed. 17. The learned Authorized Representative submitted, the entire payments has been made in cheque and assessee has furnished all details such as name, address, PAN etc., to prove the genuineness of the transactions. He submitted, wherever applicable the assessee has also deducted tax at source while making such payments. He submitted, merely because notices issued u/s. 133(6) of the Act issued to the parties have returned back un-served, the transactions cannot be held as non-genuine. He submitted, considering the volume of turnover and the payments made, the assessee would certainly not indulge in any non-genuine activity. Thus, he submitted, the disallowance made should be deleted. 18. The learned Departmental Representative relied on the obser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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