TMI Blog2019 (10) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2004-05 and in A.Y.2005-06 - Therefore, following the consistency in approach, the ratio of allocation applied by the Tribunal is found to be correct. However, the assessee has itself allocated 17.96% in personal expenses, foreign travelling expenses, staff welfare, and oil petrol expenses, hence, the disallowance made on this account is deleted. With regard to other common expenses allocated @15%, the AO is directed to allocate 10% to BEOU, therefore, this issue is partly allowed. In view of these facts and circumstances, this grounds of appeal is partly allowed. Exclusion of interest on others and liability no longer required to be written back while granting deduction under section 10B - HELD THAT:- We find that the issue on exclusion of interest income stands covered in favour of the assessee by the decision of tribunal in the case of Lubrizol Advanced Materials (India) Pvt. [ 2013 (12) TMI 1590 - ITAT AHMEDABAD] wherein it was held that once an income form part of business of undertaking, same would be included in profits of business of undertaking and will be eligible for deduction under section 10B - With regard to liabilities no longer written back, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and process of know-how, intellectual properties and other intangible assets such as commercial rights, registration and license for which composite consideration has been paid on mutual discussion and consent from both parties which in turn based on so many factors such as market value and tangible and intangible assets acquired from Mitsu Industries Ltd. From the above explanation, the AO observed that the assessee is just rhetoric without giving any cogent reason or explanation as to why business worth Rs.7.19 crores were purchased for Rs.27.50 crores. The assessee company has repeated repeatedly that most of the payments are for intangible assets of the manufacturing process of expertise and Registration and Commercial rights. A question then arises if the business sold by Mitsu Ltd. has such a good prospect, then why it did sell the business in the first place. Further, the contention of the assessee that Mitsu Ltd. is not a related company under section 40A (2) (b) is also not convincing because until the recent past, both companies had common promoters. Even in the year under assessment, few of the shareholders are common. Neither could the assessee company justified why it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of assets in the books of Mitsu Industries was only Rs. 7,19,85,974. It was explained that the Mitsu industries are not a related party under section 40A(2)(b) of the Act and the assessee has acquired profit earning apparatus from Mitsu Industries Ltd. which cannot be based on book value of tangible assets debited in the books of seller. The assessee company has acquired international product registration as well as domestic registration approval and license and manufacturing and process of know-how, intellectual properties and other intangible assets such as commercial rights, registration and license for which composite consideration has been paid on mutual discussion and consent from both parties which in turn based on so many factors such as market value and tangible and intangible assets acquired from Mitsu Industries Ltd. The assessee company has repeated again and again that most of the payments are for intangible assets of manufacturing process of know-how and Registration and Commercial rights. We further find that Mitsu Ltd. is not related company under section 40A(2)(b). The assessee has acquired the Lmidachloropid business of Mitsu Limited as slump sale basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We further note that M/s. Mitsu Limited was not a related concerns as per the provision of Section 40(A)(2)(b) of the Income-tax Act, 1961 as the point of sales. The learned counsel submitted that assets acquired under slump sale were capitalized in books of account as per generally accepted accounting principles in a slump sale several assets are purchased for a consolidated price and price is paid for the entire business as a whole. Hence, value to individual assets cannot be assigned directly. The valuation of intangible assets and marketing rights have been done in accordance with the Accounting Standard-10 (AS-10) issued by the Institute of Chartered Accountants of India (ICAI) the company has assigned the values to the various assets on a fair basis. The payments made for acquisition of lmidachloropid products business pursuant to transfer of Business Transfer Agreement and intangible assets was allocated on the basis of valuation report from independent Valuer M/s. Bansi S. Mehta Co. who had assigned the value of individual assets in accordance with AS-10. This valuation of items are placed at Paper Book Page No. 105 to 111. We are of the view that depreciation on intangib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ahmedabad Trib) wherein it was held that admissibility of depreciation of trademark is not contingent upon its registration in the name of the assessee inasmuch as description of intangible assets is Part B of depreciation schedule describe the same merely of know-how patents copyright , trademark licenses franchises or any other business or commercial rights of similar nature. Further the Hon`ble Jurisdictional High Court of Gujarat in the case of Pr. CIT v. Swastik Industries [2016] 68 taxmann.com 329 (Gujarat) held that payment of compensation made by the assessee-firm to retiring partner was to be treated as goodwill and , since , goodwill is an asset under Explanation 3 (b) to section 32 (1), assessee`s claim for depreciation on said payment was to be allowed. 118. We further observed that the Seller company has sold and transferred various assets under a Business Transfer Agreement for which valuable consideration has been paid by the appellant company. The AO has not given any factual finding as regards her observation that the assessee company could not justify in any logical and convincing way the basis on which such huge payment was made to acquire what the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Gujarat High Court in Tax Appeal No.166 of 2019 dated 22.04.2019, therefore respectfully following the decision of the Hon ble High Court the above ground is allowed in favour of the assessee. 9. Ground No.4 is against confirming the action of the A.O. in reallocating the personal expenses of Rs.1,46,40,623/- foreign travelling expenses of Rs.8,74,176/-, staff welfare expenses of Rs.81,14,448/-, Oil and Petrol expenses of Rs.15,73,169/- and other common expenses of Rs.37,34,274/-between Bilag unit and BEOU in the turnover ratio. 10. Short facts of above issues are that the assessee company was having two units viz. Bilag and BEOU. BEOU unit is 100% export oriented Unit whereas, Bilag has normal undertaking which also undertaken export. The assessee company has allocated less expenses in BEOU being 100% export oriented unit as the whole profit being earned from this unit is exempted from tax. The assessee company has filed unit wise profit and loss account for the year from which it is noticed that the common expenses which could not be directly identify with any of the unit for the assessee company was allocated on the basis of certain numbers determined. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses, hence the addition may be deleted. With regard to other common expenses the Assessing Officer may be directed to restrict the allocation to 10% as per finding of the Tribunal in earlier year. 13. We have heard the rival submissions and perused the relevant material on record. We find that turnover ratio of BEOU is 35.89% as compared to Bilag unit at 64.11%. However, the tribunal in the case of the assessee has restricted the allocation to 10% in assessment year 2004-05 in ITA No.2446 2584/Ahd/2007 and in A.Y.2005-06. Therefore, following the consistency in approach, the ratio of allocation applied by the Tribunal is found to be correct. However, the assessee has itself allocated 17.96% in personal expenses, foreign travelling expenses, staff welfare, and oil petrol expenses, hence, the disallowance made on this account is deleted. With regard to other common expenses allocated @15%, the AO is directed to allocate 10% to BEOU, therefore, this issue is partly allowed. In view of these facts and circumstances, this grounds of appeal is partly allowed. 14. Ground 5 is against the exclusion of interest on others of Rs.33,437/- and liability no longer required to be writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking, same would be included in profits of business of undertaking and will be eligible for deduction under section 10B of the Act. It was further submitted that Section 10B is pari materia to section 80HHC of the Act. 18. Per contra, Ld. D.R. relied on DRP /AO. 19. We have heard the rival submissions and perused the relevant material on record. We find that the issue on exclusion of interest income stands covered in favour of the assessee by the decision of tribunal in the case of Lubrizol Advanced Materials (India) Pvt. Ltd. 42 taxmann.com 263 (Ahmedabad-Trib) wherein it was held that once an income form part of business of undertaking, same would be included in profits of business of undertaking and will be eligible for deduction under section 10B of the Act. With regard to liabilities no longer written back, we find that the same pertains to expenses that have been allowed in the previous assessment years as business expenditure, therefore the same represents income from business, hence we are of the considered opinion same is allowable to be included for the purpose of deduction u/s.10B of the Act. In view of these facts, we allow this grounds of appeal in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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