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TMI Blog2023 (3) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration. Firstly, whether the expenditure incurred by the assessee for acquiring customer contracts and assembled workforce from M/s. Genpact India is revenue or capital in nature and secondly, whether learned first appellate authority was justified in reducing the value of customer related contracts and goodwill by tinkering with the value determined by registered valuer. 3. Briefly the facts relating to these issues are, the assessee is a non-resident corporate entity incorporated under the laws of Delaware, United State of America (USA). As stated by the Assessing Officer, the assessee is engaged in the business of providing Information Technology Enabled Services (ITES), such as, data entry, conversion/processing data, business supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has to be allowed as revenue expenditure. The Assessing Officer, however, was not convinced with the submissions of the assessee. He observed, the assessee has recorded the payments in the books of account as intangible assets in terms of Accounting Standard -26 (AS-26). Thus, he observed that the accounting treatment given by the assessee itself presupposes that the expenditure incurred is capital in nature. In this context, the Assessing Officer also referred to the note appended by the Auditor to the Audit Report. 5. Thus, ultimately, the Assessing Officer concluded that the expenditure incurred of Rs.22,16,00,276/- is in the nature of capital expenditure. Accordingly, he allowed depreciation at the rate of 25% on such expenses. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with the assessee and their services were deemed as continued. In the aforesaid premises, he was of the view that the Assessing Officer had granted excess depreciation, thereby, resulting in under assessment of income. Therefore, he issued notice proposing to enhance the income. Though, the assessee filed detailed submission objecting to the proposed enhancement, however, learned Commissioner (Appeals) rejected submissions of the assessee. In this context, he observed that while valuing the intangible assets, which includes customer contracts, the Valuer has valued it for a period of 2 years and 4 months by taking the earnings before interest and taxed for 2010, 2011 and 2012 separately and thereafter discounted at the rate of 19.20%, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stify its claim of revenue expenditure, however, no substantive evidence could be furnished by the assessee to demonstrate that the assessee had identical business activity of debt collection services. 8. In view of concurrent finding of departmental authorities that the assessee could not establish that it was in the same line of business of debt collection services prior to acquisition of the new business, specific query was made to learned counsel appearing for the assessee at the time of hearing to furnish any substantive evidence to demonstrate the aforesaid fact. However, learned counsel for the assessee expressed his inability to furnish any such documentary evidences, except, whatever is available on record. 9. On perusal of mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement between two parties, learned Commissioner (Appeals) cannot arbitrarily and unitarily reduce a part of the payment made for computing depreciation. In any case of the matter, the consideration paid by the assessee is supported by valuation report of an independent Valuer, who is an expert in the field. In case, learned first appellate authority had any doubt regarding valuation report, he should have referred the valuation to an expert, instead assuming the role of Valuer himself and tinkering with valuation of certain assets made in the valuation report, viz., customer and contract goodwill. Thus, in our view, the action of learned Commissioner (Appeals) in reducing the value of customer contract and goodwill, as determined by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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