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TMI Blog2018 (3) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... er by the respondent assessee. Decided in favor of revenue. - I.T.A No. 1935/Kol/2016 - - - Dated:- 7-3-2018 - Shri Aby. T. Varkey, JM And Shri M.Balaganesh, AM For The Appellant : Shri Arindam Bhattacharjee, Addl. CIT For The Respondent : None ORDER Per M.Balaganesh, AM 1. This is an appeal of the Revenue directed against the order passed by the Learned Commissioner of Income Tax (Appeals) 1, Kolkata (in short the ld CITA) in Appeal No. 128/CIT(A)-1/W-1(2)/2014-15 dated 08.06.2016 against the order passed by the ACIT, Circle-1(2), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 20.03.2014 for the Assessment Year 2011-12. 2. The only issue to be decided in the appeal of the revenue is as to whether the ld CITA was justified in holding that the payment on account of liability for gratuity, PF, bonus and other statutory liabilities forms part of cost of acquisition of depreciable assets, when the payment was made on behalf of the vendor, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a private limited company engaged in the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions so made. 3.2. The ld AO requested the assessee to produce the sale agreement made between M/s Gajanand Commercial (P) Ltd and the assessee. The assessee in reply furnished a copy of the expert s opinion relating to nature of outstanding liability of ₹ 263.06 lakhs in the name of M/s Padam Mercantiles (P) Ltd , which has been debited as advance receivable from M/s Gajanand Commercial (P) Ltd. The ld AO observed that on perusal of the document furnished (expert s opinion), the following facts were revealed:- i) M/s Gajanand Commercial (P) Ltd. decided to sell the jute mill owned by it in terms of the resolution passed at the Extra Ordinary General meeting of the company held on 4th March, 1994. Negotiations were held and subsequently, it entered into an agreement with M/s Padam Mercantiles (P) ltd. for the sale of the major portion of plant, machinery, equipments and other movables. ii) M/s Gajanand Commercial (P) Ltd. again passed a resolution at the Extra Ordinary General meeting held on 20th April, 1994 to sell the land, factory godown, building etc., to M/s Padam Mercantiles (P) Ltd. iii) In terms of the resolution as aforesaid plant, machinery, equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,24,23,813/- 60,61,010/- Thus, the expenditure paid by the assessee on behalf of vendor relating to outstanding gratuity, PF, bonus etc. was capital expenditure in nature, but it cannot be capitalized under different depreciable fixed assets viz. Factory building, non-factory building, plant machinery on proportionate basis. Thus, depreciation of ₹ 60,61,010/- claimed by the assessee is disallowed. 4. The assessee stated that there is no dispute as to the factum of :- a) Purchase of jute mill by the assessee . b) Incurring of expenses on behalf of vendor for clearing old dues. c) Treatment of same as Capital expenditure and not as Revenue expenditure. d) Capitalisation of said expenses by assessee in the proportion of the value of assets held in its accounts treating the same as part of consideration paid. e) Depreciation claim made by the assessee on such additions to the fixed assets. 4.1. In the opinion of the ld AO, though these are capital expenditure (not allowable as revenue expenditure) but it cannot be captilaised under different depreciable assets, entitling assessee to claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Therefore, we agree with the grounds in favour of the assessee and affirm the order of the learned Tribunal, appealed against. Accordingly, the assessee pleaded before the ld CITA to allow the depreciation as claimed by the assessee in the sum of ₹ 60,61,010/- . 5. The ld CITA placed reliance on the decision of the Hon ble Jurisdictional High Court in the case of Hooghly Mills supra and deleted the disallowance of depreciation in the sum of ₹ 60,61,010/- . Aggrieved, the revenue is in appeal before us on the following grounds:- 1. That the Ld. CIT(A) erred in deciding that the payment on account of liability for gratuity, PF, Bonus and other statutory liabilities, forms part of the cost of acquisition of depreciable assets when this payment was made on behalf of the vendor. 2. The appellant craves leave to make any addition, alteration and modification etc of ground or grounds on or before the date of hearing of the appeal . 6. None appeared on behalf of the assessee. Since this issue is settled by the decision of the Hon ble Supreme Court in CIT vs Hooghly Mills Co. Ltd in Civil Appeal No. 5149 of 2006 dated 22.11.2006, we decided to hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 2 crores and shall also take over the gratuity liability. In clause l(C) of the said agreement it is stated: ( C) The amount of consideration agreed to be paid by the purchaser to the vendor shall be apportioned amongst the following heads: ( Rs. in Lacs) (A) Land 5 (B) Buildings, structures, godowns sheds and all other constructions and properties of immovable nature at the said premises 35 (C) Plant, Machinery and other movables 160 In the same agreement it was also stated: In addition to the consideration as mentioned in 1(A), the accrued and future gratuity liability of the taken over workers, junior and senior officers, on their retirement or otherwise on termination of their services payable under the Payment of Gratuity Act or otherwise including for the entire period of service with the Vendor shall be on Purchaser's account and shall be met by the Purchaser. Thus in the same agreement of sale of the Undertaking it was not only mentioned that the vendee will pay to the vendor the sum of ₹ 2 crores as a consideration but in addition to it will also take over accrued and future gratuity liability of the employees. It is w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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