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TMI Blog2019 (1) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... as in pursuance to the order dated 29.10.2010 passed by Transfer Pricing Officer(hereinafter called "the TPO") u/s 92CA(3) of the 1961 Act. 2. First , we shall dispose of Revenue's appeal in ITA no. 4154/Mum/2015 for AY 2007-08 and Cross Objections in C.O.No. 147/Mum/2015 arising out of Revenue's appeal in ITA no. 4154/Mum/2015 , filed by the assessee. against aforesaid Revenue's appeal. This appeal filed by the Revenue in ITA No. 4154/Mum/2015 and C.O.No. 147/Mum/2015 filed by the assessee, both for AY 2007-08 are disposed of because the tax effect in the Revenue's appeal is less than Rs. 20 lacs as per the CBDT Circular No. 3/2018, F. No. 279/Misc.142/2007-ITJ (Pt) dated 11th July, 2018 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India. 3. The Ld. DR submitted that this appeal filed by Revenue is not maintainable as tax effect is less than Rs. 20 lacs being a low tax effect appeal covered by CBDT circular no. 3/2018 dated 11.07.2018 and this appeal of the Revenue is also not covered by any of exceptions as notified by CBDT circular and this appeal is thus not maintainable as tax effect is less than Rs. 20 lacs. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. 5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeals shall be filed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified monetary limits. 8. In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value and also bring to the notice of the Tribunal/ Court the provisions of sub section (4) of section 268A of the Income-tax Act, 1961 which read as under : "(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall also apply retrospectively to pending SLPs/appeals/cross objections/references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed. 14. The above may be brought to the notice of all concerned. 15. This issues under Section 268A of the Income-tax Act 1961. 16. Hindi version will follow. Sd/- (Neetika Bansal) Director (ITJ), CBDT, New Delhi. Copy to: 1. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary and above. 2. All Pr. Chief Commissioners of Income Tax and All Directors General of Income Tax with a request to bring to the attention of all officers. 3. ADG (PR, PP& OL)t Mayur Bhawan, New Delhi for printing in the quarterly Tax Bulletin and for circulation as per usual mailing list. 4. The Comptroller and Auditor General of India. 5. ADG (Vigilance), Mayur Bhawan, New Delhi. 6. The Joint Secretary & Legal Advisor, Ministry of Law & Justice, New Delhi. 7. All Directorates of Income-tax, New Delhi and DGIT (NADT), Nagpur. 8. ITCC (3 copies). 9. The ADG (System)-4, for uploading on the Department's website. 10. Data Base Cell for uploading on irsofficersonline.gov.in. 11. n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2018 , the corresponding C.O. filed by the assessee arising out of Revenue's appeal has now become infructuos which also stood dismissed. Thus, both Revenue's appeal in ITA No. 4154/Mum/2015 and assessee's C.O.No. 147/Mum/2015 arising out of Revenue's appeal , for AY 2007-08 stood dismissed. We order accordingly. 4.In the result, the appeal filed by the Revenue in ITA no. 4154/Mum/2015 as well Cross Objections filed by the assessee being C.O.No. 147/Mum/2015 arising out of Revenue's both for AY 2007-08 , are dismissed as indicated above. ITA NO. 4337/Mum/2015-AY 2007-08-Assessee's Appeeal 5. The assessee has raised following grounds of appeal in memo of appeal filed with the tribunal in ITA no. 4337/Mum/2015 for AY 2007-08, as under:- 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the entire goodwill of the assessee is the excess of the price paid over net asset value of the business unit taken over. 2.Further on the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that purchase cost paid for the entire business unit and it not relatable to any particular assets, intangible or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26.05.2005. The assessee vide this agreement dated 26.05.2005 took over assets and liabilities of Food and Pharma division of L&T. The net assets of this division of L&T was at the time of acquisition by the assessee was a negative figure of Rs. 26.49 crores, whereas the sale consideration paid by the assessee to L&T for aforesaid acquisition of its Food and Pharma division was Rs. 22.74 crores. The differential between the two or the balancing figure of Rs. 49.22 crores being difference between sale consideration paid by the assessee to L&T for acquisition of its Food and Pharma division T and the net asset value of the said divisions as on the date of takeover , was recognized in the books of accounts of the assessee, after the takeover , as goodwill. The assessee also submitted valuation list dated 20.12.2010 to quantify the valuation of intangible assets. The assessee has placed reliance on the decision of Hon'ble Supreme Court in the case of CIT v. Smifs Securities Limited (2012) 348 ITR 302(SC) before learned CIT(A).The contentions of the assessee did not found favour with both the authorities below i.e. learned Assessing officer as well learned CIT(A) who rejected the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of authorities below and has prayed that denial of depreciation on goodwill and intangibles be upheld. 9. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee company is engaged in the business of Engineering, Procurement and Construction(EPC) of Food, Diary, Chemical and Pharma Plants. The assessee company was incorporated in the year 1992 as an joint venture with L&T Limited , India and Niro A/s, Denmark. However, in the year 2005 , the JV was discontinued and the entire stake of L & T in the assessee company was taken over by Niro A/s, Denmark. Thereafter, name of the assessee company was changed and it became the wholly owned subsidiary of Niro A/s, Denmark. The assessee had acquired Food and Pharma division of L&T vide agreement dated 26.05.2005. The assessee vide this agreement dated 26.05.2005 took over assets and liabilities of Food and Pharma division of L&T. The net assets of these divisions namely Pharma and Food division of L&T was at the time of acquisition by the assessee was a negative figure of Rs. 26.49 crores whereas the sale consideration paid by the assessee for aforesaid acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 5. In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 6. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) ['CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee-Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased. This finding has also been upheld by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case the 'Business Identification Schedule' appended to the Agreement specified the business of TPPL, which was sold to the Assessee. Apart from the tangible assets the said Schedule also included the following:- "(3) TPPL Contracts: The benefits and liabilities of TPPL's ongoing contracts as well as any other letters of intent/contracts/orders related to the Business up to the 22nd September 2006 and any revenue to be still received on 22nd September 2006. The ongoing TPPL contracts are listed in Appendix 4 to this Schedule. A copy of each of the contracts listed in Appendix 4 as well as any other letters of intent/contracts/orders related the business upto 22nd September 2006 shall be provided within 22nd September 2006. (4) TPPL Business Records and Know-How: Know-how, expertise, capabilities, references, track records related to clients and/or suppliers, agents, distributors, business and production plans, forecast, correspondence, orders, inquiries, proprietary information, patent, data, archives, design specification, manuals, research data, instructions, all past and present information and whatever can be directly or indirectly referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hten to remark in IRC v. Muller and Co.'s Margarine Limited [1901] AC 217 (HL) that although goodwill was easy to describe, it was nonetheless difficult to define. In a progressing business goodwill tends to show progressive increase. And in a failing business it may begin to wane. Its value may fluctuate from one moment to another depending on changes in the reputation of the business. It is affected by everything relating to the business, the personality and business rectitude of the owners, the nature and character of the business, its name and reputation, its location, its impact on the contemporary market, the prevailing socio-economic ecology, introduction to old customers and agreed absence of competition. There can be no account in value of the factors producing it. It is also impossible to predicate the moment of its birth. It comes silently into the world, unheralded and unproclaimed and its impact may not be visibly felt for an undefined period. Imperceptible at birth it exists enwrapped in a concept, growing or fluctuating with the numerous imponderables pouring into, and affecting, the business." 15. From an accounting perspective, it is well established that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to note that Smifs Securities Ltd. (supra) was a case where assets of company - YSN shares and Securities (P.) Ltd. were transferred to Smifs Securities Ltd. under a scheme of amalgamation. And, the excess consideration paid by the Assessee therein over the value of net assets of YSN Shares and Securities (P.) Ltd. acquired by the Assessee, was accounted as goodwill. 19. In view of the above, we are inclined to accept the contention advanced on behalf of the Assessee that the consideration paid by the Assessee in excess of its value of tangible assets was rightly classified as goodwill. 20. In the facts of the present case, the ITAT has rejected the view that the slump sale agreement was a colourable device. Once having held so, the agreement between the parties must be accepted in its totality. The Agreement itself does not provide for splitting up of the intangibles into separate components. Indisputably, the transaction in question is a slump sale which does not contemplate separate values to be ascribed to various assets (tangible and intangible) that constitute the business undertaking, which is sold and purchased. The Agreement itself indicates that slump sale in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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