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TMI Blog2019 (4) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods to retail sellers like M/S.WS Retail Services Pvt.Ltd. and others, who subsequently would sell those goods as sellers on internet platform under the name 'Flipkart.Com'. The AO further noticed that the Assessee has been purchasing goods at say Rs. 100/- and selling them to the retailers at Rs. 80/-. The purchases during the relevant previous year was Rs. 10335,73,05,882/- and sales was Rs. 9351,75,05,319/-. After excluding closing stock of unsold goods, the purchase and sales figure were as follows: Purchases Rs.10335,73,05,882 Less: Stock Unsold Rs. 741,83,06,836 Rs. 9593,89,99,046 Less: Sale value Rs. 9351,75,05,319 Gross Loss Rs. 242,14,93,727 4. The loss in terms of percentage was 2.52% of the cost of purchase value. The AO was of the view that the action of the Assessee in selling goods at less than cost price was not a normal business practice. In the order of assessment, the AO concluded that the Assessee followed predatory pricing in order to create marketing intangibles and brand. According to him the enhanced valuations at which venture capitalists invest in the Assessee is based on intangibles generated by Assessee. Hence, selling at a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to be made was worked out as under: A sum of Rs. 1204,67,98,537/- was added to the total income of the Assessee. On appeal by the Assessee, the CIT(A) not only confirmed the action of the AO but in exercise of his powers of enhancement held that the Assessee was not entitled to depreciation on the capitalized value of intangible. 5. On appeal by the Assessee, this Tribunal held that the starting point for computing income from business is the profit or loss as per the profit and loss account of the Assessee, which cannot be disregarded unless certain provisions (Section 145(3)) of the IT Act are invoked. Since the AO has not invoked such provisions, the AO is not empowered to go beyond the book results. It was held that it is settled law that "where a trader transfers his goods to another trader at a price less than the market price and the transaction is a bonafide one, the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched to ascertain the profit from the transaction" and "income which has accrued or arisen can only be subject matter of total income and not income which could have been earned but not earned". It was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon'ble ITAT by the Taxpayer. Hence the loss incurred in the form of supply of goods to WS Retail at less than the cost of purchase and sale of the same to Flipkart customers was only with an intention of acquiring the intangible asset in the form of goodwill/brand value and the same was correctly held as capital in nature by the AO. The findings of the Hon'ble tribunal contrary to the above was due to suppression of material fact in the form of an agreement by the Taxpayer. 4. This Hon'ble tribunal has recorded a finding that the transaction between Taxpayer and the retailer, WS Retail was independent transaction. However the supply agreement and license and service agreement between the parties prohibits / controls the WS Retail either to purchase / procure goods from any person other than the Taxpayer and also to sell the said goods other than to the customers placing orders in the Flipkart portal. Above factual position was not placed before this Hon'ble tribunal. The above aspect would lead to only analogy that entire transaction is an colorable device to claim the cost of intangible asset as business loss. 5. This Hon'ble tribunal has accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., shall sell the products sold by the Assessee to it only through the web portal "Filpkart.com". Therefore the transaction between Assessee and M/S.WS Retail Services Pvt.Ltd., cannot be said to be an uncontrolled transaction. The further contention is that the Assessee failed to invite the attention of such agreement before the Tribunal. The further contention of the revenue is that because the transaction between the Assessee and M/S.WS Services Retail was not in the nature of uncontrolled transaction, the profits forgone by the Assessee was only with an intention of acquiring intangible asset in the form of goodwill/brand value and the same was correctly held to be capital expenditure by the revenue authorities. The further allegation is that there was suppression of the aforesaid agreement which has influenced the findings of the Tribunal. The further allegation is that there was a supply agreement and license and service agreement between parties (which parties is not spelt out in the MA) which prohibits/controls W/S.Retail Services Pvt.Ltd., from either purchasing or procuring goods from any other person other than the Assessee and also to sell the goods other than to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MA could be filed on the basis of a possibility of some hidden transaction emanating by lifting the corporate veil. To these queries the learned DR could not given any reply but reiterated the stand of the revenue as contained in the MA. 10. The learned counsel for the Assessee on the other hand pointed out that there existed no brand or intellectual property (IPR) owned by the Assessee during the previous year relevant to AY 2014-15 which was the AY which was decided by the Tribunal. He drew attention to the fact that the Assessee had already transferred whatever brand/IPR it owned to M/s.Flipkart Internet Pvt.Ltd. and these facts were noticed both by the CIT(A) as well as by the Tribunal in its order vide Paragraph-14 & 15 of the Tribunl's order. He submitted that there is no mistake in the order of the Tribunal much less a mistake apparent on the face of the record and hence the MA deserves to be dismissed. 11. We have given a careful consideration to the rival submissions. As we have already pointed out the learned DR was unable to explain the relevance of the documents now sought to be filed before us for deciding the issue that was for consideration before the AO. As we h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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