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TMI Blog2021 (11) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... w materials. This exercise has to be done by the Assessing Officer/TPO. Ground are restored to the file of Assessing Officer/TPO for adjudication as per law and as per aforesaid observations. - ITA No. 595/PUN/2020 - - - Dated:- 25-10-2021 - R.S. Syal, Vice President And Partha Sarathi Chaudhury, Member (J) For the Appellant : Mahadevan A.M. Krishnan For the Respondents : Rajendra Agiwal ORDER Per Partha Sarathi Chaudhury, JM This appeal preferred by the Revenue emanates from the order of the Ld. CIT(Appeals)-13, Pune dated 13.02.2020 for the assessment year 2013-14 as per the following grounds of appeal: 1. On the facts and in the circumstances of the case, an in law, the Ld. CIT(A) has failed to consider the real intention of the assessee to deliberately undervalue the value of the plot at Panki and shift that value to intangible assets including non-compete fees and goodwill and thereby claimed depreciation on those assets for which actually no consideration was paid. 2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in allowing depreciation on goodwill, Technical Know-how non-compete fees without appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of CCR divisional cost and IT charges cannot be taken as NIL without undertaking appropriate analysis It is evident from this mention that the TPO had asked an explanation from the assessee for not treating the ALP as NIL. 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO/TPO to delete the adjustment made by the TPO amounting to ₹ 3,73,99,209/- on the payment of CCR divisional cost, IT support service and Royalty ignoring the fact that during the TP proceedings the assessee has not furnished the requisite details. 7. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not considering that the assessee had failed to demonstrate that the services had been rendered/received and has failed to show and quantify the benefits derived pursuant to incurrence of intra group charges? 8. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not considering that the assessee has failed to demonstrate the ALP of an independent comparable entity in rendering such services? 9. Whether on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed a letter dated 14.10.2020 for condonation of the delay of 179 days stating that the Hon'ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 27.04.2021 extended period of limitation till further order. The Ld. Counsel for the assessee did not raise any objection. After hearing the parties herein, we condone the delay and proceed to hear this appeal on merits. We further take note of the present pandemic situation where the movement of people are restricted and because of such practical situation, it is always not possible to follow the time of limitation regarding filing of appeal before various Forums. This fact was also observed and taken cognizance of by the Hon'ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 (supra.). 3. At the very outset, the Ld. DR submitted that there are broadly two issues reflecting in the grounds of appeal filed by the Revenue in the appeal memo. First one relates to the issue of depreciation which are Ground Nos. 1 to 4. The other issue relates to TP adjustment and determination of ALP with regard to CCR divisional cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders as mentioned hereinabove, I allow the claim of depreciation on intangible and other assets as mentioned above amounting to ₹ 2,14,50,647/-. Therefore, the Ld. CIT(Appeals) had relied on the judgment in assessee's own case by the Pune Bench of the Tribunal for the assessment years 2005-06, 2006-07 2009-10 and assessment year 2003-04 while deciding the aforesaid case in favour of the assessee. 7. It is also observed that similar relief was given to the assessee by the Ld. CIT(Appeals) for assessment years 2010-11 2014-15. This issue raised in assessment years 2010-11 2014-15 was challenged by the Revenue before the Tribunal in ITA Nos. 1725 1726/PUN/2018 order dated 03.05.2021. In these cases, the Tribunal had dealt with the issue of depreciation on intangible assets i.e. Technical know-how, goodwill and non-compete fees. The relevant extract of the findings of the Tribunal reads as follows: 4. We have heard the rival submissions through Virtual court and gone through the relevant material on record. It is seen that the extant issue came up for consideration before the Tribunal for the first time in its order for the A.Ys. 2004-05 2005-06 (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the impugned order and restore the matter to the file of the AO for allowing depreciation on intangible assets but only after giving effect to the afore-extracted direction from para 69 of the Tribunal order. Needless to say, the assessee will be allowed opportunity of hearing in such fresh proceedings. A.Y. 2014-15: 7. Both the sides are in agreement that the facts and circumstances of this appeal are mutatis mutandis similar to those of the appeal for the A.Y. 2010-11. Following the view taken hereinabove, we set-aside the impugned order and remit the matter to the file of the AO for deciding this issue in accordance with our directions given above. 8. In the result, both the appeals are partly allowed for statistical purposes. 8. The relief impact of the aforesaid decision in assessee's own case for the assessment years 2010-11 2014-15 is that therein it was observed in the Tribunal's order dated 12.12.2017 for the assessment years 2004-05 2005-06 in ITA No. 1507 and 2036/PUN/2012, the Tribunal had dealt with the issue of depreciation on intangible assets with the qualification contained in Para 69 of its order. The Tribunal in its order for as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be taken, otherwise, how the business would go on. In para 6.4.7, the CIT(A) refers to the Toll Agreement and license to be given to ICI India Ltd. to manufacture on assessee's behalf. The assessee became the owner of know-how under the BTA and that is how it could give same to ICI India Ltd. under Toll Agreement. 36. The learned Authorized Representative for the assessee distinguished the reliance placed upon by the learned Departmental Representative for the Revenue. He further pointed out that for period of four years after perusing the details given by the assessee, the Assessing Officer was satisfied and no addition was made. In the fourth year, the Commissioner exercised jurisdiction under section 263 of the Act and the CIT(A) thereafter, exercised his jurisdiction in the second year itself. Objecting to the comments of learned Departmental Representative for the Revenue on the report of Ernst Young Pvt. Ltd., he pointed out that there was due diligence in valuation report. He further pointed out that no fault was found with the Valuer. In respect of reliance of the learned Departmental Representative for the Revenue on the ratio laid down by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation on goodwill; since it was not specifically mentioned in the list of intangible assets under section 32(1)(ii) of the Act, which talked about know-how, patents, copyrights, trademarks, license, franchise, etc. Further goodwill was also not covered by the expression any other business or commercial rights of similar nature. The CIT(A) thus, denied the depreciation on goodwill and non-compete fees. Further, during the appellate proceedings, the CIT(A) issued enhancement notice to the assessee under section 251 of the Act vis-a-vis. claim of depreciation on knowhow, trademark and patents, which was allowed by the Assessing Officer. The objection of CIT(A) was that two-fold that it was neither owned nor used by the assessee and the cost of acquisition of intangible assets was also incorrectly taken for the purpose of depreciation. The CIT(A) thus, show caused as to why sum of ₹ 21.93 crores claimed as depreciation on knowhow, trademarks and patents, should not be withdrawn. The basis for making the aforesaid disallowance was that the assessee had not purchased the same as per BTA. Further, there was no material available on record to show that the said know-how had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ₹ 231.85 crores as against slump price of ₹ 153.18 crores, then no balance amount was left to be allocated to intangible assets. He was of the view that the assessee had not acquired any intangible assets in consolidated slump price of ₹ 153.18 crores. Accordingly, he did not accept the working of asset vis-a-vis. value allocated to intangible assets including know-how, patents, trademarks, etc. and rejecting the report of the Valuer who was assigned this job of bifurcating value of tangible and intangible assets, the CIT(A) held that the assessee was not eligible for any depreciation on knowhow, trademarks and patents. Accordingly, he made enhancement of ₹ 21.93 crores. The second issue for enhancement which was considered by the CIT(A) was the depreciation on assets acquired in the slump sale. He was of the view that as apparent from the terms of BTA, no specific cost was paid by the assessee for purchase of specific assets and the value which was assigned to the assets was merely guess work and at best an estimated cost of particular assets. He was of the view that slump price paid for acquiring bundle of rights/assets could not be apportioned amongst t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not followed and the order was liable to be quashed. 13. At the time of hearing, when we enquired with the Ld. DR whether the case records were there or not, the Ld. DR responded in negative. Proceeding with the merits of the case as per material available on record we find during the year under consideration, the assessee has made payment to its AE Johnson Matthey Plc, UK for various intra-group services. Regarding CCR divisional cost i.e. Strategy, Finance, Human resources others health and safety matters, the amount paid to AE was ₹ 2,21,10,297/-. In this regard, the assessee has placed before the Department various e-mail correspondences between local and regional personnel towards availing of various services etc. The TPO on the other hand felt that these documentary evidences were not sufficient enough to justify CCR divisional cost and hence, this amount was added to the income of the assessee. 13.1. The next nature of service was with regard to IT support and implementation of various projects such as SAP for which ₹ 1,07,29,271/- was paid. Again the assessee provided evidences and e-mail correspondence between local and regional personnel with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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