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TMI Blog2018 (5) TMI 2095X X X X Extracts X X X X X X X X Extracts X X X X ..... years 2006-07, 2008-09 and 2009-10. Since, the issues involved in these appeals are identical and are arising from same set of facts, these appeals are taken up together for adjudication and are decided vide this common order. 2. In ITA No.1274/PUN/2016, the assessee has assailed the order of Commissioner of Income Tax (Appeals)-2, Aurangabad dated 25.03.2016 for the assessment year 2006-07. The Revenue has filed cross-appeal against the aforesaid order of Commissioner of Income Tax(Appeals) in ITA No.1313/PUN/2016. In ITA No.630/PUN/2014, the assessee has assailed the order of Commissioner of Income Tax (Appeals)-II, Thane dated 20.01.2014 for the assessment year 2008-09. ITA No. 1275/PUN/2016 by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Aurangabad dated 28.03.2016 for the assessment year 2009-10. The Revenue has filed cross appeal against the order of Commissioner of Income Tax (Appeals) for assessment year 2009-10 in ITA No. 1314/PUN/2016. ITA No. 1274/PUN/2016 (By Assessee) Assessment Year: 2006-07 3. The grounds raised by assessee in assessment year 2006-07 are as under: "On the facts and in the circumstances of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout prejudice to the above, erred in holding that the actual cost of assets forming part of the block of asset can be changed in subsequent years based on reanalysis and reappraisal of the same facts in the subsequent assessment years. Ground 5 : Without prejudice to above- Value of land at Taloja and Panki XI. without prejudice to the above, erred in holding that the value of land at Panki division is Rs. 174.36 crores and the value of land at Taloja is Rs. 13 crores. Ground 6 : Without prejudice to above- Value of trade-marks, patents and know-how XII. erred in ignoring the fact that the valuation of trade-marks, patents and know-how has been undertaken by an independent valuer in a fair and reasonable manner and that the value of trade- marks, patents and know-how would not be affected by the value of land. Ground 7: without prejudice to above, Initiation of penalty under section 271(1)(c) of the Act. XIII. erred in not quashing the initiation of penalty proceedings by the Assessing Officer. The Appellant craves leave to add, alter, omit or substitute any or all the above grounds of appeal, at any time before or at the time of appeal hearing." 4. Shri Percy J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued to claim depreciation on intangible assets in subsequent assessment years i.e. assessment years 2006-07, 2007-08, 2008- 09 and 2009-10. The return of the assessee in assessment year 2006-07 was processed u/s. 143(1) of the Act and the claim for depreciation was allowed in its entirety. In assessment year 2007-08 in assessment u/s.143(3), the Assessing Officer disallowed the claim of depreciation on goodwill and noncompete. In assessment year 2008-09, the claim of depreciation on goodwill, non-compete, know-how, patents, trade-marks and other assets was disallowed in entirety. 5.2 The Commissioner of Income Tax initiated revision proceedings u/s. 263 of the Act for assessment year 2007-08. The Commissioner of Income Tax held that the assessee has not acquired any know-how and denied the claim of depreciation on patents, trademarks and goodwill. Thereafter, assessment for assessment year 2006-07 was reopened in an illegal manner vide notice dated 15.07.2011. The reasons recorded for reopening the assessment does not mention reasons for formation of belief for reopening. The assessee filed objections assailing validity of reassessment on 19.11.2011. The Assessing Officer co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mently supported the findings of Assessing Officer in disallowing claim of depreciation on intangible assets viz. goodwill, non-compete fees, trademarks , patents etc. The ld. DR vehemently prayed for dismissing the appeal of the assessee. 6.1 In respect of appeals filed by the Revenue, the ld. DR submitted that the Commissioner of Income Tax (Appeals) has failed to consider the fact that the assessee has deliberately undervalued the plot at Panki and Taloja. The assessee in order to claim benefit of depreciation has allocated substantial part of consideration to intangible assets including non- compete fees, goodwill etc. without actually paying any consideration for acquiring intangible assets. The ld. DR further submitted that the Commissioner of Income Tax (Appeals) has erred in allowing depreciation on goodwill & non compete fees without appreciating the fact that fair value of leasehold rights acquired by the assessee is Rs. 174.36Crores (for the year 2002). Under such situation, no part of consideration received i.e. Rs. 153.80 Crores is left to be assigned towards goodwill and non-compete fees. Hence, no depreciation would be allowed on intangible assets. 7. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 5 of the appeal, the assessee has assailed valuation of land at Taloja and Panki. The ld. AR pointed that identical ground was raised in appeal by assessee for assessment year 2004-05. We find that the Tribunal while deciding the issue observed as under: "48. Reading the terms of BTA as agreed upon between the parties, ICI India Ltd. agreed to transfer, sell and / or to assign its Indian business as a going concern. As referred to in paras hereinabove, Indian business was defined and understood between the parties, was catalyst business carried on by ICI India Ltd. under the name and style Synetix. The same included business plant & machinery, business properties, employees, debtors, all the rights and liabilities of ICI India Ltd. in or to the business IP, the business goodwill and primary and secondary books and records. However, the term 'Indian business' did not talk about Panki activities and also excluding the 'Excluded assets'. We have already referred to the list of 'Excluded assets', which clearly excludes among others Panki sites, employees and Panki assets along with excluded IP. All these excluded assets are enlisted in Part I of Schedule 10 to the BTA. The Panki a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, it transpires that the value of land at Panki was not part of slump price since the same was not transferred on the date of signing of BTA and TCA. ICI India Ltd. owned 279.30 acres of land, out of which catalyst business was being carried on part of it i.e. 27.53 acres, which admittedly, was to be transferred to the assessee. The said land was under lease with Kanpur Development Authority, for which necessary permission was required before the land could be transferred. Hence, the conclusion of CIT(A) in this regard that the land at Panki was transferred and its value as per valuation done by KDA works out to Rs. 174.36 crores is without any basis. In the absence of any land at Panki being transferred under the BTA, there is no merit in findings of CIT(A) in this regard. 49. Now, coming to the second piece of land on which catalyst business of ICI India Ltd. was being carried on i.e. at Taloja. As per understanding between the parties with special reference to Schedule 4, which defined the business property in Part II, clause 12, it is provided that at completion, ICI India Ltd. and the purchaser i.e. assessee shall enter into Leave and License Novation Agreement in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said land was agreed to be sold by HLL to the assessee for Rs. 6.93 crores. The Deed of Assignment is placed at page 399 of the Paper Book, the said Deed of Assignment which was entered after approval from MIDC on 19.01.2009. In view thereof, there is no merit in the stand of CIT(A) that the land at Taloja was transferred by ICI India Ltd. to the assessee under BTA and hence, the value of slump price is first to be attributed to the cost of said land. We further observe that the Co-ordinate Bench after holding that land at Taloja was not part of Business Transfer Agreement (BTA) finally concluded as under: 69. Before parting, we may also point out that as per the Toll Conversion Agreement, the value of Panki assets was taken at Rs. 1 lakh. However, the CIT(A) had worked out the cost of 279.30 acres i.e. total landholding of ICI India Ltd. at Rs. 174 crores; in case the same rate is applied to 27.52 acres, which was the portion of land on which catalyst business was carried on, then the same would work to Rs. 17.37 crores. The learned Authorized Representative for the assessee fairly admitted that the value of Rs. 17.37 crores be attributed to Panki assets. However, revised al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will and non-compete fee. However, the value of intangible assets would be reduced by Rs. 13 crores on account of value of Panki land. The grounds of appeal raised by the assessee are thus, partly allowed. Following the decision of Co-ordinate Bench of Tribunal, ground No. 6 raised in appeal by assessee for assessment year 2006-07 is partly allowed in the similar terms. 11. In ground No. 7, the assessee has assailed initiation of penalty proceedings u/s. 271(1)(c) of the Act. We are of considered view that challenge to penalty proceedings is premature at this stage, accordingly, ground No. 7 of the appeal is dismissed as premature. 12. Since appeal of the assessee has been allowed on merits, the legal issue raised by assessee in Ground No. 1, challenging reassessment proceedings u/s. 147 of the Act has become academic. The ld. AR for the assessee has also not made any submissions in respect of ground No. 1. Thus, the ground No. 1 is dismissed as academic. 13. In the result, appeal of the assessee for assessment year 2006-07 is partly allowed. ITA No.1313/PUN/2016 ( By Revenue) A.Y 2006-07 14. The Revenue in cross appeal for assessment year 2006-07 has raised following grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In ITA No. 630/PUN/2014, the assessee has raised following grounds: "On the facts and in the circumstances of the case and in law, the learned CIT(A) has: Depreciation on various assets purchased for lumpsum consideration 1. Erred in disallowing depreciation amounting to Rs. 15,57,41,188/- claimed by the Appellant on the values of following tangible and intangible assets determined as per the valuation report obtained from an independent valuer, by holding that depreciation is not allowable in respect of assets acquired under slump sale arrangement since the Appellant has acquired an undertaking and not individual assets perse. Sr. No. Nature of Assets Depreciation (Rs.) 1. Depreciation on other assets 7,12,04,732 2. Trade-marks, Patents and knowhow 7,34,81,217 3. Goodwill 83,30,821 4. Non-compete fees 27,24,418 Total 15,57,41,188 2. Erred in disallowing depreciation on all the assets on which depreciation, totaling to Rs. 15,57,41,188 has been claimed in the AY 2008-09, despite of the fact that the depreciation claim on other assets, amounting to Rs. 7,12,04,732, also included assets acquired in years subsequent to the AY 2003-04 includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation amounting to Rs. 27,24,418 on non-compete payment on the contention that non-compete payment is not in the nature of "any other business or commercial rights of similar nature" as stated in the definition of intangible assets under Section 32(1)(ii) of the Act. Depreciation on Goodwill 11. Without prejudice to Ground 1 above, erred in upholding the disallowance of depreciation on goodwill amounting to Rs. 83,30,821 on the contention that goodwill is not in the nature of "any other business or commercial rights of similar nature" as stated in the definition of intangible assets under Section 32(1)(ii) of the Act. Initiation of penalty under section 271(1)(c) of the Act 12. The learned CIT(A) has erred in holding that the Appellant has submitted wrong particulars of income and hence penalty proceedings are required to be initiated. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal hearing." 18. Similar issues have been raised by the assessee in appeal for assessment year 2006-07. The findings given by us on the respective grounds in assessment year 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on incorrect appreciation of facts VII. without prejudice to above, erred in disallowing depreciation on trademark, patents and know- how on the ground that Appellant has not purchased any knowhow from ICI India Limited and has not used any knowhow for the purpose of its business. VIII. without prejudice to above, erred in concluding that the allocation of Rs. 94.35 crores to trade- marks, patents and know-how out of the purchase consideration of Rs. 153.18 crores has not been done in a fair and reasonable manner. Ground 5: Value of land at Taloja and Panki IX. without prejudice to the above, erred in holding that the value of land at Panki division is Rs. 174.36 crores and the value of land at Taloja is Rs. 13 crores. Ground 6: Value of trade-marks, patents and know-how X. erred in ignoring the fact that the valuation of trade-marks, patents and know-how that the value of trade-marks, patents and know-how would not be affected by the value of land. Ground 7: Initiation of penalty under section 271(1)(c) of the Act XI. erred in not quashing the initiation of penalty proceedings by the Assessing officer. The Appellant craves leave to add, alter, omit or sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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