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TMI Blog2024 (12) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... on opening WDV of intellectual property rights - Assessee submitted that the scheme of Amalgamation has been approved by the Hon'ble High Court and once the scheme of amalgamation has been approved, no authority should be allowed to tinker with the scheme - HELD THAT:- For all practical purpose, the merger effectively took place in Financial Year 2013- 14 relevant to Assessment Year 2014-15 as effect of said amalgamation the assets and liabilities of M/s Macro Steel Engineers Pvt. Ltd. merged with Assessee Company. Further the assets included value of Patented Technology developed by M/s Micro Engineers Pvt. Ltd. The valuation of the said patent technology has been accepted by the Hon'ble High Court and the Assessee has declared the same as value of its asset for Financial Year 2013-14 relates to Assessment Year 2013-14 which stood accepted u/s 143(3) of the Act and no adverse observation has been drawn in the assessment proceedings. As decided in Rohit Bal Designs Pvt. Ltd.[ 2022 (8) TMI 1555 - ITAT DELHI] A.O has committed an error by passing assessment order based on standalone basis despite fact that he had full knowledge of amalgamation while making the addition. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,48,77,532/- claimed @ 25% on opening WDV of intellectual property rights. 3. Brief facts of the case are that, the Assessee filed its return by declaring the total income of Rs. 22,96,57,162/- which was processed u/s 143(1) of the Income Tax Act, 1961 ( Act for short). The case of the Assessee was selected for scrutiny and a notice u/s 143(2) of the Act issued on the Assessee. The assessment order came to be passed on 27/12/2017 by making following disallowance/additions:- Disallowance of late deposit of ESI/PF Rs. 17,93,995/- Addition of interest alleged to be of penal nature Rs. 26,093/- Addition of sundry creditors outstanding Rs. 19,08,698/- Disallowance of amount claimed to be incurred for charity and donation Rs. 2,39,501/- Disallowance of deprecation claimed on intangible Asset Rs. 5,48,77,532/- 4. Aggrieved by the assessment order dated 27/12/2017, the Assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 22/04/2019, allowed the appeal of the Assessee by deleting the addition. As against the order of the Ld. CIT(A) dated 22/04/2019, the Department of Revenue preferred the present appeal on the grounds mentioned above. 5. In the Ground No. 1 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that such sum is taxable under section 41(1) of the Act. It is noted that the above issue had come up for consideration before the Jurisdictional High Court in the case of CIT vs. Vardhman Overseas Ltd. 343 ITR 408. In the aforesaid case, the facts were that the assessee was engaged in the manufacture of rice from paddy and also selling rice after purchasing the same from the local market. The Assessing Officer noted that the sundry creditfor outstanding on account of purchase of paddy was paddy of Rs 1.31.17.230/. The assessee did not submit the confirmatory letters and wrote to the Assessing Officer that it was not aware of the present whereabouts of the creditors after a lapse of four years and whatever addresses were available with the assessee had been given by the suppliers at the time when it purchased paddy from them. In the above background, the Assessing Officer was of the view that the assessee was not interested in proving the genuineness of the creditors by filing confirmation letters or by giving the necessary information. He therefore added that sum of Rs. 1,25,46,534/- which represented the credit balances in the accounts of 9 parties as income of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, a fresh period of limitation shall commence from the time when the acknowledgement was so signed. In an early case, in England, in Jones v. Bellgrove Properties [1949] 2KB 700, it was held that a statement in a balance sheet of a company presented to a creditor- share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt. In Mahabir Cold Storage v. CIT [1991] 188 ITR 91/56 Taxman 4ZF, the Supreme Court held: The entries in the books of accounts of the appellant would amount to an acknowledgement of the liability to Messrs. Prayagchand Hanumanmal within the meaning of Section 18 of the Limitation Act, 1963, and extend the period of limitation for the discharge of the liability as debt. In several judgments of this Court, this legal position has been accepted. In Daya Chand Uttam Prakash Jain v. Santosh Devi Sharma [1997] 67 DLT 13, S.N. Kapoor J. applied the principle in a case where the primary question was whether a suit under Order 37 CPC could be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we dismiss Ground No. 2 of the Revenue. 12. In Ground No. 3 the Department contended that the Ld. CIT(A) has erred in deleting the disallowance of depreciation of Rs. 5,58,77,532/- claimed @25% on opening WDV of intellectual property rights. 13. The Ld. Departmental Representative relying on the findings and conclusion of the assessment order, submitted that the Ld. CIT(A) committed error in deleting the addition. 14. Per contra, the Ld. Senior counsel appearing for the Assessee submitted that the scheme of Amalgamation has been approved by the Hon'ble High Court and once the scheme of amalgamation has been approved, no authority should be allowed to tinker with the scheme. Further submitted that, even the value of the assets have been approved, by the Hon'ble High Court as a part of scheme of Amalgamation which cannot be doubted or rejected by the Revenue Authorities. The Ld. Senior Counsel further contended that the value of patent technology acquired under the scheme of Amalgamation was duly accounted in the financial statement of Financial Year 2013-14 i.e. Assessment Year 2014- 15 showing additions due to amalgamation to tangible assets of Rs. 21,95,10,125/- was duly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 302 examined the issue of eligibility of deduction of goodwill on amalgamation of a company with another company. In holding that goodwill is a legitimate claim of deduction, the Hon'ble Court held that the excess consideration paid by it over value of net assets acquired of the amalgamating company should be considered as goodwill which is an asset under explanation 3(b) of section 32(1) of the Act. In the aforesaid case, one of the issue was raised was that Assessing Officer had held that no amount was actually paid on account of goodwill. However, the Commissioner (Appeals) has come to the conclusion from the orders of High Court ordering amalgamation that assets and liabilities of the amalgamated company were transferred to the assessee for consideration and the difference between the cost of asset and amount paid constituted goodwill and that the assessee-company in the process of amalgamation had acquired a capital right in the form of goodwill. This finding was upheld by the Income Tax Tribunal and also by the Hon'ble High Court and therefore, it was held that excess consideration paid by the assessee over the book value of assets is an eligible deduction. In an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be amalgamated, created for the sole purpose of facilitating transfer of capital asset, through its medium, have not been carried on in a manner prejudicial to public interest. Public interest looms large in this background, and the machinery of judicial process is sought to be utilised for defeating public interest and the court would not lend its assistance to defeat public interest, namely, tax provision. It must be confessed that it is open to a party to so arrange its affairs so as to reduce its tax liability. The assessee or party can arrange its affairs so that he or it may not incur any tax liability. But it must be within the power of the party to arrange its affairs. If the party seeks assistance of the court only to reduce tax liability. the court should be the last instrument to grant such assistance or judicial process to defeat a tax liability, or even to avoid tax liability. If the party has so arranged its affairs, as to reduce or even avoid tax liability and the taxing authority disputes it, and the matter is brought before the court, the court would adjudicate upon the dispute between the revenue and the assessee on the rival contentions. That is not the situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logy to the business of appellant company. In this regard, appellant had furnished a reply dated 23.12.2017 in the course of assessment proceedings wherein it was stated as under: Note on the patent Technology: M/s Macro Steel Engineers Private Limited developed cot efficient technology for drilling of oil over several years and got it patented as offshore winch, onshore Winch and Truck Mounted Winch form Controller General of Patents, Designs and Trademarks, Government of India vide patent registration no.21550, 21549 and 177295. The reason of purchasing these technologies from the seller company was that it is recognized by ONGC and other Oil companies. This technology has provided a monopoly position to the assessee. By acquiring this technology the assessee got huge orders in India as well as abroad. This fact is evident from the jump in turnover in the subsequent years. 6.6 That assessee further vide letter dated 29.11.2017 (page 117 of Paper book has submitted as under: 8. The Turnover of the company has increased substantially from 66.20 cr to Rs. 111.57 Cr. This is due to high tech machinery and technology installed at Noida SEZ. Due to high technique machinery and technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so in view of the specific mandate of the Hon'ble High Court. The Ld. A.O has ignored the above facts. Further, as per the decision of Hon ble Madras High Court in the case of Pentamedia Graphics Ltd. vs. ITO: 236 CTR 204, which is also followed by the Delhi Bench of the Tribunal in the case of Bharti Airtel Limited vs. ACIT: ITA No. 3907/Del/2010, the only course open to the Revenue would be to act as per the scheme sanctioned effective from 01/04/2013 which means that the tax authorities are bound to take note of the state of affairs of the Assessee as on 01/04/2013 and a return filed reflecting the same cannot be ignored on the strength of section 139(9) of the Act. The merits otherwise on the return field have never been challenged by the A.O. Therefore, in our opinion the assessed income as per the return field by the appellant u/s 139(9) of the Act on the basis of consolidated Balance sheet should have been accepted by the A.O. The Ld. CIT (A) has rightly allowed the Appeal filed by the Assessee by setting aside the Assessment Order. Therefore, in our opinion, the order of the Ld. CIT(A) requires no interference. Accordingly, we dismiss the grounds of Appeal filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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