DCIT 1(1)(2), MUMBAI vs. GOLDSTAR METAL SOLUTION P.LTD, MUMBAI

ITA No.: 297/Mum/2017 Assessment year: 2012-13 Deputy Commissioner of Income Tax-1(1)(2) Mumbai ……………..…….Appellant Vs. Goldstar Metal Solution Pvt. Ltd., ..………………..Respondent 512, Himalaya House, 79- Palton Road, CST, Mumbai 400 001 [PAN: AACCG5917H] Appearances: Gaurav Kabrafor the appellant Mehul Jain for the respondent Date of concluding the hearing : 27/05/22 Date of pronouncing the order : 26/08/22 O R D E R Per Pramod Kumar, VP:

1. 1. By way of this appeal, the Assessing Officer has challenged the correctness of the order dated 29th September 2016, passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2012-13.

2. In ground nos 1 and 2, which we will take up together, the appellant has raised the following grievances:- 1. “Whether on the facts and circumstances of the case and in Law, the ld. CIT(A) erred in deleting the disallowance of depreciation of Rs. 47,40,000/- on mining rights which are claimed to be in the nature of commercial rights without appreciating that the Deed of Compromise records that assessee paid the amount of Rs. 10 crores on behalf of all the members of Group II and not in his individual capacity?” 2. “Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee has purchased the assets for Rs. 10 crores in the absence of MOU between members of Group II of which assessee is a member?”

ITA No.: 297/Mum/2017 Assessment year: 2012-13 Page 2 of 6 3. So far as this disallowance is concerned, it is sufficient to take note of only a few material facts. During the course of scrutiny assessment proceedings, the Assessing Officer disallowed depreciation of Rs. 47,40,000/- by observing as follows:- 4. DISALLOWANCE OF DEPRECIATION ON GOODWILL: 4.1 Assessee has, during the year, made payment of Rs.10 crores for acquisition of exclusive mining rights, on behalf of group of persons, including its directors, and its subsidiary company. The back ground of the case is as follows. 4.2 The assessee had entered into an agreement for exclusive purchase of iron ore from the mines of M/s Deccan Minerals Pt Ltd, dated 24.06.2006. Deccan Earlier, the assessee had also entered into a similar agreement with M/s Minerals and Metals, and M/s Raw and Finished Products, in October, 2007. Prior to the agreement with the assessee, M/s Deccan Minerals entered into an agreement M/s Melateru Mining Company giving exclusive rights for purchase of iron ore from the mine belonging to Deccan Minerals, Minerals and Metals, & Raw and Finished Products, vide agreement dated 06.08.2006. But the assessee was granted exclusive rights earlier. Hence a dispute arose. 4.3 The dispute over mining rights was settled by the assessee by making a payment of Rs. 10 crores to Melateru Mining Company during the year. The assessee got its exclusive rights back after this payment, which was made vide agreement entered into on 05.01.2011. Further, M/s Deccan Minerals, M/sMinerals and Metals, and M/s Raw and Finished Products, entered into separateagreements, dated 10.05.2011, granting exclusive mining rights back to theassessee. 4.4 Out of the payments of Rs. 10 crores, the assessee acquired assets of Rs.8.104 crores. The balance of Rs. 1,89,60,000/- was credited to the goodwill account of the assessee, on which the assessee claimed depreciation @ 25%, amounting to Rs. 47,40,000 / -. 4.5 The assessée asked to submit the details and justify the depreciation on intangible assets, vide questionnaire dated 05.01.2015. The assessee replied vide letter dated 13.01.2015. The same has been placed on records, after perusal. But the arguments of the assessee have not been found to be tenable in law. 4.6 The payment itself was on behalf of a group of companies to settle the disputes relating to earlier mining contract, and it is not clear as to how much share of rights has accrued to the account of assessee. In any case, the payment is in nature of debt, for which other parties to contract have to settle the accounts with assessee, and it is not for assessee to unilaterally claim the benefit of entire payment. Assessee has by its conduct waived off amounts due to itself from other parties to contract, which may lead to a separate taxable incidence in their hands. The payments made by the assessee, however, as per agreement dated 05/01/2011, is made to Melatheru Mining Company Pvt. Ltd., on behalf of (Group-II) as referred in the agreement:

1. 1. M/s. Gold Star Metals Solutions P Ltd. (Company itself), 2. M/s. Vidharbha Mining Pvt. Ltd.

3. Shri Prem Prakash Saraogi, 4. Shri UmapatiShyambhari Tiwari, 5. Decan Mineral Pvt. Ltd., 6. M/s. Minerals and Metals, 7. M/s. Raw & Finished Products, 8. Shri Shyamkumar Shrivastava, 9. Shri Sandeep S. Shrivastva 10. M/s. Sudeep S. Shrivastava ITA No.: 297/Mum/2017 Assessment year: 2012-13 Page 3 of 6 The payments made are not only for company itself, but for the entire group as above. Hence the assessee cannot claim the benefit only for itself since it is not clear, how much benefit has accrued to the assessee. 4.7 Irrespective of above, the claim of having any intangible assets itself is incorrect and with it, claim of any depreciation claimed against the profit of the period. Explanation of assessee, give vide letter dated 13.01.2015 just reiterates the facts already mentioned and is silent on the core issue of inter party rights and liabilities.

ITA No.: 297/Mum/2017 Assessment year: 2012-13 Page 4 of 6

Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 4,07,10,542/- by admitting additional evidence in the form of Research without recording reason for admitting such additional evidence and also without giving an opportunity to the AO to examine the same which is a violation of Rule 46A and hence ought to be quashed as bad in law?