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Income Tax Appellate Tribunal, DELHI ‘I-2’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI KULDIP SINGH
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the Revenue is preferred against the order of the ld. CIT(A) - 28, New Delhi dated 28.07.2017 pertaining to A.Y 2012-13.
The substantive grievance of the Revenue is two- fold – firstly, the Revenue is aggrieved by the decision of the ld. CIT(A) in allowing depreciation on good will value of Rs. 6.09 crores. Secondly, the revenue is aggrieved by the deletion of disallowance of marked to market foreign exchange loss of Rs.4,10,404/-.
At the very outset, the ld. counsel for the assessee stated that both the issues have been decided by the Tribunal in assessee’s own case in A.Y 2010-11 in ITA no. 1761/DEL/2015. Copy of the order was supplied.
Per contra the ld. DR could not bring any distinguishing decision in favour of the revenue.
We have carefully considered the orders of the authorities below qua the quarrel. We find force in the contention of the ld. counsel for the assessee. Both the issues in the quarrel are settled in favour of the assessee and against the revenue by the Tribunal in assessee’s own case in for A.Y 2010-11.
The Tribunal, in A.Y 2010-11 has considered the claim of depreciation on goodwill and adjudicated as under:
“Now, coming to the corporate issues raised by the assessee. The first issue raised vide Ground of appeal
Nos. 10 & 11 is against the disallowance of depreciation on Goodwill claimed by the assessee pursuant to the Business Transfer Agreement. The assessee had made no claim of depreciation of goodwill in its return of income and the claim was made for the first time during the course of assessment proceedings. The Assessing Officer placing Assessment Year: 2010-11 8 reliance on the decision of Hon’ble Supreme Court in Goetze (India) Ltd. [2006] 284 ITR 323 (SC) rejected the claim of the assessee. The said claim was also rejected on merits by the Assessing Officer. The Assessing Officer proposed the addition in the hands of the assessee against which objections were filed before the DRP, who did not adjudicate the issue. The Assessing Officer passed final assessment order, not granting depreciation on goodwill, against which the assessee is in appeal before us.
14. The Ld. AR for the assessee after pointing out to the factual aspects referred to the order of the CIT(A) for Assessment Year 2011-12 and pointed out that after obtaining Remand Report from the Assessing Officer, the said claim was allowed in the hands of the assessee. The Ld.AR for the assessee further pointed out that pursuant to the agreement of slum sale, vide agreement dated 20.06.2008, sum of Rs.34 crores was paid to Mitsubishi and the difference between sale value and book value of the assets was booked and depreciation was claimed, though during the course of assessment proceedings. The Ld. AR for the assessee points out that the Hon’ble Supreme Court in Smifs Securities Ltd.: (2012) 348 ITR 302 has held that goodwill was intangible asset and depreciation is to be allowed on it. Our attention was drawn to the order of the CIT(A) in Assessment Year 2011-12 and the Remand Report of the Assessing Officer which are placed at pages 25 to 29 of the Paperbook. The assessee further pointed out that the Hon’ble Delhi High Court in Triune Energy Services (P.) Ltd. vs DCIT [2016] 237 Taxman 230 (Delhi) observed that in view of Accounting Standard 10, Assessment Year: 2010-11 9 consideration paid in excess of value of tangible assets was rightly classified as goodwill and therefore, further exercise to value goodwill was not warranted.
The Ld.DR for the Revenue took us through various convenants of the Business Transfer Agreement and pointed out that no depreciation was claimed in any of the assessment years i.e Assessment Year 2009-10 to 2011- 12. He further pointed that payment of goodwill is not defined anywhere in the agreement. Further, no valuation report of any competent person was available; so, no depreciation is to be allowed on goodwill.
We have heard the rival contentions and perused the record. The first issue is whether the claim which has not been made in the Return of income, can the same be allowed in the hands of the assessee, if subsequently raised during the assessment proceedings. The Hon’ble Delhi High Court in CIT vs Jai Parabolic Springs Ltd. 306 ITR 42 (Del.) and Hon’ble Bombay High Court in CIT vs Pruthvi Brokers & Shareholders Pvt.ltd. 349 ITR 336 (Bom.) has held that “even if a claim made by assessee- company does not form part of original return or even revised return”, the same is to be allowed in accordance with law. In such facts and circumstances, we are of the view that the claim of depreciation on goodwill needs to be considered in the hands of the assessee. The Business Transfer Agreement is dated 20.06.2008 and no depreciation on goodwill was claimed in the return of income. The case of the assessee is that the said depreciation on goodwill is allowable in the hands of the assessee. On the other hand, the case of the Revenue is that the Assessment Year: 2010-11 10 payment of goodwill itself is not defined in the agreement and there is no valuation report from any Competent Authorities so the said claim of depreciation on goodwill is not allowable. We are of the view that the claim can be considered in the hands of the assessee subject to verification of the factual aspects in the hands of the assessee. The Assessing Officer was of the view that the claim was not allowable because of the decision of Hon’ble Supreme Court in Goetz India Ltd. (supra); though he has made some reference to the factual aspects of the case. The DRP has not adjudicated this issue; though the CIT(A) has allowed the claim of the assessee in Assessment Year 2011-12. The present Assessment Year being the year in which agreement was entered into i.e. dated 20.06.2008, it is considered fit to remit this issue of determining resultant amount of goodwill on which depreciation is allowable in the hands of the assessee, consequent to the terms and conditions of the Business Transfer Agreement, back to the file of Assessing Officer. The Assessing Officer is directed to verify the claim of the assessee after allowing reasonable opportunity of hearing. The assessee is also directed to produce all the facts before the Assessing Officer, who shall decide the same in accordance with law”.
On finding parity in the facts, respectfully following the decision of the co-ordinate bench Ground no. 1 with its sub grounds is dismissed.
In so far as the issue relating to deletion of disallowance of marked to market foreign exchange loss is concerned, the co-ordinate bench has considered the same in A.Y 2010-11 and has held as under :
“We have heard the rival contentions and perused the record. The issue is raised against the disallowance of Mark to Market foreign exchange loss of Rs.
28,14,307/-. The assessee has booked the said loss on account of reinstatement of forward contract. The Assessing Officer had treated it to be notional and also speculative in nature. The issue stands covered by the decision of Hon’ble Delhi High Court in CIT vs Industrial Finance Corporation of India Ltd. (supra); further Revenue’s SLP(C).CC No.10349 of 2020 against this decision was dismissed by Hon’ble Supreme Court vide order dated 09.07.2020. The Hon’ble Bombay High Court in Pr.CIT vs International Gold Company Ltd. Tax Appeal 1827 of 2016 allowed mark to market loss on revaluation of forward exchange contracts and also held that CBDT Instruction No.3 of 2010 dated 23.03.2010 cannot be applied.
Following the same parity of reasoning, we reverse the orders of Assessing Officer in this regard and direct the Assessing Officer to delete the disallowance made on account of mark to market foreign exchange loss. Ground of appeal No.12 raised by the assessee is thus allowed”.
9. In light of the aforesaid findings of the co-ordinate bench we direct the assessing officer to allow claim of loss. Ground no. 3 with its related grounds is dismissed.
In the result, the appeal of the revenue in dismissed
The order is pronounced in the open court on 28.08.2020.