Income Tax Appellate Tribunal - Mumbai
Snb Infrastructure Private Ltd, Mumbai vs Income Tax Officer Ward 10(1)(4), ... on 1 May, 2019
THE INCOME TAX APPELLATE TRIBUNAL
"E" Bench, Mumbai
Before Shri Shamim Yahya (AM) & Shri Ramlal Negi (JM)
M.A. No. 553/Mum/2018 arising out of
I.T.A. No. 666/Mum/2016 (Assessment Year 2010-11)
SNB Infrastructure Pvt. Ltd. ITO Ward
512, A Wing Kohinoor City V s . 10(1)(4)
Commercial-1, Kirol Road Mumbai.
Kurla, Mumbai-400 070.
PAN : AAMCS0182N
(Appellant) (Respondent)
Assessee by Shri Pheroz Andhyarjuna
Department by Shri Ajit Pal Singh Daia
Date of Hearing 1.2.2019
Date of Pronouncement 1.5.2019
ORDER
Per Shamim Yahya (AM) :
By way of this Miscellaneous Application assessee seeks rectification of mistake apparent from record u/s. 254(2) in the order of this Tribunal in ITA No. 666/Mum/2016 vide order dated 2.5.2018.
2. We have heard both the counsel and perused the records. The submission of learned Counsel of the assessee in this regard are as under :
There are certain mistakes apparent on record which requires rectification; hence the appellant prefers the said rectification application u/s 254 of the Income Tax Act, 1961. We submit as below;
i) We find that the Ld. Commissioner of Income Tax (Appeals) in his order has given a clear finding that no tangible asset on account of goodwill and commercial rights and registration existed in the books of the firm before Succession. Pg.5. para.2.7 This finding is not correct and is a contradiction since the CIT(A) on pg. 6 has clearly mentioned "... it is precisely because of the fact that no consideration was paid for the intangible assets which were created on succession that depreciation was disallowed as there was no cost of acquisition."2
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Thus, the question is not of creation but of consideration. The CIT (A) has held that intangible assets were created on succession however, no consideration was actually paid. It may be noted that on creation of Goodwill & Commercial Rights and Registration there is no necessity to pay consideration because it is on the basis of name, business standing and other factors by virtue of which intangibles are self-generated & created. However, the facts remains that the intangible existed on 30/09/2009 but the issue was that, there was no cost paid on creation of the same.
ii) This duly corroborates that the assessee has created artificially these assets after the succession of the firm. '....Pg.5. para.2.7.
In the first place the word "after" is incorrect. The goodwill and commercial rights already existed. The Partnership of Shyam Narayan & Bros, was in existence since 1972 and the goodwill and commercial rights were generated all along over the period of years. Now on succession these intangible are created and valued on 30.09.2009.
Thus what has been done is prior to succession the existing intangibles were quantified and monetized and brought into the books on 30.09.2009 which on 01.10.2p09 continued and reflected for which corresponding shares were issued to the erstwhile partners.
iii) Hence it is clear that as on 30.09.2009 in the balance sheet submitted of the firm in succession there was no existence of any goodwill or commercial right. . ...Pg.6. para.2.7.
This statement is incorrect since in the Balance Sheet as on 30.09.2009 Fixed assets is shown at Rs.31,00,64,900/- which includes Goodwill and commercial rights. Thus, goodwill and commercial rights do exist on 30.09.2009.
iv) Now further we note that in pages 6 to 30, the assessee has attached in the said paper hook balance sheet as on 01.10.2009 of M/s. Shyam Narayan & Brothers. In this balance sheet account there is an existence affixed assets business and non-business of same amount as mentioned in the balance sheet as on 30.09.2009. However in this balance sheet, in page no.11, there is schedule E which mentions goodwill and commercial rights of Rs.63,50,000/- each, This schedule is an unsigned documents as against the main balance sheet which contains a signature of Chartered Accountants and a partner of the firm. We find it is strange that when the firm has been taken over on the balances of existing as on 30.09.2009, how on 01.10.2009 in the balance sheet of the same firm, balances as on 30.09.2009 are existing and surprisingly there is a existence of unsigned Schedule E and 3 SN B In f r as tr u c tu r e P v t. L t d.
F which were absent in the earlier balance sheet." ....Pg.6. para.2.7.
a) In the first place, for the figure referred to of Rs.63,50,000/- the correct figure is Rs.6,35,00,000/-.
b) The pages at 6 to 30 constitute the Balance Sheet drawn on commencement of 01/10/2009 which is the same as that of drawn on close of 30/09/2009. The figures are therefore the same in both the Balance Sheet.
c) With regard to the observation, of Schedule E is an unsigned document is not correct. All the schedules are initialed. The unsigned schedule E & F has been emphasized. In this connection attention is drawn, that, it is undisputed part that Balance sheet is duly signed. The schedules are supplement and annexures to balance Sheet and forms part of the Balance Sheet and accordingly the signature of the Balance Sheet is sufficient to cover the schedules as well. Though, the schedules are initialed there is no requirement, as such, that it has to be signed. This is, in addition to the fact, that in schedules of Fixed assets comprising of the various assets including that of goodwill and commercial rights and registrations do have appropriate initials.
v) This makes it further clear that no information about the existence of goodwill or commercial right was there on the date of allotment after the succession. Furthermore, the said allotment also shows share premium of Rs.17,78,39,700/-. We find there is no mention whatsoever in the succession agreement for allotment of shares on premium. The Ld. Counsel of the assessee submitted that he had no information or details as to how and on what account the share premium was arrived at and mentioned. ... .Pg. 7. para.3.
a) The Succession Agreements refers to the consideration and the manner it has to be discharged. The Premium amount is a part of the consideration and the increase or decrease of the amount would not have any bearing as the overall consideration would continue to remain the same.
b) The assessment proceedings for firm and the appellant company had been completed under section 143(3) and the concerned assessing officer had examined the issue of the basis of determination of Premium.
c) Further, in the issue of depreciation of intangibles the question of premium on allotment of shares and its justification is not germane. At page 65 in the column in Form 2 total premium is specified. This establishes that shares were issued at a premium.
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vi) We concur with the Assessing Officer that these assets were artificially created subsequent to the succession of the firm in the books of the assessee company. ....Pg.7/8.para.4.
This finding is erroneous "Balance Sheet as on 30.09.2009 against the column of F Assets Business assets figure of Rs.31,00,64,900/- is clearly reflected which includes goodwill and commercial rights. Pg. l of PB and on Page 6 of PB in the Balance sheet on 01.10.2009 in 'Application of Fund' Business Fixed assets of Rs.31,00,64,900/-is mentioned. A conjoint reading of Pgs. 1 & 6 would establish that the Business assets on 30.09.2009 and 01.10.2009 were Rs. 31,00,64,900/-. Hence, there is no question of subsequent creation of intangibles. On page 11 specifically Goodwill & Commercial Rights and Registrations amount of Rs.6,35,00,000/- respectively is mentioned. On page 14 the figure of Rs.31,00,64,900/- corroborates with the figure of 30.09.2009 which proves beyond doubt that figure of Rs.31,00,64,900/- includes goodwill and commercial rights. On Page 50 the Premium paid and the capital is clearly reflected and the Premium amount does correspond with pg.65 of Form 2 of PB.
Even legally it is therefore, submitted and stated that the existence of Intangibles as on 30/09/2009 cannot be denied as supported by the Balance Sheet of the relevant dates being 30/09/2009 & 01/10/2009. It is therefore stated and submitted that the denial of claim of depreciation on the question of existence of assets is incorrect. It is submitted and stated that in the scheme of things the issue and allotment of Shares as provided in section 47(xiii) for non-existent assets on the date of Succession is an impossibility. It is stated and submitted that the intangible assets of Goodwill and Commercial Rights have not been artificially created as alleged in the Order and those intangible assets along with other assets existed as on 30/09/2009.
3. In his oral submissions learned Counsel of the assessee reiterated the submission as referred here in above.
4. Per contra, learned Departmental Representative submitted that in the aforesaid income tax appeal, the ITAT has passed a well reasoned order. He submitted that in the garb of rectification of the mistake the assessee is seeking a review of the order which is not permissible under the Act.
5. Upon careful consideration, we may gainfully refer to the adjudication by the ITAT in this case which reads as under :-
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"2.5. We have heard both the Counsel and perused the records. The ld. Counsel of the assessee reiterated the submissions made before the Ld. Commissioner of Income tax(Appeals). He submitted that the assessee company has duly taken over the partnership firm. The goodwill and commercial rights were duly taken over from the partnership firm Assessee is very much eligible as per law to claim depreciation their upon. In this regard he referred to the paper book filed by the assessee. Per contra Ld. Departmental Representative relied upon the order of the ld. CIT(A). He submitted that the ld. CIT(A) has given a clear finding in his order that there was no such goodwill or commercial right in existence in the books of the partnership firm which has been taken over. Hence, Ld. Departmental Representative submitted that there is no question of granting any depreciation on the asset which were never in existence.
2.6. We have carefully considered the submissions and perused the records. 2.7. We find that the ld. Commissioner of Income Tax (Appeals) in his order has given a clear finding that no tangible asset on account of goodwill and commercial rights and registration existed in the books of the firm before succession. This duly corroborates that the assessee has created artificially these assets after the succession of the firm. Apparently this is a colorable device to claim huge depreciation on this account. In this regard, we note that the assessee has submitted paper book before us which is running into 83 pages. On paper book no. 1, we note that there is a balance sheet of M/s. Shyam Narayan & Brothers, the firm which has succeeded as on 31.09.2009. In this balance sheet in fixed assets there is a mention of schedule E and F being details of business fixed asset and non business fixed asset respectively. However, we note that no such schedule has been attached. In this balance sheet there is no mention any where whatsoever about the existence of any goodwill or commercial right which has been claimed by the assessee company to have taken over. It may also be noted that in the succession agreement produced in PB pg. 68, which is dated 01.10.2009, it has been mentioned that the assets and consideration thereof are as per the balance sheet of the firm M/s. Shyam Narayan & Brothers as on 30.09.2009. Hence, it is clear that as on 30.09.2009 in the balance sheet submitted of the firm in succession there was no existence of any goodwill or commercial right. Now further we note that in pages 6 to 30, the assessee has attached in the said paper book balance sheet as on 01.10.2009 of M/s. Shyam Narayan & Brothers. In this balance sheet account there is an existence of fixed assets, business and non business of same amount as mentioned in the balance sheet as on 30.09.2009. However, in this balance sheet, in page no. 11, there is schedule E which mentions goodwill and commercial rights of Rs.63,50,000/- each. This schedule is an unsigned document as against the main balance sheet which contains a signature of Chartered Accountant and a partner of the firm. We find it is strange 6 SN B In f r as tr u c tu r e P v t. L t d.
that when the firm has been taken over on the balances of existing as on 30.09.2009, how on 01.10.2009 in the balance sheet of the same firm, balances as on 30.09.2009 are existing and surprisingly there is a existence of unsigned Schedule E and F which were absent in the earlier balance sheet.
3. We further note that in the succession agreement produced before us there is no mention of existence of any goodwill and similar right which is being taken over. The said agreement only mentions that the balance sheet of the firm drawn on 30.09.2009 will be taken over and the consideration shall be discharged by way of allotment of equity shares to the partners of the said firm in ratio of capital balance. In the paper book submitted, the assessee has produced Form No.2 submitted before the Registrar of Companies pursuant to section 75(1) of the Companies Act. The said Form No.2 runs of 4 pages running from PB pgs. 64 to 67. In the said Form of allotment the property and asset acquired have been shown at Rs.20,74,79,650/-. Furthermore, there is no mention in the column for goodwill and other items. This makes it further clear that no information about the existence of goodwill or commercial right was there on the date of allotment after the succession. Furthermore, the said allotment also shows share premium of Rs.17,78,39,700/-. We find there is no mention whatsoever in the succession agreement for allotment of shares on premium. The ld. Counsel of the assessee submitted that he had no information or details as to how and on what account the share premium was arrived at and mentioned.
4. In the light of the above factual details and evidence we are of the considered opinion that ld. Commissioner of Income tax(Appeals) is quite correct in holding that there is no evidence whatsoever on record regarding the existence of goodwill and commercial right claimed to have been taken over from partnership firm either in the books of the said partnership firm or from documents submitted before the registrar of Companies. In such situation when no intangible asset on account of goodwill and commercial right and registration existed in the books of the partnership firm before succession, there is no question of the assessee company taking over the same and claiming depreciation their upon. In view of this factual finding the entire claim of the assessee regarding the reliance upon provisions of section 47(xiii) and the case laws doesn't support the case of the assessee in as much as there is no quarrel about the principles laid down in the Act and those case laws. However the facts of the present case are totally different as it has not been established that the assets in the form of goodwill and commercial right claimed which has been taken over were in existence in the books of the predecessors firm. We concur with the Assessing Officer that these assets were artificially created subsequent to the succession of the firm in the books of the assessee company. The only purpose of this action is to claim huge deprecation in hands of the assessee company.7
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5. Hence, in the background of the aforesaid discussion, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals). Accordingly, we affirm the same.
6. Upon careful consideration we find that by submitting elaborate arguments in the realm of review of the order of ITAT, the assessee is seeking an order u/s. 254(2) of the I.T. Act, which only permits rectification of mistake apparent from record. The submission of the assessee hereinabove, barring a typographic mistake in figures, which though has no affect on the final outcome has duly been rectified by corrigendum, call for immense amount of reasoning and review. The learned Counsel of the assessee has even made further legal submissions. It is settled law that review of the order in the garb of rectification of mistake is not permissible in the Act.
7. In these circumstances, the Miscellaneous Application filed by the assessee stands dismissed.
Order has been pronounced in the Court on 1.5.2019.
Sd/- Sd/-
(RAMLAL NEGI) (SHAMIM YAHYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated : 1/5/2019
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT
5. DR, ITAT, Mumbai
6. Guard File.
BY ORDER,
//True Copy//
(Assistant Registrar)
PS ITAT, Mumbai