Itxa/40/2011 Of The Commissioner Of Income Tax -8 v. Kec International Ltd

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.40 OF 2011 The Commissioner of Income Tax-8, Mumbai ..Appellant. V/s. M/s. KEC International Ltd. ..Respondent. Mr. Suresh Kumar for the appellant. Mr. S.E. Dastur, senior Advocate with Niran Seth and A.K. Jasani for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATED : 7TH FEBRUARY, 2013 P.C. :- 1.In the appeal by the revenue for assessment year 2006- 07, the following questions of law are raised for our consideration :- (a)Whether on the facts and circumstances of the case and in the provisions of law, the ITAT is justified in holding that it is a case of slump sale and not a de-merger in terms of section 2(19AA) of the I.T. Act, even though the assessee issued its entire shares to KEC Infrastructure Ltd. which in turn distributed the entire shares to the shareholders of erstwhile KEC Infrastructure Ltd. in the ratio of 1:1. Thus, in terms of section 2(19AA)(v), not only 3/4[th ]but all the shareholders of the erstwhile de-merged company became the shareholders of the resulting company ?provisions of law, the ITAT is justified in holding that it is a case of slump sale and not a de-merger in terms of section 2(19AA) of the I.T. Act, even though the assessee issued its entire shares to KEC Infrastructure Ltd. which in turn distributed the entire shares to the shareholders of erstwhile KEC Infrastructure Ltd. in the ratio of 1:1. Thus, in terms of section 2(19AA)(v), not only 3/4[th ]but all the shareholders of the erstwhile de-merged company became the shareholders of the resulting company ? (b)Whether on the facts and circumstances of the case and in the provisions of law, the ITAT is justified in not appreciating the facts and findings of the AO that depreciation on the revaluation of assets is not allowable as there is de-merger of the Power Transmission Business of the assessee and not a slump sale ? (c)Whether on the facts and circumstances of the case and in the provisions of law, the ITAT is justified in not appreciating that the arrangement is a de-merger and not a slump sale. Hence no asset by way of 'brand' is created by revaluing the old, existing assets ?provisions of law, the ITAT is justified in not appreciating that the arrangement is a de-merger and not a slump sale. Hence no asset by way of 'brand' is created by revaluing the old, existing assets ? (d)Whether on the facts and circumstances of the case and in the provisions of law, the ITAT is justified in equating 'brand' with trademark and allowing depreciation thereon u/s.32(1)(ii) of the I.T. Act, 1961 ?provisions of law, the ITAT is justified in equating 'brand' with trademark and allowing depreciation thereon u/s.32(1)(ii) of the I.T. Act, 1961 ? (e)Whether on the facts and circumstances of the case and in the provisions of law, the ITAT is justified in relying on the decision of the Bombay High Court in the case of CIT V/s. Techno Share & Stock Ltd. [2009 184 Taxman 103] the facts of which are completely distinguishable from the facts of the present case ?provisions of law, the ITAT is justified in relying on the decision of the Bombay High Court in the case of CIT V/s. Techno Share & Stock Ltd. [2009 184 Taxman 103] the facts of which are completely distinguishable from the facts of the present case ? 2.So far as the issues relating to questions (a) & (b) are concerned i.e. whether there is de-merger or slump sale was not raised before the Tribunal. In fact, the impugned order records in its order that the revenue has not challenged the finding of the first appellate authority that this is a case of de-merger. In fact attention was invited to the grounds of appeal of the Revenue before the Tribunal and no such ground is taken in challenge to the order of CIT(A). In view of the above, questions (a) & (b) do not arise from the order of the Tribunal. Thus, questions (a) & (b) are not entertained. itxa40-11 2.So far as the issues relating to questions (a) & (b) are concerned i.e. whether there is de-merger or slump sale was not raised before the Tribunal. In fact, the impugned order records in its order that the revenue has not challenged the finding of the first appellate authority that this is a case of de-merger. In fact attention was invited to the grounds of appeal of the Revenue before the Tribunal and no such ground is taken in challenge to the order of CIT(A). In view of the above, questions (a) & (b) do not arise from the order of the Tribunal. Thus, questions (a) & (b) are not entertained. itxa40-11 3.So far as the issue relating to questions (c), (d) & (e) are concerned, viz. whether depreciation is allowable on brand name. The case of the Revenue before the Tribunal as upheld by the CIT(A) was that what was received by the respondent-assessee under the scheme of arrangement was Goodwill and not a brand name. Therefore, no depreciation on Goodwill is available under Section 32 of the I.T. Act. The Tribunal on consideration of Section 32 of the Act, various dictionary meanings and the definition under the Trademark Act concluded that the brand name is similar to trademark and depreciation under Section 32(1)(ii) of the Income Tax Act would be available. However, even if the department's case is taken at its highest then what was received under the scheme of arrangement was not brand name but goodwill, depreciation would be available on the same in view of the decision of the Supreme Court in the matter of CIT V/s. Smifs Securities Ltd. reported in [2012] 348 ITR 302 (SC). Thus, as the respondent-assessee is entitled to depreciation even if the revenue's stand is accepted, the entire exercise would be acadamic. Therefore, we do not entertain the proposed questions of law (c), (d) & (e). 4.Accordingly, the appeal is dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)