ADITYA BIRLA NUVO LTD ( SUCCESSOR TO BIRLA GLOBAL FINANCE LTD ), v. ACIT CEN CIR 1,

MA 125/MUM/2010 | 2001-2002
Pronouncement Date: 06-08-2010 | Result: Dismissed

Appeal Details

RSA Number 12519924 RSA 2010
Assessee PAN AAACB4314R
Bench Mumbai
Appeal Number MA 125/MUM/2010
Duration Of Justice 5 month(s) 12 day(s)
Appellant ADITYA BIRLA NUVO LTD ( SUCCESSOR TO BIRLA GLOBAL FINANCE LTD ),
Respondent ACIT CEN CIR 1,
Appeal Type Miscellaneous Application
Pronouncement Date 06-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 06-08-2010
Assessment Year 2001-2002
Appeal Filed On 23-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER MA NO. 125/MUM/2010 (ARISING OUT OF ITA NO. 1802/MUM/2005) (ASSESSMENT YEAR: 2001-02) M/S. ADITYA BIRLA NUVO LTD. ACIT CENTRAL CIRCLE 1 (SUCESSOR TO BIRLA GLOBAL FINANCE LTD.) MUMBAI APPEJA HOUSE 2ND FLOOR SHAHID BHAGAT VS. SINGH ROAD MUMBAI 400001 PAN - AAACB 4314 R APPLICANT RESPONDENT APPLICANT BY: SHRI J.D. MISTRI RESPONDENT BY: SHRI HARI GOVIND SINGH O R D E R PER B. RAMAKOTAIAH A.M. THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASSE SSEE AGAINST THE ORDER IN ITA NO. 1802/MUM/2005 FOR A.Y. 2001-02. THE ASSE SSEE HAS RAISED TWO ISSUES STATED TO BE MISTAKE APPARENT FROM RECORD FO R CONSIDERATION. 2. WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE SHRI J.D. MISTRI AND THE LEARNED D.R. SHRI HARI GOVIND SINGH IN THIS REGARD. 3. VIDE PARA 1 THE ASSESSEE CONTENDS THAT THE ORDER WA S PASSED IN THE CASE OF M/S. BIRLA GLOBAL FINANCE LTD. WHICH HAS B EEN AMALGAMATED WITH M/S. ADITYA BIRLA NUVO LTD. W.E.F 30 TH JUNE 2006 AND SINCE THE BENCH WAS CONSCIOUS OF THE FACT THAT ORIGINAL ASSESSEE M/S. B IRLA GLOBAL FINANCE LTD. HAS AMALGAMATED INTO M/S. ADITYA BIRLA NUVO LTD. AN D THUS NO LONGER IN EXISTENCE THE IMPUGNED ORDER PASSED IN THE NAME OF M/S. BIRLA GLOBAL FINANCE LTD. WAS BAD IN LAW. 4. WE HAVE CONSIDERED THE ISSUE. AS NOTED BY THE TRIBU NAL IN PARA 2 OF THE ORDER THE COMPANY HAS BEEN AMALGAMATED WITH M/S . ADITYA BIRLA NUVO LTD. W.E.F. 30 TH JUNE 2006. THE ASSESSMENT HAS BEEN MADE IN THE CAS E OF M/S. BIRLA GLOBAL FINANCE LTD. WHICH WAS IN EXISTE NCE THEN AND THE APPEALS MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 2 WERE ALSO IN THE SAME NAME. THE APPEALS WERE FILED IN THE NAME OF M/S. BIRLA GLOBAL FINANCE LTD. THE ASSESSEE VIDE LETTER DATED 4 TH FEBRUARY 2008 ONLY HAS INFORMED THE REGISTRAR ITAT THAT THE ASS ESSEE I.E. M/S BIRLA GLOBAL FINANCE LTD. HAS BEEN AMALGAMATED WITH M/S. ADITYA BIRLA NUVO LTD. W.E.F 30 TH JUNE 2006 WHICH IS A LISTED COMPANY. AN APPLICATI ON TO BRING THE SUCCESSOR IN RECORD ALONGWITH THE HON'BLE HIGH COUR T APPROVAL SCHEME OF AMALGAMATION WAS FILED WITH THE HON'BLE TRIBUNAL VI DE LETTER DATED 28 TH OCTOBER 2007. 5. THE SAME WAS TAKEN ON RECORD. THE CAUSE TITLE IN TH E APPEAL ITA NO.1802/MUM/05 BY THE ASSESSEE DESCRIBES THE ASSESS EE AS M/S.BIRLA GLOBAL FINANCE LTD. (KNOWN AS ADITYA BIRLA NUVO LT D. THE FACTUM OF SUCCESSION HAVING BEEN ALREADY TAKEN NOTE OF BY THE TRIBUNAL AND THE DESCRIPTION OF THE ASSESSEE IN THE CAUSE TITLE AS A BOVE ONLY MEANS THAT THE TRIBUNAL HAS DULY TAKEN NOTE OF THE SUCCESSION. TH EREFORE IT IS NOT CORRECT TO STATE THAT THE ORDER OF THE TRIBUNAL HAS BEEN PA SSED ON A NON-EXISTING ENTITY AND THEREFORE NOT VALID IN LAW. IN VIEW O F THE ABOVE CONCLUSION THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR TH E ASSESSEE DO NOT REQUIRE ANY CONSIDERATION. HENCE THE FIRST ISSUE RAISED I N THE MA IS REJECTED. 6. THE OTHER ISSUE VIDE PARAS 2 3 & 4 RAISED BY THE A SSESSEE IS WITH REFERENCE TO THE ADDITIONAL GROUND WHICH WAS RAISED BY THE ASSESSEE AND WAS DEALT WITH IN THE APPEAL VIDE PARA 5 TO 9. THE DECISION OF THE ITAT WAS STATED IN PARAS 8 & 9 OF THE ORDER. IN ORDER TO APP RECIATE THE CONTENTIONS IT IS NECESSARY TO EXTRACT THE ALLEGATIONS AND PRAYER OF THE ASSESSEE IN THIS MISCELLANEOUS APPLICATION WHICH IS AS UNDER: - 2. ONE OF THE ISSUES DEALT WITH IN THE IMPUGNED OR DER WAS WHETHER AN AMOUNT OF RS. 12 92 33 805/- RECEIVED BY THE APPELLANT FROM SUN L IFE CANADA WAS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. BEFORE THE LOWER AUTHORITIES THE APPLICANT CONTENDED THAT THIS RECE IPT GAVE RISE TO CAPITAL GAINS. THE AUTHORITIES HELD THAT IT GAVE RISE TO BU SINESS INCOME. BEFORE THE TRIBUNAL AN ADDITIONAL GROUND WAS RAISED TO THE EF FECT THAT THE RECEIPT WAS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX AT ALL AND HENCE IT SHOULD BE EXCLUDED FROM THE INCOME OF THE APPLICANT. THE TRIB UNAL AT PARA 9 OF THE IMPUGNED ORDER REJECTED THE ARGUMENT THAT THE SUM I N QUESTION WAS NOT CHARGEABLE TO TAX AT ALL. THE FOLLOWING REASONS WER E GIVEN FOR REJECTION OF THIS PLEA: MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 3 A. IN AY 2000-01 A SIMILAR AMOUNT RECEIVED BY THE APPL ICANT WAS HELD TO BE TAXABLE AS LONG-TERM CAPITAL GAIN; B. THE APPLICANT HAD ITSELF OFFERED THE AMOUNT AS TAXA BLE IN THE CURRENT YEAR AND THE ONLY DISPUTE BEFORE THE LOWER AUTHORIT IES WAS AS REGARDS THE HEAD UNDER WHICH THE AMOUNT WAS ASSESSABLE BU SINESS INCOME OR CAPITAL GAINS; C. THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. ASSOCIATE ELECTRONIC & ELECTRICAL INDUSTRIES ( BANGALORE) PVT. LTD. V. DCIT REPORTED IN 2009 TIOL-263-ITAT (BANG) WAS N OT RELEVANT TO THE PRESENT ISSUE SINCE THE BANGALORE BENCH WAS CON CERNED WITH THE QUESTION WHETHER TRANSFER OF TRADEMARK IS A TRANSFE R OF GOODWILL OR NOT WHEREAS IN THE PRESENT CASE THE RECORD INDICATES TH AT APPROVAL AND MONIES WERE RECEIVED IN CONSIDERATION OF SUCH TRANS FER OF GOODWILL. FURTHER THE CONTENTION THAT NO ASSET WAS TRANSFERR ED WAS NOT SUPPORTED BY ANY EVIDENCE ON RECORD. 3. THE APPLICANT HUMBLY SUBMITS THAT EACH OF THE AF ORESAID FINDINGS ARE MISCONCEIVED IRRELEVANT AND/OR CONTRARY TO THE REC ORD AND HENCE THE CONCLUSION DERIVED THEREFROM NAMELY THAT THE AMOU NT IN QUESTION GIVES RISE TO A LONG-TERM CAPITAL GAINS IS A MISTAKE APP ARENT FROM THE RECORD. THE FINDINGS AND THE MISTAKES THEREIN ARE DISCUSSED BELOW SERIATIM: A. IN THE IMPUGNED ORDER THE TRIBUNALS ORDER IN A Y 2000-01 HAS BEEN FOLLOWED. IN AY 2000-01 THE APPLICANT ITSELF OFFER ED THE RECEIPT TO TAX AS CAPITAL GAINS. THE ASSESSING OFFICER ACCEPTED TH IS TREATMENT BUT CIT REVISED THE ASSESSMENT UNDER SECTION 263 TO ASSESS THE RECEIPT AS BUSINESS INCOME. THE APPLICANT FILED AN APPEAL TO T HE TRIBUNAL. THE TRIBUNAL HELD THAT THE CIT WAS NOT JUSTIFIED IN INV OKING POWERS UNDER SECTION 263. ON MERITS THE TRIBUNAL HELD THAT NO C ASE WAS MADE OUT FOR THE AMOUNT TO BE REGARDED AS A BUSINESS RECEIPT . THE CONTROVERSY BEFORE THE TRIBUNAL WAS LIMITED TO THE QUESTION AS TO WHETHER THE AMOUNT IN QUESTION WAS TO BE REGARDED AS BUSINESS I NCOME OR AS CAPITAL GAINS. THE APPEAL BEING FROM AN ORDER UNDER SECTION 263 THE APPLICANT COULD NOT HAVE RAISED THE CONTENTION THAT THE RECEIPT WAS NOT CHARGEABLE TO TAX. AS THE QUESTION WHETHER THE AMOUNT WAS NOT CHARGEABLE TO TAX AT ALL WAS NOT BEFORE THE TRIBUNA L IN AY 200-01 THAT DECISION HAS NO RELEVANCE IN DECIDING THE CONTROVER SY IN THE PRESENT APPEAL. THUS BY FOLLOWING THE EARLIER ORDER FOR AY 2000-01 WHILE DECIDING THE PRESENT APPEAL THE TRIBUNAL HAS COMMI TTED A MANIFEST ERROR. B. THE VERY REASON FOR THE ADDITIONAL GROUND WAS TH AT IT WAS NOT TAKEN BEFORE THE LOWER AUTHORITIES AND BECAUSE THE APPLIC ANT PROCEEDED ON THE FOOTING THAT THE RECEIPTS GAVE RISE TO A CAPITA L GAIN. THE TRIBUNAL ADMITTED THE ADDITIONAL GROUND. HOWEVER WHILE DECI DING THE MERITS THEREOF IT STRESSED THAT THIS PLEA WAS NOT TAKEN B EFORE THE LOWER AUTHORITIES AND BASED ITS DECISION ON THIS FACTOR. THE APPLICANT SUBMITS THAT ONCE HAVING ADMITTED THE ADDITIONAL GR OUND THE TRIBUNAL COULD NOT HAVE REJECTED IT ON MERITS ON TH E GROUND THAT IT WAS MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 4 NOT TAKEN EARLIER. BY DOING SO IT IS SUBMITTED TH E TRIBUNAL HAS COMMITTED A SERIOUS ERROR. C. THE TRIBUNAL HAS COMPLETELY MISUNDERSTOOD THE AP PLICANTS RELIANCE ON THE DECISION OF THE BANGALORE BENCH. RELIANCE WA S PLACED TO THE SAID DECISION TO SHOW THAT EVEN WHERE TRADEMARK OF A BUSINESS IS TRANSFERRED THERE IS NO TRANSFER OF GOODWILL AND T HEREFORE IN THE PRESENT CASE WHERE THERE IS NO TRANSFER AT ALL OF A NY ASSET THERE IS NO QUESTION OF TRANSFER OF ANY ASSET AND CONSEQUENTLY NO QUESTION OF CAPITAL GAINS. HOWEVER THE BENCH HAS COMPLETELY MI SUNDERSTOOD THIS ARGUMENT WHICH DISCLOSES A SERIOUS MISTAKE APPAREN T FROM THE RECORD. MOREOVER THE RELIANCE ON THE SAID DECISION HAS BEEN REJECTED BY INCORRECTLY HOLDING THAT THERE WAS TRANSFER OF G OODWILL IN THE APPLICANTS CASE. THE APPLICANT SAYS THAT THE RECOR D NOWHERE INDICATES ANY TRANSFER OF GOODWILL. THEREFORE THE OBSERVATION THAT THERE WAS APPROVAL AND RECEIPT OF MONIES FOR TRANSF ER OF GOODWILL IS WITHOUT ANY BASIS AND CONTRARY TO THE RECORD. BOTH THESE ASPECTS DISCLOSE MISTAKES APPARENT FROM THE RECORD. 4. THUS IT WILL BE SEEN THAT ALL THE THREE REASONS GIVEN FOR DECIDING THE ISSUE AGAINST THE APPLICANT ARE WHOLLY MISCONCEIVED AND INCORRECT. IT IS SUBMITTED THAT THE FINDING ARRIVED AT BY THE TRIBUN AL SUFFERS FROM SERIOUS MISTAKES WHICH GO TO THE ROOT OF THE ISSUE AND CAN BE CORRECTED ONLY BY RECALLING THE MATTER AND HEARING BOTH SIDES AGAIN. IT IS CLARIFIED THAT THIS IS NOT A MATTER WHERE THE TRIBUNAL HAS TAKEN A VIEW WI TH WHICH THE APPLICANT DOES NOT AGREE BUT RATHER A CASE WHERE TH E VIEW TAKEN BY THE TRIBUNAL IS BASED ON MISCONCEPTION OF THE APPLICANT S ARGUMENTS RELIANCE ON A WHOLLY INAPPLICABLE EARLIER ORDER AND WRONGFUL DISTINCTION FROM A WHOLLY RELEVANT DECISION OF A CO-ORDINATE BENCH. 7. WE HEARD THE LEARNED COUNSEL WHO REITERATED THE ST AND OF THE ASSESSEE AS CONTAINED IN THE MISCELLANEOUS APPLICAT ION. THE LEARNED D.R. RELIED ON THE ORDERS OF THE ITAT. 8. AT THE OUTSET IT IS NOTICED THAT IN PARA- 3(B) OF THE M.A. THE ASSESSEE HAS CONTENTED THAT THE VERY REASON FOR THE ADDITION AL GROUND WAS THAT IT WAS NOT TAKEN BEFORE THE LOWER AUTHORITIES AND BECAUSE THE APPLICANT PROCEEDED ON THE FOOTING THAT THE RECEIPT S GAVE RISE TO A CAPITAL GAIN. THE TRIBUNAL ADMITTED THE ADDITIONAL GROUND. HOWEVER WHILE DECIDING THE MERITS THEREOF IT STRESSED THAT THIS PLEA WAS NOT TAKEN BEFORE THE LOWER AUTHORITIES AND BASED ITS DECISION ON THI S FACTOR. THIS ALLEGATION IN THE M.A. IS INCORRECT. IN THIS REGARD THE CONC LUSIONS OF THE TRIBUNAL AT PARA-9 REQUIRES TO BE SEEN. IN PARA-9 OF THE ORDE R OF THE TRIBUNAL THE TRIBUNAL HAS BASED ITS CONCLUSIONS THAT THE CLAIM O F THE ASSESSEE CANNOT MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 5 BE ALLOWED FOLLOWING THE FINDINGS IN ITA NO.3414/MU M/2005 FOR A.Y.2000- 2001 DATED 10-3-2006. THE CONSIDERATION RECEIVED O N TRANSFER OF GOODWILL WAS RECEIVED BY THE ASSESSEE IN INSTALMENTS. THE F IRST INSTALMENT WAS RECEIVED IN A.Y.2000-01 AND THE SECOND INSTALMENT W AS RECEIVED IN A.Y.01-02. IN A.Y.00-01 THE CIT IN EXERCISE OF PO WERS U/S.263 TREATED THE RECEIPT AS BUSINESS INCOME AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE RECEIPT WAS IN THE NATURE OF CAPITAL GAIN. THE T RIBUNAL IN THE APPEAL AGAINST THE ORDER OF THE CIT U/S.263 HELD THAT THE RECEIPT WAS IN THE NATURE OF A CAPITAL GAIN ON TRANSFER OF GOODWILL AF TER ANALYSING THE AGREEMENTS. THEREFORE THE CONTENTION IN THE M.A. TH AT THE TRIBUNAL ONCE HAVING ADMITTED THE ADDITIONAL GROUND COULD NOT HA VE REJECTED IT ON MERITS ON THE GROUND THAT IT WAS NOT TAKEN EARLIER IS INCORRECT AND CONTRARY TO THE FINDINGS OF THE TRIBUNAL. THEREFORE IT IS NOT CORRECT TO SAY THAT THE TRIBUNAL HAS COMMITTED A SERIOUS ERROR IN THIS REGARD. 9. BEFORE GOING TO THE MERITS OF THE OTHER CONTENTIONS IT IS NECESSARY TO STATE THE FOLLOWING FACTS WHICH ARE EXTRACTED IN TH E ORDER OF THE TRIBUNAL IN THE APPEAL AGAINST THE ORDER OF CIT UNDER SECTION 2 63. WHICH IS THE BASIS FOR GIVING FINDINGS IN THE ORDER VIDE PARA 8 OF ORDER. THE FACTS OF RECEIPT OF GOODWILL WAS ON RECORD BEFORE THE ITAT IN ITA NO. 3 414/MUM/2005 AND AS RECORDED IN THAT ORDER IN PARA 2 & 3 AS UNDER: - 2. THE ASSESSEE COMPANY IS A NON BANKING FINANCE CO MPANY (NBFC). IT IS ENGAGED IN THE BUSINESS OF ASSET FINANCING M ERCHANT BANKING AND OTHER RELATED FINANCIAL ACTIVITIES AND SERVICES INC LUDING DEALING IN FINANCIAL PRODUCTS. THE ASSESSEE COMPANY IS IN THE BUSINESS SINCE 1986. ON THE ANVIL OF ECONOMIC LIBERALIZATION STARTED IN INDIA THE ASSESSEE COMPANY AS A MAJOR PLAYER IN THE FINANCE SECTOR IN INDIA WAS LOOKING OUT FOR DIVERSIFIED BUSINESS PROSPECTS. FINANCE SEC TOR WAS ALSO OPENED TO FOREIGN PLAYERS AT THAT POINT OF TIME. IN THIS CONT EXT M/S. SUNLIFE ASSURANCE COMPANY OF CANADA APPROACHED THE ASSESSEE COMPANY TO JOIN ITS HANDS AS A JOINT VENTURE PARTNER TO CARRY ON BUSINESS AND SERVICES IN FINANCIAL SECTOR IN INDIA UNDER THE BRA ND NAME OF BOTH THE COMPANIES THAT OF SUNLIFE AS WELL AS BIRLA. THE AS SESSEE ENTERED INTO AGREEMENT WITH SUNLIFE OF CANADA TO MAKE WAY FOR TH E LATTER TO ENTER INTO INDIAN MARKET THROUGH A PROGRAMMED ASSOCIATION WITH CERTAIN ASSOCIATES CONCERNS OF THE ASSESSEE. IN THE SCHEME OF THESE ARRANGEMENTS THE ASSESSEE COMPANY CONTINUED TO BE A PROMOTER OF THE FINANCIAL SERVICES BUSINESS IN INDIA. IT HAS ALSO A GREED TO REDUCE ITS CONTROLLING INTEREST IN ITS ASSOCIATE CONCERNS MAKI NG WAY FOR ACQUIRING MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 6 THE SHARES BY THE CANADIAN COMPANY THROUGH SUBSIDIA RIES. THE ASSESSEE COMPANY DILUTED ITS CONTROLLING SHARE HOLD ING IN THOSE CONCERNS IN FAVOUR OF THE SUBSIDIARIES OF THE CANADIAN COMPA NY. 3. THE SCHEME OF JOINT VENTURE BUSINESS HAS BEEN MA DE ON THE BASIS OF AGREEMENTS ENTERED INTO BETWEEN THE GROUP COMPANIES . ALL THE AGREEMENTS ARE UNIFORM IN NATURE. AS PER THE AGREEM ENTS SUNLIFE OF CANADA HAD TO GIVE PAYMENTS TO THE ASSESSEE COMPANY BY WAY OF GOOD WILL IN CONSIDERATION OF THE FACILITIES ARRANGED B Y THE ASSESSEE COMPANY TO MAKE WAY FOR THE CANADIAN COMPANY TO ENTER INTO INDIAN MARKET UNDER THE TRUSTED BRAND NAME OF THE ASSESSEE COMPAN Y WHICH HAS A HIGH MARKET VALUE IN INDIA. THE SUNLIFE OF CANADA M ADE THE SAID PAYMENT OF GOOD WILL TOTALLING TO RS.40 45 37 681/- IN THE FOLLOWING MANNER: CANADIAN $ BIRLA SUNLIFE INTL AMC LTD 94 56 455 BIRLA SUNLIFE SECURITIES LTD 6 87 842 BIRLA SUNLIFE DISTRIBUTION CO LTD 37 52 560 13896863 ========= 10. AS POINTED OUT BY THE LEARNED COUNSEL AND BY THE AS SESSEE IN THE PETITION THE ISSUE BEFORE THE ITAT IN THAT APPEAL IN AY 2000-01 WAS WHETHER THE AMOUNT OF GOODWILL RECEIVED WAS TO BE ASSESSED AS CAPITAL GAIN OR AS BUSINESS INCOME. HOWEVER WHILE DECIDING THAT ISSUE THE FACTS AS PLACED BY THE ASSESSEE ON RECORD WERE CONSIDERED BY THE BENCH IN ARRIVING AT THE CONCLUSION THAT THE ASSESSEE HAS TRANSFERRED THE GO ODWILL AND SO ASSESSABLE AS CAPITAL GAINS. THE FACTS AS SUBMITTED BY THE ASS ESSEE BEFORE THE CIT FOR THE SECOND SHOW CAUSE NOTICE AT THE TIME OF PROCEED INGS UNDER SECTION 263 ARE WORTH REPEATING HERE AS EXTRACTED IN PARA 9 OF THE ORDER IN ITA NO. 3414/MUM/2005 WHICH IS AS UNDER: - 9. THE ASSESSEE COMPANY REPLIED TO THE SECOND SHO W CAUSE NOTICE ON 26.08.2003 FURTHER ELABORATING ITS EARLIER SUBMISSI ONS MADE BEFORE THE COMMISSIONER. THE ASSESSEE COMPANY FINALLY CONCLUDE D ITS SUBMISSION IN THE FOLLOWING MANNER: WE ARE THE TORCH BEARERS OF THE BIRLA GROUP AS FAR AS THE FINANCIAL SERVICES ARE CONCERNED AND THE GOOD WILL PRICE CHAR GED FROM SUNLIFE GROUP IS FOR SHARING THE BENEFITS OF OUR REPUTATION IN THE FINANCIAL SERVICE SECTOR WITH THE SUNLIFE GROUP AS A RESULT O F DILUTION OF OUR CONTROLLING INTEREST; MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 7 BIRLA GROUP HOLDINGS LTD (BHG) IS OUR HOLDING COMPA NY AND HENCE ANY DILUTION IN OUR CONTROLLING INTEREST IN THAT CO MPANY AUTOMATICALLY RESULTS IN THE DILUTION OF ITS CONTRO LLING INTEREST IN OTHER COMPANIES; IN VIEW OF THE FACT THAT WE ARE IN THE FINANCIAL SE RVICES BUSINESS SINCE 1986 AND IN PARTICULAR IN THE MUTUAL FUND BU SINESS (MF) SINCE 1994 IN THE DISTRIBUTION BUSINESS SINCE 1995 AND I N THE SECURITIES BROKING BUSINESS SINCE 1996 THE GOODWILL IN RELATI ON TO THE FINANCIAL SERVICE BUSINESS IS UNDOUBTEDLY A LONG TERM CAPITAL ASSET; THERE IS NO BROKER IN THE TRANSACTION AS ALLEGED IN THE EARLIER NOTICE DATED JULY 29 2003 AND HENCE THE QUESTION OF TREA TING THE GOOD WILL PRICE AS BROKERAGE DOES NOT ARISE; THE DEAL IS BETWEEN TWO LARGE AND WELL KNOWN BUSINE SS HOUSES OF INTERNATIONAL REPUTE AT AN ARMS LENGTH BASIS. THE F IPB APPROVAL AND THE FIRC LETTER SHOW THESE AMOUNTS WERE RECEIVED TO WARDS GOOD WILL. THERE IS THEREFORE NO REASON TO BELIEVE THA T FACTS STATED IN THE AGREEMENTS AND IN THE OFFICIAL RECORDS OF THE REGUL ATORY AUTHORITIES ARE NOT REAL AND THE SAME WAS REVENUE RECEIPT. THERE IS NOTHING WITH THE DEPARTMENT TO PROVE THAT THE IMPUGNED PAYMENTS ARE IN RESPECT OF BROKERAGE ALLEGED IN THE EARLIER NOTICE; THE ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER AFTER MAKING ADEQUATE ENQUIRIES AND OBTAINING ALL NECESSARY INFO RMATION AND THEREFORE THE ORDER PASSED BY THE ASSESSING OFFER TAKING THE GOOD WILL AS LONG TERM CAPITAL GAINS IS NOT ERRONEOUS. 11. IN CONTINUATION THEREOF EVEN THOUGH THE CIT HAS NO T AGREED WITH THE ABOVE SUBMISSION AND TREATED THE RECEIPT AS INCOME FROM BUSINESS THE MATTER WAS CARRIED OUT TO THE ITAT AND THESE WERE T HE ARGUMENTS ON THE ISSUE OF GOODWILL MADE BY THE LEARNED COUNSEL AS RE CORDED IN PARA 13 OF THE ORDER: - 13. WE HEARD SHRI ARVIND SONDE THE LEARNED COUNSE L APPEARING FOR THE ASSESSEE ALONG WITH SHRI SAMPAT KABRA THE LEAR NED CHARTERED ACCOUNTANT. THE CONTENTIONS AND ARGUMENTS OF THE LE ARNED COUNSEL APPEARING FOR THE ASSESSEE COMPANY ARE BRIEFLY STAT ED AS BELOW: .1. THE COMMISSIONER OF INCOME-TAX HAS GROSSLY ERRE D IN MAKING A STATEMENT THAT THE ISSUE OF THE RECEIPT OF GOOD WIL L WAS NOT PROPERLY EXAMINED BY THE ASSESSING AUTHORITY IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE FINDING RECORDED BY THE COMMISSIONER AS ABOVE IS AGAINST THE FACTS OF THE C ASE. .2. IN THE PRE-ASSESSMENT NOTICE DATED 16-08-2002 I SSUED BY THE ASSESSING AUTHORITY TO THE ASSESSEE COMPANY THE AS SESSING MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 8 AUTHORITY HAD ASKED FOR THE DETAILS OF GOOD WILL OF RS.4045 LAKHS (COPY OF THE LETTER IS AVAILABLE AT PAGE 106 OF THE PAPER BOOK). .3. IN COMPLIANCE TO THE QUERY RAISED BY THE ASSESS ING AUTHORITY THE ASSESSEE COMPANY HAS EXPLAINED AS BELOW REGARDING THE GOOD WILL RECEIPTS IN ITS REPLY DATED DECEMBER 03 2002. .4. DURING THE YEAR IT HAS EARNED GOOD WILL OF RS.4 045 LAKHS (DETAILS PLACED IN PAPER BOOK AS EXHIBIT D). THIS GOOD WIL L IS ON ACCOUNT OF AGREEMENT WITH SUNLIFE ASSURANCE CO OF CANADA TH ROUGH SUBSIDIARY COMPANIES TO CONCURRENTLY PURCHASE SHAR ES IN THE CAPITAL OF BIRLA CAPITAL INTERNATIONAL AMC LTD. ASS ESSEE HAS BEEN AND CONTINUES TO BE A PROMOTER OF THE FINANCIAL SER VICE BUSINESS IN INDIA AND HAS AGREED TO REDUCE ITS CONTROLLING INTE REST IN THE COMPANIES WHEREVER IT HAS SHAREHOLDINGS AND SHARE WITH SUNLIFE THE BENEFIT OF THEIR GOOD WILL IN THE FINANCIAL SER VICE BUSINESS. GOOD WILL ACCOUNTED FOR IN THIS YEAR IS ALSO OFFERE D FOR TAXATION AS LONG TERM CAPITAL GAINS (AGREEMENTS ENCLOSED AT PAG E 109 OF THE PAPER BOOK). .5. THE ASSESSEE COMPANY HAS IN ITS PROFIT & LOSS ACCOUNT CREDITED THE RECEIPT OF AMOUNTS FROM SUNLIFE ASSURANCE CO OF CANADA AS EXTRAORDINARY ITEM AS REQUIRED BY THE PROVISIONS OF THE COMPANIES ACT BY SPECIFYING THAT THE RECEIPTS REPRESENTED REC EIPTS TOWARDS GOOD WILL. THIS DISCLOSURE HAS BEEN VERY MUCH BEFOR E THE ASSESSING AUTHORITY IN THE COURSE OF ASSESSMENT. .6. FURTHER IN THE NOTES ON ACCOUNTS GIVEN IN SCHE DULE XXI FORMING PART OF THE ACCOUNTS OF THE ASSESSEE COMPANY THE A SSESSEE COMPANY HAS FURTHER STATED THE NATURE OF THE TRANSA CTION IN NOTE NO. 8 IN THE FOLLOWING WORDS: THE COMPANY HAS DURING THE PERIOD ENTERED INTO A STRATEGIC ALLIANCE WITH SUNLIFE ASSURANCE CO OF CANADA IN RES PECT OF ITS FINANCIAL SERVICES BUSINESS IN INDIA AND RECEIVED ` 4045 LAKHS TOWARDS GOODWILL. THE SAME HAS BEEN CREDITED TO PRO FIT & LOSS ACCOUNT AS AN EXTRAORDINARY INCOME. .7. THE ASSESSEE COMPANY HAS DISCLOSED THE TRUE CHA RACTER OF THE PAYMENTS RECEIVED FROM THE CANADIAN COMPANY IN ITS ACCOUNTS AS AN EXTRAORDINARY ITEM REPRESENTING THE GOOD WILL RE CEIVED BY THE ASSESSEE COMPANY IN CONSIDERATION OF THE STRATEGIC ALLIANCE SO ALSO DILUTING IN THE SHAREHOLDING IN THE CONNECTED COMPANIES. THIS DISCLOSURE SHOWS THAT THE INFORMATION HAVE BEEN VER Y MUCH PLACED BEFORE THE ASSESSING AUTHORITY IN THE COURSE OF ASSESSMENT PROCEEDINGS. IN ITS COMPUTATION OF INCOME FILED ALO NG WITH THE RETURN OF INCOME THE ASSESSEE HAS MADE A SEPARATE NOTE REGARDING THE RECEIPT OF GOOD WILL WHICH WAS ALSO L OOKED INTO BY THE ASSESSING AUTHORITY. IN ADDITION TO THOSE DETAI LS FURNISHED AND AVAILABLE BEFORE THE ASSESSING AUTHORITY FURTHER D ETAILS WERE CALLED FOR BY HIM THROUGH HIS PRE-ASSESSMENT NOTICE DATED 16-08- MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 9 2002 TO WHICH THE ASSESSEE HAD REPLIED ALONG WITH T HE COPIES OF THE AGREEMENTS. .8. IN THE CIRCUMSTANCES IT IS AGAINST THE FACTS O F THE CASE TO MAKE A FINDING THAT THE ASSESSING AUTHORITY HAS NOT PROPER LY EXAMINED THE QUESTION OF GOOD WILL DECLARED BY THE ASSESSEE AS LONG TERM CAPITAL GAINS IN ITS COMPUTATION OF TAXABLE INCOME. .9. THE STRATEGIC ALLIANCE MADE BY THE ASSESSEE COM PANY WITH SUNLIFE ASSURANCE CO OF CANADA WAS CLEARED BY GOVERNMENT OF INDIA IN THE MINISTRY OF INDUSTRY THROUGH THE FOREIGN COLLAB ORATION BOARD. IN THE APPROVAL GIVEN BY THE COMPETENT AUTHORITY FO R SUCH A STRATEGIC ALLIANCE SPECIFIC APPROVAL HAS BEEN GIVE N TO THE ASSESSEE COMPANY TO RECEIVE CONSIDERATION ON ACCOUN T OF GOODWILL FROM THE CANADIAN COMPANY. IN THE APPROVAL LETTER O F THE COMPETENT AUTHORITY DATED MARCH 15 1999 PARAGRAPH 6 READS AS BELOW: 6. THE APPROVAL IS ALSO CONVEYED FOR PAYMENT OF ` 63.25 CRORE TO THE PROMOTERS VIZ. M/S. BIRLA GLOBAL FINANCE LTD / BIRLA GROUP HOLDINGS LTD. BY M/S. SUNLIFE ASSURANCE CO CANADA ON ACCOUNT OF GOOD WILL SUBJECT TO THE CONDITION THAT THIS AM OUNT WILL NOT BE REPATRIATED (PAGE 332 OF PAPER BOOK). .10. FURTHER APPROVAL WAS GRANTED BY GOVERNMENT OF INDIA AGAIN IN THE MINISTRY OF INDUSTRY THROUGH LETTER DATED 10-05-199 9 (PAGE 337 OF THE PAPER BOOK). AGAIN AN AMENDED APPROVAL WAS REC EIVED BY THE ASSESSEE COMPANY FROM THE GOVERNMENT THROUGH LETTER DATED 24 TH MAY 1999 (PAGE 339 OF PAPER BOOK). .11. THE BANK ADVICE ACKNOWLEDGING THE REMITTANCE O F THE FUNDS BY THE CANADIAN COMPANY HAS ALSO QUALIFIED THE PAYMENTS AS GOOD WILL AS PER THE CERTIFICATE OF FOREIGN INWARD REMITTANCE ISSUED BY CITIBANK DATED 25-05-1999. .12. THE AGREEMENTS ENTERED INTO BETWEEN THE PARTIE S IN THE SCHEME OF STRATEGIC BUSINESS ALLIANCE SPECIFIC PROVISION HAS BEEN MADE FOR THE PAYMENT OF GOOD WILL TO THE ASSESSEE COMPANY AL ONG WITH BIRLA GROUP HOLDINGS LTD. THE RELEVANT CLAUSE IN TH E AGREEMENT READS AS BELOW: EACH OF BGLF & BGH HAS BEEN AND CONTINUES TO BE A PROMOTER OF THE FINANCIAL SERVICES BUSINESS IN INDI A AND EACH HAS ESTABLISHED ITS GOOD WILL (AS DEFINED HERE IN) IN SUCH RECEIPT AND EACH OF THEM HAS AGREED THAT THE PURCHASER TO REDUCE ITS CONTROLLING INTEREST IN THE COMPANY AND SHARE WITH THE PURCHASER THE BENEFIT OF THEIR G OOD WILL IN THE FINANCIAL SERVICE BUSINESS AS AFORESAID. .13. GOODWILL IS DEFINED IN THE AGREEMENT AS GOOD WILL GOOD WILL MEANS THE BENEFIT AND ADVANTAGE OF BIRL A NAME ASSOCIATED WITH THE FINANCIAL SERVICE BUSINESS OF T HE MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 10 COMPANY AND THE REPUTATION AND RELATIONSHIP BETWEE N THE COMPANY AND EACH OF BGFL AND BGH THE PROMOTERS OF THE COMPANY ALL OF WHICH ASSIST AND GENERATE BUSINESS AND CUSTOMERS FOR THE COMPANY BY REASON OF AND IN CONNE CTION WITH THE REPUTATION OF BGFL AND BGH ENJOYED IN RESP ECT OF THE FINANCIAL SERVICE BUSINESS CARRIED ON IN INDIA AND ABROAD. .14. FURTHER IT IS STIPULATED IN THE AGREEMENT THAT THE PURCHASER SHALL PAY THE GOODWILL TO EACH OF BGFL AND BGH AS P ROVED THEREIN IN CONSIDERATION OF BGFL AND BGH REDUCING T HEIR CONTROLLING INTEREST IN THE COMPANY AND SHARING WIT H THE PURCHASER AND THE COMPANY THEIR GOOD WILL IN THE FI NANCIAL SERVICE BUSINESS IN INDIA. 12. THUS IT IS CLEAR THAT THE AMOUNT RECEIVED BY THE AS SESSEE WAS FOR TRANSFER OF GOODWILL AND WAS CHARGEABLE TO TAX AS C APITAL GAIN. THE AGREEMENT ALSO SPECIFICALLY MENTION TRANSFER OF GOO DWILL AND THESE FACTS ARE RECORDED. ON THE BASIS OF THESE FACTS THE ITAT HAS GIVEN A FINDING IN A.Y. 2000-01 WHICH WAS EXTRACTED IN THIS ORDER AT PARA 8 . 13. SINCE THE FACTS AS RECORDED IN THE ASSESSMENT PROCE EDINGS BEFORE THE A.O. AND CIT(A) DO INDICATE THAT THE AMOUNTS WERE R ECEIVED ON TRANSFER OF GOODWILL AND COMPANY ACCOUNTS IN VARIOUS SCHEDULES ALSO REFLECT THE SAME AND FURTHER THESE FINDINGS WERE REITERATED BY THE I TAT IN THE ORDER AGAINST 263 IN EARLIER YEAR IN ITA NO. 3414/MUM/2005 THE D ECISION WAS TAKEN BY THE BENCH AT PARA 9 AS UNDER: - 9. SINCE THERE IS ALSO A FINDING BY THE HON'BLE IT AT THAT THE AMOUNTS ARE RECEIVED IN EARLIER YEAR AS PART OF GOODWILL AN D THE ASSESSEE HAS OFFERED THE AMOUNTS AS TAXABLE WE ARE NOT PERSUADE D BY THE ARGUMENTS OF THE LEARNED COUNSEL THAT THIS AMOUNT IS NOT TAXA BLE IN THIS ASSESSMENT YEAR. THE LEARNED COUNSEL RELIED ON THE DECISION OF THE BANGALORE TRIBUNAL REFERRED SUPRA FOR THE PROPOSITION THAT THE TRANSFER OF TRADEMARK IS NOT TRANSFER OF GOOD WILL. AS SEEN FRO M THE ORDER OF THE ITAT THE ISSUE INVOLVED IS WHETHER THE TRANSFER OF TRADE MARK IS TRANSFER OF GOODWILL OR NOT. THE PRESENT CASE IS DIFFERENT ON T HE FACT THAT THE ASSESSEE HAS RECEIVED AMOUNTS TOWARDS GOODWILL OF T HE BUSINESS WHILE ENTERING INTO JOINT VENTURE AND ALL THE CONTENTIONS OF THE ASSESSEE IN EARLIER YEAR AS WELL IN THIS YEAR SO FAR ARE THAT THESE AMOUNTS RECEIVED WERE TOWARDS TRANSFER OF GOODWILL AND ACCORDINGLY CHARGEABLE UNDER THE HEAD CAPITAL GAINS. SINCE THE FACTS OF THE CASE A RE DIFFERENT WE ARE NOT PERSUADED BY THE LEARNED COUNSELS RELIANCE ON THE ABOVE SAID DECISION OF THE HON'BLE ITAT. SINCE THE FACTS INDICATE THAT AS PART OF JOINT VENTURE AGREEMENT THREE WAS APPROVAL AND ALSO RECEI PT OF MONIES MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 11 FOR TRANSFER OF GOODWILL THE ADDITIONAL GROUND RAI SED ABOUT NON- TAXABILITY OF THE ABOVE SAID RECEIPT CANNOT BE ACCE PTED AS EITHER PARTY HAS NOT QUESTIONED THE TAXABILITY BUT ONLY TH E HEAD OF INCOME TO BE CONSIDERED WHEN TAXING THE AMOUNT. FUR THER THE CONTENTION THAT NO ASSET WAS TRANSFERRED WAS NOT SU PPORTED BY ANY EVIDENCE ON RECORD. CONTRARY TO THE SUBMISSIONS NOW THE ASSESSEE OFFERED INCOME AND ALSO CONTESTED THE ISSU E ON FACTS BEFORE THE ITAT IN EARLIER YEAR THAT THE AMOUNT WAS PAYMENT FO R TRANSFER OF GOODWILL AS A PART OF BUSINESS ARRANGEMENT. THERE A RE FINDINGS OF THE ITAT ACCORDINGLY. IN VIEW OF THIS WE REJECT THE AD DITIONAL GROUND. 14. IN VIEW OF THE FACTS ON RECORD THE LEARNED COUNSEL S ARGUMENTS THAT NO ASSET HAS BEEN TRANSFERRED COULD NOT BE ACCEPTED. E VEN THOUGH LEGALLY THE ADDITIONAL GROUND WAS ADMITTED ON THE BASIS OF THE FACTS ON RECORD THE ADDITIONAL GROUND WAS REJECTED. 15. THERE IS NO MISCONCEIVING OF FACTS OR MISCONCEPTION OF ASSESSEES ARGUMENTS AS ALLEGED IN THE M.A. EVENTHOUGH THE ISS UE BEFORE THE ITAT IN EARLIER YEAR WAS WHETHER THE INCOME IS TO BE TAXED AS INCOME UNDER THE HEAD CAPITAL GAINS OR INCOME UNDER THE HEAD BUSINESS TH E FACTS ON RECORD CANNOT BE CHANGED. THESE ARE ADMITTED FACTS BY THE ASSESSE E. THE DECISION WAS GIVEN ON FACTS THAT THERE IS A TRANSFER OF GOODWILL . IN VIEW OF THIS WE ARE OF THE OPINION THAT THE ORDER IS NEITHER MISCONCEIVED NOR INCORRECT AS ALLEGED. 16. THE PRAYER IN PARA 5 IS AS UNDER: - 5. IN THE PREMISES IT IS SUBMITTED THAT THE IMPUG HED ORDER DESERVES TO BE RECALLED FOR A FRESH HEARING OF THE APPEAL GIVIN G OPPORTUNITY OF HEARING TO BOTH SIDES. 17. SINCE THE ORDER WAS PASSED AFTER DUE APPRECIATION O F ALL RELEVANT FACTS WE ARE OF THE OPINION THAT THE ORDER BY THE TRIBUNA L DOES NOT SUFFER FROM ANY MISTAKE MUCH LESS A MISTAKE APPARENT ON THE FACE OF THE RECORD. HENCE THE PRAYER OF THE ASSESSEE TO RECALL THE ORDER OF THE T RIBUNAL IS DEVOID OF ANY MERIT. EVEN OTHERWISE WE ARE OF THE VIEW THAT IN TH E GARB OF A M.A. THE ASSESSEE IS VIRTUALLY SEEKING TO REARGUE THE APPEAL AND SEEKING A REVIEW OF THE ORDER OF THE TRIBUNAL. THE TRIBUNAL DOES NOT H AVE POWER TO REVIEW ITS OWN ORDER. U/S.254(2) THE TRIBUNAL CAN ONLY RECTI FY ERRORS APPARENT ON THE FACE OF THE RECORD. ISSUES WHICH ARE DEBATABLE OR ON WHICH TWO VIEWS ARE POSSIBLE CANNOT BE SAID TO BE MISTAKE APPARENT ON T HE FACE OF THE RECORD. IN MA NO. 125/MUM/2010 M/S. ADITYA BIRLA NUVO LTD. 12 THE CIRCUMSTANCES THE MISCELLANEOUS APPLICATION FI LED BY THE ASSESSEE DESERVES TO BE DISMISSED. 18. IN THE RESULT MISCELLANEOUS APPLICATION IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST 2010. SD/- SD/- (N.V. VASUDEVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 6 TH AUGUST 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL-I MUMBAI 4. THE CIT CENTRAL-I MUMBAI CITY 5. THE DR F BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.