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2024 Supreme(Online)(ITAT) 3277
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
MRS. ANNAPURNA GUPTA, ACJ, MS. SUCHITRA R. KAMBLE, J
ANANYA FINANCE FOR INCLUSIVE GROWTH PVT.LTD. AHMEDABAD – Appellant
Versus
DY.COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1) AHMEDABAD – Respondent
MA No. 93/Ahd/2022 (Arising out of ITA No. 959/Ahd/2016)
For the Appellants/Petitioners:Shri Tushar Hemani, Sr. Advocate & Shri Parimalsingh B. Parmar, AR
For the Respondents: Shri J.L. Bhatia, Sr DR
Taxpayers must ensure all transactions reflect genuine transfers of assets to qualify for tax benefits; superficial arrangements aimed at depreciation claims may be disregarded.
Headnote:(A) Income Tax Act, 1961 - Section 254(2) - Rectification of the Tribunal's order - The application for rectification cites numerous mistakes in the earlier ruling, asserting that significant judgments and contentions were overlooked. The Tribunal, however, found that no substantial errors existed that would warrant review; the initial findings confirming the lack of intangibles remained undisturbed. (Paras 2, 6, 12, 19)
(B) The valuation of intangibles and production of depreciation claims must align with actual transactions and legal definitions, and the Tribunal reaffirmed that no genuine assets had been transferred. Such transactions that misrepresent their nature may invoke the principle of lifting the corporate veil. (Paras 14, 18)
Facts of the case:
The assessee challenged the validity of previous Tribunal findings related to tax liabilities stemming from alleged intangible asset transfers, highlighting claimed inconsistencies.
Findings of Court:
The Tribunal, upon review, found the claims of error baseless and maintained its original findings, concluding the entire arrangement was an artificial attempt at tax evasion.
Issues: The primary questions involved whether the Tribunal overlooked the arguments pertaining to the valuation of transferred intangibles and the implications of corporate structure on tax responsibilities.
Ratio Decidendi: The Tribunal ruled that the lack of real transfer of intangibles precluded any valid tax deductions and underlined the need for substantial legal basis in asset valuations.
Result: The Miscellaneous Application is dismissed.
| Table of Content |
|---|
| 1. assessment of rectification claims regarding tribunal order rectitude. (Para 2 , 3 , 4) |
| 2. challenges to terminal findings regarding intangibles. (Para 6 , 8 , 9 , 10 , 14) |
| 3. substance over form in evaluating tax implications. (Para 12 , 18) |
| 4. declarative of the final verdict. (Para 19 , 20) |
ORDER/आदशे
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER:
Vide this Miscellaneous Application, the assessee seeks rectification of the order dated 25.08.2022 passed by the Tribunal in ITA No. 959/Ahd/2016. The application points out numerous mistakes in the order of the ITA T listed in a 20 page application.
2. Before us, reference was made to the impugned application while orlly bringing to our notice the errors/mistakes in the order of the ITAT. Rectification with regards to which was sought with the plea that the order be recalled and the issue be decided afresh after taking into consideration the correct position of facts and law. Briefly put, the mistakes pointed out in the order of the ITAT were with respect to certain contentions raised by the assessee and judgments relied upon by the assessee not dealt with by the ITAT, as also with respect to mistakes in the findings of the ITAT to the effect that :-
(a) the intangibles transferred to the assessee were irrelevant;
(b) that the valuation of the intangibles was incorrect;
(c) no actual transfer of business to an independent entity had taken place;
(d) that the entire exercise of business transfer was a colourable device for evasion of tax. It was also pointed out that the decision relied upon by the ITAT while finding the entire exercise to be a colourable device was not confronted to the assessee and also stood reversed by the Hon’ble Apex Court.
3. The ld. DR vehemently opposed the entertainment of this application, pointing out that what the assessee was seeking by virtue of this application was a review of the Tribunal’s order which was not permissible in terms of Section 254 (2) of the Act. He contended that the ITAT had passed a well- reasoned order on the basis of facts before it and the impugned application needed to be rejected.
4. We have heard both the parties carefully and have also gone through the contents of the application placed before us. Reference was also made to certain judicial decisions during the course of arguments made before us which were also considered by us. Taking note of all of the above, we do not find any merit in the present Miscellaneous Application.
5. We shall now proceed to point out as to why we have held the present Miscellaneous Application to be of no substance.
6. The application reveals that the mistake noted in the order of the ITAT was in relation to the issue of claim of depreciation on intangibles, which was consistently denied by both the Revenue authorities below, i.e. the Assessing Officer and the ld. CIT(A), and confirmed by the ITAT also. Perusal of the order of the ITAT reveals that the findings of the Assessing Officer on the issue were confirmed to the effect that the intangibles which came into existence in the hands of the assessee by virtue of Business Transfer Agreement (‘BTA’ for short) with a Trust i.e. Friends of Women’s World Banking (‘FWWB’ for short), was entirely baseless since there were no intangibles transferred by virtue of that agreement. That, the valuation, therefore, of the same at Rs.34 crores was liable to be rejected and the assessee’s claim of depreciation to be denied. The ITAT confirmed the findings of the Assessing Officer that the entire exercise of creation of intangible in the hands of the assessee by virtue of BTA was only for claiming depreciation on this intangible so as to avoid payment of taxes. The ITAT’s findings, therefore, were to the effect that:-
i. No intangibles were created/transferred to the assessee by virtue of BTA entered into with FWWB by the assessee;
ii. The valuation, therefore, of the intangibles was ‘Nil’;
iii. Even the valuer’s report justifying the value of the intangibles
