Saipem Triune Engineering Pvt. ... vs Assistant Commissioner Of ...
2013 Latest Caselaw 1032 Del

              THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Judgment delivered on: 01.03.2013

+       W.P.(C) 1037/2013 & CM 1960/2013

SAIPEM TRIUNE ENGINEERING
PVT. LTD AND ANR                                               ... Petitioner

                                        versus

ASSISTANT COMMISSIONER
OF INCOME-TAX                                                  ... Respondent
Advocates who appeared in this case:
For the Petitioner     : Mr Ajay Vohra with Ms Kavita Jha and Mr Amit Sachdeva
For the Respondent     : Mr Sanjeev Rajpal

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR

                                  JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1. This writ petition is directed against the order dated 30.01.2013

passed by the Income Tax Appellate Tribunal, Delhi Bench, whereby the

petitioner's application for stay being Stay No. 309/Del/2012 in ITA

5239/Del/2012 relating to the assessment year 2007-08 was disposed of

by the Tribunal, inter alia, directing that:-

(a) The assessee shall pay an amount of ` 50 lacs on or before 5th February, 2013.

(b) The assessee shall continue to pay an instalment of ` 1 crore per month till this case is disposed of.

(c) The order shall be in force for a period of six months or till disposal of appeal, whichever is earlier.

2. The demand raised against the assessee by virtue of the demand

notice dated 02.11.2012 is ` 16,42,55,970/-, which includes the demand

payable pursuant to the order passed by the Commissioner of Income Tax

(Appeals) to the extent of ` 15,81,63,498/-, the balance being interest

under Section 220(2) of the Income Tax Act, 1961 (hereinafter referred to

as 'the said Act').

3. The petitioner is aggrieved by the order passed by the Tribunal

inasmuch as according to the petitioner it was a case where the Tribunal

ought to have granted complete stay of the recovery of the said amount

demanded by the respondents during the pendency of the appeal before it.

The Tribunal has merely granted instalments and that, according to the

petitioner, would cause great hardship to the petitioner particularly as the

petitioner has an excellent prima facie case.

4. Initially, the petitioner filed a loss return in respect of the

assessment year 2007-08 disclosing a loss of ` 5,80,21,210/-. In the year

in question, the petitioner had acquired the running business of design

and consultancy in the oil and gas sector from Triune Projects Private

Limited. The said acquisition was by way of a slump sale and the total

amount paid therefor was approximately ` 45.68 crores. The said price of

` 45.68 crores was divisible into two categories:-

(i) tangible assets to the extent of approximately ` 5.10 crores;

and

(ii) intangible assets to the extent of approximately ` 40.58 crores.

5. It is also relevant to note that the assessee (Saipem Triune

Engineering Private Limited) is a joint venture of Saipem SPA (Italy) and

one Mr Binoy Jacob. Both the joint venture partners have a 50% share in

the assessee company. It is also pertinent to note that Mr Binoy Jacob

was the major shareholder in Triune Projects Private Limited. It has also

been contended by the learned counsel for the petitioner that in respect of

the said slump sale, Triune Projects Private Limited had paid capital gain

tax to the extent of ` 12 crores.

6. In the loss return filed by the petitioner, the petitioner had made a

claim of depreciation at the rate of 25% on the intangible assets which

was embedded in the slump sale. A claim of depreciation was also made

at the rate of 15% with regard to the tangibles. The Assessing Officer

disallowed the depreciation claimed of ` 10,14,68,882/- in respect of the

intangibles. He, however, allowed the depreciation claimed by the

petitioner with regard to the tangible assets. By doing so, the Assessing

Officer assessed the income of the petitioner at ` 4,34,47,670/- and

computed the total tax liability of the petitioner at ` 1,61,29,322/-. As

against this, the revenue adjusted an amount of ` 1,62,40,170/- being the

refunds due to the petitioner for the assessment year 2008-09. Thus,

according to the computation given by the learned counsel for the

petitioner, the entire demand sought to be raised pursuant to the

assessment under Section 143(3) by the Assessing Officer, stood cleared

by way of adjustment of the refunds due and, in fact, an amount of

` 1,10,848/- was shown to be refundable to the assessee in respect of the

assessment year 2007-08.

7. The petitioner, being aggrieved by the disallowance of depreciation

on intangibles to the extent of ` 10,14,68,882/-, went up in appeal before

the Commissioner of Income Tax (Appeals). The latter maintained the

disallowance and not only that, he added an amount of ` 30,44,06,647/-

under Section 40A(2) of the said Act. This sum of approximately `.

30.44 crores is the difference between the amount allocated for

intangibles (i.e. ` 40.58 crores) less the amount disallowed by way of

depreciation thereon (= approximately ` 10.15 crores).

8. The learned counsel for the petitioner submitted that this sum of

approximately ` 30.44 crores could not, in any event, be added back to

the income of the assessee. This is so because the petitioner had never

claimed this amount as an expenditure and, therefore, there was no

question of Section 40A(2) being applied for adding this amount. Prima

facie, we agree with the submission made by the learned counsel for the

petitioner. This amount had not been claimed by way of expenditure by

the petitioner. It was an amount which was embedded in the price paid in

the slump sale. Even if we construe the said sale to be a sham or not to

be slump sale at all, this amount of ` 30.44 crores (approximately) could

not be added to the income of the assessee under Section 40A(2) of the

said Act or any other provision. Of course, disallowance for depreciation

could be made if the law permitted. That disallowance had already been

made by the Assessing Officer and, therefore, there was no occasion for

any further disallowance insofar as the depreciation amount was

concerned.

9. Apart from the said addition of ` 30.44 crores (approximately), the

Commissioner of Income Tax (Appeals) also made a disallowance of `

16,86,487/- with regard to the depreciation claimed by the petitioner as

against the tangible assets. In other words, he disallowed the depreciation

on the intangible assets and allowed the major portion of depreciation on

tangible assets. Thus, according to the learned counsel for the petitioner,

this stand of the Commissioner of Income Tax (Appeals) was inconsistent

with the view taken by him that the transaction was a sham transaction.

If on the one hand, he disallowed depreciation on intangibles, he could

not have, on the other, allowed depreciation on tangibles. Prima facie, we

also agree with this submission made by the learned counsel for the

petitioner.

10. Apart from the aforesaid disallowances, the Commissioner of

Income Tax (Appeals) also made certain other disallowances. The result

being that the total disallowance made by the Commissioner of Income

Tax (Appeals) came to ` 31,68,20,064/-. This was by way of

enhancement. The total demand which was payable by the petitioner

pursuant to the order passed by the Commissioner of Income Tax

(Appeals) came to ` 15,81,63,498/- which, along with interest under

Section 220(2) of the said Act, came to ` 16,42,55,970/-, which has been

demanded by virtue of the demand notice dated 02.11.2012. Out of the

figure of ` 15,81,63,498/-, an amount of ` 13,36,32,605/- is the result of

tax of ` 10,24,63,277/- and interest thereon of ` 3,11,69,328/- in respect

of the enhancement of ` 30.44 crores (approximately) made by the

Commissioner of Income Tax (Appeals) with regard to the purported

disallowance under Section 40A(2) relating to the intangible assets

purchased in the said slump sale. It is necessary to note that out of the

total tax demand of ` 15,81,63,498/-, an amount of ` 1,62,40,170/-

already stands paid as it was adjusted against the refunds due for the

assessment year 2008-09. The balance tax payable would then be

` 14,19,23,328/-, out of which, pursuant to the order passed by the

Tribunal, a sum of ` 50 lacs has already been paid by 5th February, 2013,

which leaves a balance of ` 13,69,23,328/- and as against this, an amount

of ` 13,36,32,605/- is only on account of enhancement made of ` 30.44

crores which, prima facie, does not appear to be backed by law.

11. In these circumstances, we feel that the petitioner has an excellent

prima facie case and the Tribunal ought to have granted stay of the

demand raised by the revenue. We set aside the impugned order passed

by the Tribunal to the extent of balance payments other than the payment

of ` 50 lacs already made by the petitioner. The rest of the demand is

stayed till the Tribunal disposes of the appeal. The writ petition stands

disposed of. Any observations made in this order are only prima facie

observations and will not be taken into account by the Tribunal while

considering and deciding the appeal. We expect that the Tribunal shall

decide the appeal expeditiously. The parties have assured that they shall

not take any adjournments.

Dasti under the signature of the Court Master.

BADAR DURREZ AHMED, J

R.V.EASWAR, J

MARCH 01, 2013 SR