2010 PLP (Trib (PTD)

Above captioned appeal has been filed by the taxpayer against the impugned order, dated 14-5-2010 passed by the Commissioner Inland Revenue (Appeals-I), Karachi on the following grounds:-- (2) The CIRA erred in confirming the order passed by the Additional Commissioner Inland Revenue (AC) under section 122(5A) of the Income Tax Ordinance, 2001 without considering that the revisional powers could not have been delegated to the AC, as the expression Commissioner as appearing in section 12(5A) when read in conjunction with section 211, clearly provides that although powers and functions can be delegated by the Commissioner, however, his mental faculty of applying an independent mind cannot be entrusted to the AC. (3) Without prejudice to the ground of Appeal No.2 above, the CIRA erred in confirming that the AC being an officer of a lower rank was competent in amending the assessment which was earlier treated to have been made by the Commissioner pursuant to section 120(1)(b), being an officer of a higher rank. (4) Without prejudice to the grounds of Appeals Nos. 2 and 3, the CIRA erred in observing that the AC was competent in amending the assessment without proper delegation of powers 'from the Commissioner. (5) Without prejudice to the grounds of Appeals Nos. 2 to 4 the CIRA erred in confirming the AC's contention that the assessment treated to have been made was erroneous in so far as prejudicial to the interests of revenue, for attracting the provisions of section 122(5A). (6) Without prejudice to the grounds of Appeals Nos. 2 to 5 above, the CIRA erred in confirming the disallowance by the AC the appellant's claim for amortization of intangible (Goodwill) amounting to Rs.2,552,073,

873. It is submitted that the CIRA failed to pass a speaking order on the issue. (7) Without prejudice to the grounds of Appeals Nos. 2 to 5 above, the CIRA erred in not following and deviating from the principles laid down by the Hon'ble Income Tax appellate Tribunal in its order reported 2008 PTD (Trib.) 679.

2. Mr. Soli, R. Parakh, FCA; learned counsel for the appellant/ taxpayer did not press grounds Nos. 2 to

5. Accordingly, the legality of the order under section 122(5A) of the Income Tax Ordinance, is not questioned. As such the issue is decided in favour of the Revenue. We are left with only 2 grounds i.e. 6 and 7 as narrated above.

3. AR of the appellant/taxpayer contested that the .CIR(A) erred in confirming the disallowance by the AC the appellant's claim for amortization of intangible (Goodwill) amounting to Rs.2,552,073,

873. The AR also pointed out that the CIR(A) erred in not following and deviating from the principles laid down by the Hon'ble Income Tax Appellate Tribunal in its order reported as (2008) 97 Tax 110 (Trib.). The learned AR further explained as under:- (i) Standard Chartered Bank UK (SCB) used to operate as a registered foreign bank through network of 50 branches in Pakistan under the name of 'Standard Chartered Bank-Pakistan Branches'. (ii) In 2005, the State Bank of Pakistan through BSC Circular No.6, dated October, 28, 2005 raised the Minimum Capital Requirement (including the required Minimum Capital Adequacy Ratio) for the Banks which required a minimum paid up capital of Rs.6 billion by the end of December, 31, 2009. (iii) The regulatory direction prompted SCB to take a strategic initiative and converts such direction into an investment opportunity by expanding its operations in Pakistan through acquisition of a well-established local medium sized commercial bank (comparable to the commercial standing of SCB in Pakistan) against the injection of the required capital. It is important to mention that the Banking Companies Ordinance, 1962, (BCO) does not allow a foreign bank (operating through branches) to acquire a locally incorporated bank unless it is incorporated and listed under the (BCO). (iv) In pursuance of the above, SCB decided to incorporate a wholly owned subsidiary in Pakistan for acquiring a stake in the local commercial bank. It was planned that the subsidiary would then acquire and merge with a medium sized local publicly listed bank along with the existing branch network of the SCB. (v) Pursuant to the above, on July 19, 2006 SCB incorporated Standard Chartered Bank ' Pakistan Limited (SCBPL) in Pakistan. (vi) In line with its ultimate objective, SCR had already targeted Union Bank Limited (UB), a locally incorporated bank which till then, had established a country-wide popularity and respect by maintaining commercial banking standards which, in the opinion of the SCB's Management, could not have compromised the good standing of the SCB. (vii) By history, UB was established in 1991 and that its headquarters in Karachi. In 2000, UB acquired Bank of America's operations in Pakistan followed by signing of an Independent Operation agreement for American Express Cards in Pakistan in July, 2001. In 2002, UB acquired the operations of Emirates Bank International. This purchase helped UB in becoming one of the larger private banks in the country. Immediately prior to the merger, UB was Pakistan's eighth largest bank and had 65 branches in 22 cities backed by approximately US$2 billion in assets and over 400,000 customers. (viii) On September 5, 2006, SCBPL, acquired 95.37% of the shares of UB and paid PKR.39,847,990,000 to acquire the said shares. The purchase of the shares of .UB by SCBPL was part of the entire and wider scheme for the merger of UB's business with the Standard Chartered Group in Pakistan. (ix) On December, 4, 2006, the State Bank of Pakistan (SBP) vide its Order No. BPRD (LCGD-04/625-74/2006/11168, dated December 4, 2006 sanctioned the merger of SCBPL and UB under section 48 of the Banking Companies Ordinance, 1962 (BCO). The SBP subsequently, vide letter No. BPRD (LCGD-04)/625/74/2006/12103 dated December 27, 2006 notified December 30, 2006 as the effective date of the merger. (x) As explained above SCBPL, was incorporated in Pakistan on July, 19, 2006, pursuant to the above scheme and consequently on September 5, 2006, as a starting first step towards acquisition, the SCBPL acquired 95.37 per cent of the holding in UB. The purpose of this transaction was to allow the Bank to expand its footprint in Pakistan by acquiring the large branch network and customer base of UBL. (xi) The purchase of business of UB on September 5, 2006, was substances, an acquisition precedent to merger of the UB with Standard Chartered Group banking business in Pakistan, which became effective on December 30, 2006. (xii) As a consequence of the aforesaid acquisition, an 'intangible asset', being excess of the consideration paid over the net assets acquired on the acquisition, was recognized as goodwill in the books of account of the Bank. (xiii) this goodwill was attributable to the significant synergies that were expected to arise from the development of UB within the Standard Chartered Group and to those intangibles, such as the branch network, depositors' base, customer relations etc. which are not recognized separately in the books of account. (xiv) The Bank acquired the entire business of UB representing Rs.5,258,970,000 worth of net assets (break up value) valued at fair market value, for Rs.30,847,990,

000. The difference between these amounts, therefore, has given rise to Goodwill of Rs.25,589,020,000. (xv) For the purpose of tax, this Goodwill has been computed on the basis of carrying values of the assets and liabilities which, nevertheless, are not materially different from the fair values. Rupees Purchase consideration paid in case and shares issued (A) 30,826,296,000 Carrying amount of UB's assets on acquisition date 118,585,234,000 Carrying amount UB's Liabilities on acquisition date 113,108,767,000 Carrying amount of UB's net assets on acquisition date 5,476,467,000 Less: Minority Interest 170,909,732 Net Assets acquired (B.) 5,305,557,268 Goodwill for tax purpose (A-B) (A-B) 25,520,738,732 The working of Goodwill amortization for tax purposes is, therefore, as follows:-- Rupees Total Goodwill (as above) A 25,520,738,732 Estimated useful life B 10 years Amortization allowance per year A/B 2,552,073,873 The above computed amortization has been claimed in the returns for Tax year, 2007 (proportionate for a period of two days only), 2008 and 2009".

4. The departmental representative Dr. Farrukh Ansari and Dr. Muhammad Ali Khan defended the order passed under section 122(5A) in case of taxpayer bank, relevant comments are summarized below:-- Substance of transaction claimed as Goodwill by the taxpayer, (a) Taxpayer's treatment: Taxpayer has calculated the value of Goodwill for accounting purposes as per IFRS3, being the difference (in excess) between the purchase consideration paid and the fair value of identified assets acquired and liabilities assumed in the acquisition of U13 by SCBPL. The working of Goodwill by the taxpayer is given as under Rs. in 000 Total purchase consideration 30,847,990 Fair value of net assets acquired 5,258,970 Goodwill 25,589,020 OBJECTIONS TO ABOVE ACCOUNTING TREATMENT: (i) The learned Commissioners Appeals at page 49 (last para) of his order, dated 14-5-2010 has given the following remarks:-- "As admitted in the arguments reproduced above only an accounting colour has been given to this claim and it is also pointed out that assessment is being made under the Income Tax Ordinance and not under IAS and in case of conflict between the two the provision of Income Tax Ordinance would prevail specially in view of clause (9) of the Seventh Schedule so the arguments of relying on IFRS-3 will not help the appellant." (ii) Even the valuation made under IFRS 3 is not substantiated by any documents regarding the Fair Value of net assets acquired. It is also pertinent to note that even as per Accounting Standard IRFS 3 the amount of Goodwill would have been on lower side, if the fair value of net assets acquired was made at Fair Market Value, as per the provisions of the Income Tax Ordinance, 2001. It is held in 91 Tax 484 (Trib.) that Income Tax Law is a special law and International Accounting Standards do not override it. ACTUAL SUBSTANCE OF THE TRANSACTION:-- (i) The amount of Rs.25 (Billion) claimed as Goodwill did not represent the price of Goodwill. Goodwill deduction claimed on amortization basis at Rs.2552.073 (M) is actually part of cost of shares of Messrs Union Bank (having been so paid), which are capital assets in nature in terms of section 76 of the Income Tax Ordinance, 2001. The amount claimed being part of the cost of tangible capital asset and so paid is inadmissible under section 24 read with section 21(n) of the Income Tax Ordinance, 2001. (ii) Payment for non resident share holders, have been made and same is substantiated by the fact that the taxpayer has claimed exemption under section 152 of the Income Tax Ordinance, 2001. (iii) Reference letter, dated 23-8-2006 of CEO Standard Chartered Bank Pakistan Ltd. and relevant exemption certificated enclosed. (iv) If the amortization of Goodwill is allowed then it would tantamount to amortizing the cost of shares which is, not permissible under the law. (v) No evidence has been produced by the taxpayer that payment is made as Goodwill as previously stated, taxpayer has claimed exemption of withholding tax under section 152 on account of capital gains arising to the share holders of Union Bank Ltd. on sale of shares. (Reference letter, dated 23-8-2006 of CEO SCBPL). (vi) The ACIR at pages 16 and 17 of the order under section 122(5A) has clarified the issue that payment was actually made on account of purchase of shares of Union Bank as per price quoted on Stock Exchange. This payment pertains to cost of assets/ shares. Share is tangible asset and same cannot be amortized as Goodwill. (vii) The ACIR-C in his order under section 122(5A), dated 31-12-2009 has pointed out following fact:-- -Total No. of shares of Messrs Union Bank 338,750,509 -Market rate 91 x 338, 750,509= 30(B) approx (The price quoted in respect of shares of Messrs Union Bank Ltd. at Karachi Stock Exchange was between 88 to 91 as per Karachi Stock Website www.ksc.com.pk/market-date. The open rate on 1-9-2006 was 89.5 and the closing rate was 88.1) Thus it is proved that substance of the transaction is that the amount of purchase consideration was part of cost of shares of Messrs Union Bank (having been so paid), which are capital asset in nature and thus does not qualify to be amortized. (vii) The learned CIT (Appeals) was justified to give the concluding remarks that sham, cooked and coloured transaction-did not qualify to be amortized as Goodwill. The following case law is relevant:-- CIT v. Gammon (Pak.) Limited. Karachi 14 Tax 304 (H.C. Kar.) Interest

Assessee company carrying on business in East and West Pakistan

East Pakistan branch converted into subsidiary company

Subsidiary-company a different legal entity

Entire capital of subsidiary-company owned and investment therein made by assessee company

Interest paid by assessee company on overdrafts and loans to be invested in subsidiary-company

Whether revenue expenditure

Held yes

Forms and substance of transaction CIT v. Trustee of Estate of Late C.E. Beven Petman 84 Tax 421 (H.C. Lhr); 2001 PTD (H.C. Lhr) 2829 Taxability

Name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction

Transaction which on its true construction was of a kind that would escape tax, is not taxable on the ground that the same result could be brought about by a transaction in another form which would attract tax

Without prejudice to above, the share prices of Union Bank showed a steep use after the completion of the deal. Such unnatural rise cannot be attributed to the goodwill. The following data depicts the rise:-- Paid Up Value Rs.10.00 Closing Price June, 2002 Rs.7.00 Closing Price December, 2002 Rs.10.00 Closing Price June, 2003 Rs.15.30 Closing Price December, 2003 Rs.18.60 Closing Price June, 2004 Rs.27.50 Closing Price December, 2004 Rs.39.95 Closing Price June, 2005 Rs.39.50 Closing Price December, 2005 Rs.68.85 Closing Price June, 2006 Rs.74.00 Source:-- www.docstoc.com The steep rise in the prices of stock after the beginning of negotiations shows that the same cannot be attributed to goodwill which as held by Hon'ble Supreme Court of Pakistan in case of Dr. M.B. Ankalsaria v. CWT reported as 66 Tax 11 (SC Pak) is defined as under:- "It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in customers. It is the one thing which distinguishes an old established business from a new business at its first start. The good will of a business must emanate from a particular centre or source. However, widely- extended or diffused its influence may be, good-will is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Good-will is composed of a variety of elements. It differs in its composition in different traders and in business in the same trade. One element may preponderate here and another element there. To analyse good-will and split it up into its component parts to pare it down as the Commissioners desire to do until nothing is left but a dry residuam ingrained in the actual place where the business is carried on while everything else is in the air seems to me to be as useful for practical purpose as it would be to resolve the human body into the various substances of which it is said to be composed. The good-will of a business is one whole, and in a case like this it must be dealt with as such." The history of Standard Chartered in Pakistan dates back to 1863, when the Chartered Bank of India; Australia and China first established its operations in Karachi. Standard Chartered Bank (Pakistan) Limited is Pakistan's oldest and largest foreign commercial bank. It employs over 9000 people in its 162 branches in Pakistan. In 2006 Standard Chartered Bank acquired Pakistan's Union Bank. On 30 December, 2006, Standard Chartered merged Union Bank with its own subsidiary, Standard Chartered Bank (Pakistan), to create Pakistan's sixth largest bank. Union Bank was established in 1991 and had its headquarters in Karachi, Sindh, Pakistan. Going by the attributes defined by the honourable Supreme Court of Pakistan, it is clear that it was SCB which enjoyed a better goodwill. Even after the merger, the new entity carried out its activities in the name and style of the former bank in light of the better goodwill. Case Law 2008 PTD (Trib.) 679 distinguishable Counsel of the taxpayer has relied on case law (2008) 97 Tax 110 (Trib.) in support of their contention. The above referred case law is distinguishable on the basis of following facts:-- (i) Substance/nature of transaction involved in case of SC BPL is entirely different as such facts of the case of taxpayer are distinguishable. In case of taxpayer, Good-will claimed did not represent the price of Good-will it is actually part of cost of shares of Messrs Union Bank. (ii) In the above referred reported case the amount of Rs.3.58 (M) was written off as an expense in computation of income, treated as notional amount by the Taxation Officer. Same is not the case in respect of SCBPL. (iii) The reported case law the transaction is between the associated companies i.e. public limited companies are involved whereas there is merger between the two banking companies i.e. SCB and Union Bank in the present case. (iv) In the reported judgment there was big question mark over the validity of the consideration paid by the assessee company in acquiring the Good-will and the related assets of World Call Pay Phone Cards Limited. (v) In the reported case law it has been mentioned that Goodwill "depends very largely upon the continuance of the business and a cession of the business for any extended time will generally in whole or in part destroy the value of the Good-will". The above case law is distinguishable on the fact that business is being carried out in the name of Standard Chartered Bank Pakistan Limited and the Union Bank has ceased to exist after merger CASE LAW ON TREATMENT OF GOODWILL Without prejudice to the contention of the department on facts of the case reliance cannot be placed on the treatment of Good-will as intangible in old case law, due to the following reasons: (i) In the repealed Ordinance, 1979 etc. definition of intangible was not given, hence there are case law that Good-will is an intangible asset, however it held that it cannot be amortized. (ii) In the Income Tax Ordinance in section 24 with reference to amortization of intangibles, definition is given, goodwill means patent invention, design, model, secret formula or process, copy right, trade mark, scientific or technical knowledge, computer software, motion picture film, export quotas, franchise, license, intellectual property, contractual rights. Thus following the Ejusdem Generis Rule, Good-will cannot be deemed by the stretch of imagination to be included under the category of expenditure which provides an advantage or benefit for a period of more than one year. Ejusdem Generis Rule stipulates that if general words follow the specific words, the general words are interpreted as if they are species of the same genus. The above concept was upheld by the honourable Sindh High Court in the case of Premier Mercantile reported as 97 Tax 89, 2007 PTD 2521 "

5. We have heard arguments of both the parties and have perused the record. The CIR(A) while adjudicating upon the case as given his verdict as under:- "Without prejudice to the grounds of Appeals Nos. 2 to 6 above, the AC erred in disallowing the claim for amortization of Intangibles (Goodwill) amounting to Rs.2,552,073,

873. It is submitted that the AC erred in deviating from the principle laid down by the Income Tax Appellate Tribunal in its order reported as 2008 PTD (Trib.) 679. "Appellant's Arguments Your appellant claims that Good-will arising on the merger transaction between the Bank and the erstwhile Union Bank Limited (UB) is an intangible asset under the definition of the term 'intangible', as defined in section 24(11) of the Income Tax Ordinance, 2001 and is consequently subject to amortization under the same section. In view of the above, an amortization allowance was claimed by your appellant in both the tax years viz. 2008 and 2009 at Rs.2,552,073,873 per annum which was disallowed by the AC. Before your. appellant proceeds to give a rebuttal against the contentions of the AC on the disallowance, it is pertinent that at the outset a full chronology of the facts and the circumstances that resulted in the Good-will is presented before your Honour, depicting the extent mode of the Scheme of Amalgamation, in its entirety, along with the principles that had enabled your appellant to claim a deduction in respect of such Good-will in the returns of income." " .Findings/Inference: Taxpayer's counsel's main contentions are summarized as under: As a consequence of the aforesaid merger an 'intangible .asset', being the difference between the value of the purchase consideration paid in cash, and the net assets acquired on the acquisition, accounted for accounting purposes as a good-will in the books of account of the Bank. The Advanced Law Lexicon provided several related definitions of Goodwill including the following: (x) Any excess of the cost of the acquisition over the acquirer's fair interest value, of the identifiable assets and liabilities acquired as at the date of the exchange transaction; This consequently establishes the fact that whatever is paid in excess of the fair value of 'the net assets of the business contributes to an additional asset which is intangible in nature and is termed as Good-will. A Good-will only arises when the entire business is sold i.e. when a 'revenue generating apparatus' terms of both the acquirer. It is therefore, crystal clear that anything paid over and above the net assets acquired during the purchase of a business is nothing, other than Good-will. The entire business of UB was acquired for Rs. 30,847,990,000 which was nearly six times the worth of its net assets (approx. 5.2 billion above). The difference between these amounts is being claimed as Good-will. The shares were acquired at a price of approximately Rs.90 per share through separate negotiations with the majority shareholders and not through the Stock Exchanges. The shares which the Bank purchased in UB, however, ceased to exist once UB was amalgamated into the Bank (SCBPL). As such, while the consideration paid by the Bank to acquire the shares was the cost of those shares those shares do not represent a capital asset since they are not property held by the Bank." "The Additional Commissioner as per his order under section 122(5A) for tax years, 2008 and 2009 is of the following view: -- Deduction claim on account so called goodwill on amortization basis is not admissible because the same already stands qualified and admitted as part of the cost of shares of Messrs Union Bank (having been so paid) which are capital asset in nature, in terms of section 76 of the Income Tax Ordinance, 2001. The amount C claimed being part, of tangible capital assets and so paid is inadmissible under section 24 read with section 21(n) of the Income Tax Ordinance. Good-will claim is actually part of cost of share of Messrs Union Bank limited. Following paras will clarify the fact Goodwill claim is actual part of cost of shares of Messrs Union Bank Ltd. The payment of 25.589.020 (M) terms as Good-will by the taxpayer was actually being paid on account of purchase of shares (details referred above) as per price quoted on Stock Exchange. This payment pertains to the cost of assets/shares. Share is tangible assets and same cannot be amortized as Good-will. The price quoted in respect of shares of Union Bank Ltd. at the Karachi Stock Exchange was between 88 to 91 (Karachi Stock Website, www.Ksc.com.pk/market-data). The open rate on 1-9-2006 was 89.5. The amount paid to non-residents on account of sale of shares comes to Rs.91 per share same was demonstrated as per chart given in the order at page 17 Tax year, 2008 and page 36 Tax year, 2009 with following working: Total number of shares Messrs Union Bank 338,750,509 Marekt rate (91x338,750,509 = 30,826,296,319" "I have perused the contention of the AR of the appellant and the relevant findings of the Additional Commissioner, Inland Revenue - C (AC IR-C) and I agree with the contention of the Additional Commissioner. Inland Revenue-C (AC IR-C) that t deduction claimed is not admissible because the same qualify and was paid as part of cost of shares which is tangible capital assets. Even otherwise, the addition is also sustainable on the arguments that the appellant has not produced any satisfactory reason or documentary evidence either before the TO or during these proceedings that amount has been paid as good-will. It is also observed that the right to use the name of the acquired bank has not been acquired and that whatever good-will was associated with the acquired bank has become non existent once the bank was acquired by the SCB through merger. The SCB is not doing the business in the name of UB and in fact it is good-will of the SCB which has replaced the UB. The following facts admitted by the AR himself also substantiate and justify the action taken by the Additional Commissioner, Inland Revenue-C (AC IR-C) in this regard. (1) Standards Chartered Bank (SCB) as a registered foreign bank in Pakistan would acquire the shares of private locally incorporated and listed bank (Target Bank) for cash. (2) SCB UK would form a wholly owned subsidiary ("Newco") in Pakistan that in turn will acquire SCB Pakistan Branch. The capital of Newco on incorporation will be minimum permitted under Pakistan corporate law. (3) The merger of Pakistan Branch of SCB in the Newco will take place through a scheme of amalgamation under section 48 of the Banking Companies Ordinance, 1962 duly sanctioned by State Bank of Pakistan ("First Merger"). This in substance will be the corporatization of the SCB Pakistan Branch. The capital of Newco would increase to reflect the net assets of the SCB Pakistan Branch. Newco would issue shares equivalent to book value as consideration for the acquisition of the SCB Pakistan, i.e., all its business and assets. (4) The Target Bank would at a later point in time be merged, into Newco through a scheme of amalgamation under section 48 of the Banking Companies Ordinance, 1962 duly sanctioned by the State Bank of Pakistan ("Second Merger"). The consideration for the acquisition of Target Bank's business will be shares; the amount of shares issued to the minority shareholders will be based on swap ratio determined on the basis of fair value of the respective business. Shares owned by Newco in the Target Bank will be cancelled." The value of Good-will for accounting purposes was calculated under IFRS 3 being the difference (in excess) between the purchase consideration paid and the fair value of the identified assets acquired and liabilities assumed in the acquisition of UB by SCBPL. It is also pointed out that in the above reproduced arguments the learned AR has himself admitted the case law 97 tax 110 is distinguishable from the facts and circumstance of the present case, i.e. the one is that the transaction under 97 Tax 110 was between associated companies. The second point of distinction is that there was big question mark over the validity of the consideration paid by the assessee in acquiring the good-will and the related assets of Worldcall Payphone Cards Ltd. The other case laws relied by the appellant on this issue are not relevant or on all fours with facts and circumstances of this case. Without prejudice to the above it is also observed at that the purchase of shares of a company from some share holders does not amount to purchase of good-will of the company particularly when the purchased company dissolved its identity in the SCB. Then it is also pointed out that purchase of physical assets of the UB including the tangible amount invested in investing activities and the tangible interest profit expected therefrom, its staff and building cannot be equated with the purchase of good which already has evaporated into thin air on merger. Then even otherwise no documentary evidence has been given neither during the assessment nor during the appeal proceedings that claimed payment was made for acquiring goodwill of the bank so the onus on the appellant that payment was made on account of so-called goodwill has not been discharged. As admitted in the arguments reproduced above only an accounting colour has been given to this claim and it is also pointed out that assessment is being made under the Income Tax Ordinance and not under the IASs and in case of conflict between the two, the provisions of the Income Tax Ordinance would prevail specially in view of clause 9 of the 7th Scheme. So the argument of relying on IFRS-3 will not help the appellant. It is also pointed out that only control and management of a company is acquired through acquisition of majority shares from shareholders. The good-will of a company is different from the shares of that company. Then shares of a company cannot be treated as units shares of goodwill. In transactions on stock exchanges or otherwise shares are traded and not the good-will. Assets are different from good-will. No earning assets of bank is dormant and are only invested in profit earning activities which are quantifiable so it is not good-will, but earning worth for which price was paid. Without prejudice to the above it is also observed the copy of agreement for purchase amalgamation of the UB was neither provided during the assessment stage nor during the appellate proceedings despite specific request made by the undersigned during the hearing that it should be provided and the promise of AR to provide the same. So in such a situation again the appellant has not discharged his onus that the impugned gain was not claimed by way of a sham, cooked, or coloured transaction. Hence for the totality of the reason given above, the action of the Additional Commissioner, Inland Revenue-C (ACIR-C) is confirmed."

6. After hearing the arguments of both the side and carefully perusing, the facts of the case and the reported case law cited by the AR of the appellant we are of the considered view that facts of the case-law 97 Tax 110 are distinguishable.

7. Citing the same case as provided by the AR viz. AIR 1970 SC 564 we would like to reproduce a very pertinent observation of the honourable Supreme Court of India which may make significant contribution for proper decision on the matter. It runs as follows:-- "No facts have been pleaded in the petition to show as to what goodwill the bank has, Good-will is not shown in assets. In the present case the names of the 14 banks are not the corresponding new banks are not the same and it cannot therefore be said that any goodwill has been transferred. The 14 banks will be able to carry on business other than banking in their names. Again under the Act compensation is being paid for the assets and secret reserves which are provided for by depreciating the value of assets will also be taken into account...."

8. We feel that this also applies to the taxpayer's case as such that it has not been able to come forward with the extent of good-will the seller Bank (UB) was 'carrying in its balance sheet. Even otherwise the characterization of transaction as good-will has not been accepted by the department for the reasons narrated by both the authorities down below We are inclined to agree with their conclusion.

9. During the course of hearing before this Bench. It was deposed that the taxpayer has applied for exemption certificate treating this transaction as "exempt/capital gain:" This certificate was issued to the taxpayer and holds its validity till date. The taxpayer has never surrendered its claim. This also speaks that it is due to an afterthought that the taxpayer has resorted to colouring of the transaction in a manner that suits its objective of avoiding the tax. An important document in this case is the scheme of amalgamation between Union and SCB Branch Business into SCBP Clause 10 of the said scheme reads as follows:-- "with effect from the Effective Date, all banking and branch licenses issued by the State Bank to SCB Branch Business and to the bank branches of Union Bank shall stand cancelled and SCB Branch Business and the bank branches of Union Bank as the case may be, shall become the branches of SCBP and shall be authorized to transact banking business."

10. The above clause clearly shows that the sellers Bank (UB) business ceased to exist on the date of amalgamation. This scheme of amalgamation does not specifically provide for transaction of any goodwill which was apparently created contrary to the factum of characterization of the accounting entries to give a different colour.

11. To indulge in the discussion of good-will would be of no consequence as the very essence of this asset has no locus standi in the scheme of amalgamation and as well as the issue under consideration from the stand point of Income Tax Ordinance, 2001.

12. We agree with the findings of learned Commissioner Inland Revenue that no documentary evidence has been given for the claimed payment for acquiring Good-will of the Union Bank. Accordingly, for the reason narrated above, the appeal of the appellant bank fails.

13. The appeal is disposed of to as stated above. H.B.T./151/Tax(Trib.) Appeal dismissed.