Non-existent entity assessment and goodwill depreciation on amalgamation were both decided in favour of the assessee.

An assessment framed in the name of an amalgamating company that had already ceased to exist after amalgamation and conversion into an LLP is jurisdictionally invalid; participation by the assessee or use of the old name does not cure the defect, and section 292B cannot validate proceedings against a non-existent entity. The article also notes that goodwill arising on amalgamation, computed as the excess of consideration over the net assets taken over, qualifies as an intangible asset under section 32(1) as "business or commercial rights of similar nature," and depreciation is allowable for years before the prospective exclusion of goodwill. The ITAT therefore quashed the assessment and allowed depreciation on goodwill.

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Issues: (i) Whether an assessment framed in the name of a company that had ceased to exist after amalgamation and conversion into an LLP is valid in law; (ii) Whether goodwill arising on amalgamation is an eligible intangible asset for depreciation under section 32 of the Income-tax Act, 1961.

Issue (i): Whether an assessment framed in the name of a company that had ceased to exist after amalgamation and conversion into an LLP is valid in law.

Analysis: The assessment order was passed in the name of the erstwhile company after it had ceased to exist. The legal position applied was that once amalgamation is sanctioned, the amalgamating company loses its separate existence and cannot be treated as a person against whom assessment proceedings can validly continue. Participation by the assessee or use of the old name in correspondence does not cure the jurisdictional defect, and section 292B does not save an assessment framed on a non-existent entity.

Conclusion: The assessment was void ab initio and bad in law; the issue is decided in favour of the assessee.

Issue (ii): Whether goodwill arising on amalgamation is an eligible intangible asset for depreciation under section 32 of the Income-tax Act, 1961.

Analysis: The goodwill arose from the excess of purchase consideration over the net value of assets taken over in the approved amalgamation scheme. Goodwill is within the expression "any other business or commercial rights of similar nature" in Explanation 3(b) to section 32(1). The statutory provisions governing amalgamation and block depreciation did not justify treating the goodwill as nil merely because it was not reflected in the transferor's books. The amendment excluding goodwill from depreciation applied only prospectively and did not govern the year under consideration. The valuation objections and the allegation of colourable device were not accepted.

Conclusion: Depreciation on the goodwill was allowable; the issue is decided in favour of the assessee.

Final Conclusion: The appeal succeeds in full, the assessment is quashed on the jurisdictional ground, and the disallowance of depreciation on goodwill is set aside.

Ratio Decidendi: An assessment made on a non-existent amalgamating entity is a jurisdictional nullity, and goodwill arising on amalgamation is a depreciable intangible asset under section 32(1) for assessment years prior to the prospective exclusion of goodwill.

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