2018 (5) TMI 1097 - HC - Income Tax

High Court affirms Tribunal decision on tax appeal; disallows debt provision claim, allows goodwill depreciation.

The High Court upheld the Tribunal's decision in a tax appeal case. The disallowance of a claim for provision for doubtful debt and advances was not ... Provision for doubtful debt and provision for doubtful advances - Tribunal setting aside the matter to adjudicate afresh ? - Held that:- Tribunal merely remanded the issue before the Assessing Officer for deciding it afresh in light of the Full Bench judgment of this Court in case of Commissioner of IncomeTax v. Vodafone Essar Gujarat Ltd. [2017 (8) TMI 451 - GUJARAT HIGH COURT] . The judgment of full bench was not available when the issue was decided by the Assessing Officer and Commissioner of Income Tax (Appeals). We see no error in the order of the Tribunal and therefore, there is no question of asking the Assessing Officer to decide it again in light of the said judgment. No question of law in this respect arises Allowability of claim of depreciation on goodwill - Held that:- Referring to Explanation 3 to subsection (1) of section 32 which contains two clauses (a) and (b) explaining the expression 'asset' and 'block of asset'. Tribunal was of the view that goodwill would be included as an asset under Explanation3( b) to subsection (1) of section 32 of the Act and also held that in the present case, the difference was paid for acquisition of such goodwill. The Tribunal referred to the judgment of the Supreme Court in case of Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT) and held the issue in favour of the assessee. The Tribunal had come to the correct conclusion that excess payment was towards goodwill and that by settled law, goodwill would also be a depreciable asset. - Decided against revenue Issues:1. Disallowance of claim for provision for doubtful debt and doubtful advances.2. Allowance of claim for depreciation on goodwill.Analysis:Issue 1: Disallowance of claim for provision for doubtful debt and doubtful advancesThe Revenue appealed against the judgment of the Income Tax Appellate Tribunal regarding the disallowance of the claim for provision for doubtful debt and advances. Both the Assessing Officer and the Commissioner of Income Tax (Appeals) had disallowed the claim. The Tribunal remanded the issue back to the Assessing Officer for reconsideration in light of a Full Bench judgment. The Full Bench judgment was not available when the Assessing Officer and Commissioner of Income Tax (Appeals) made their decisions. The High Court found no error in the Tribunal's decision and stated that there was no need for the Assessing Officer to decide the issue again based on the Full Bench judgment. The Revenue's representative did not object to this decision before the Tribunal. Therefore, the High Court concluded that no question of law arose in this regard, and the Tax Appeal was dismissed.Issue 2: Allowance of claim for depreciation on goodwillThe second issue involved the assessee's claim for depreciation on goodwill. The assessee had initially not claimed depreciation on the excess consideration paid for the acquisition of assets and liabilities of an amalgamated company. Subsequently, the assessee sought depreciation on this investment based on a Supreme Court judgment. The Assessing Officer rejected the claim on the grounds that no revised return was filed. The Commissioner of Income Tax (Appeals) also dismissed the claim on merits, stating that the excess payment was not for goodwill but for the acquisition of a new business. However, the Tribunal allowed the claim, citing the inclusion of goodwill as an asset under the relevant section of the Income Tax Act and referring to the Supreme Court judgment. The Tribunal concluded that the excess payment was for goodwill and that goodwill was a depreciable asset based on settled law. The High Court upheld the Tribunal's decision, stating that no question of law arose in this matter, and consequently dismissed the Tax Appeal.