Goodwill depreciation and non-existent entity assessment: pre-amendment goodwill was depreciable, and jurisdiction failed after LLP conversion.

Goodwill arising from amalgamation was treated as an intangible asset eligible for depreciation under the pre-amendment regime, because it fell within the expression covering business or commercial rights of similar nature; the later exclusion of goodwill was held prospective, and the disallowance was unsustainable. An assessment made in the name of a company that had ceased to exist after conversion into an LLP was void for lack of jurisdiction, and the defect was not cured by the assessee's use of the old name in return and appeal filings. Both substantive challenges succeeded and the assessment could not stand.

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Issues: (i) Whether depreciation was allowable on goodwill arising from amalgamation and recognised in the books of the amalgamated entity. (ii) Whether the assessment framed in the name of an entity that had ceased to exist after conversion into an LLP was valid.

Issue (i): Whether depreciation was allowable on goodwill arising from amalgamation and recognised in the books of the amalgamated entity.

Analysis: The goodwill represented the excess of purchase consideration over the net assets taken over in the amalgamation. The statutory scheme governing depreciation and amalgamation was examined in the context of the allowance of depreciation on intangible assets, the treatment of actual cost and written down value in amalgamation, and the principle that amalgamation is intended to be tax neutral. The earlier binding view that goodwill falls within the expression "any other business or commercial rights of similar nature" was applied. The amendment excluding goodwill from depreciable assets was noted to be prospective and not applicable to the year under appeal. The objection that the transaction was a colourable device was also rejected on the facts.

Conclusion: Depreciation on the goodwill was allowable and the disallowance was unsustainable, in favour of the assessee.

Issue (ii): Whether the assessment framed in the name of an entity that had ceased to exist after conversion into an LLP was valid.

Analysis: The assessment was made in the name of the erstwhile company after it had ceased to exist in law upon conversion into an LLP. A proceeding against a non-existent entity is without jurisdiction. The fact that the assessee had itself filed return and appeal papers in the old name did not cure the jurisdictional defect, since consent cannot confer jurisdiction. The assessment order was therefore not sustainable in law.

Conclusion: The assessment framed in the name of the non-existent entity was invalid and liable to be quashed, in favour of the assessee.

Final Conclusion: Both substantive challenges succeeded, and the assessment could not be sustained either on the goodwill depreciation issue or on the jurisdictional issue relating to the non-existent assessee.

Ratio Decidendi: Goodwill arising on amalgamation is depreciable as an intangible asset where the claim falls within the pre-amendment regime, and an assessment made in the name of a non-existent entity is void for lack of jurisdiction.

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