https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=459420 https://www.taxtmi.com/caselaws?id=459420 Revision u/s 263 - assessee has failed to declare in 3CEB report the transactions with related parties - HELD THAT:- It is not a case of simpliciter invoking of revisional jurisdiction u/s 263 of the Act upon receiving of the reference. Thus, the preliminary exercise of examining the records by the PCIT and forming his own view after considering the records was carried out by the PCIT, before invoking jurisdiction u/s. 263. Therefore, the arguments of assessee that provisions of section 263 have been invoked merely on reference without consideration of records by the PCIT as envisaged under the provisions of sub-section (1) to section 263 is unfounded. Therefore, the said argument is rejected. Transaction between M/s. Metallurgical Services and the assessee is a specified domestic transaction and falls within the ambit of section 92BA(i) - The clause (i) to Section 92 BA has been omitted by the Finance Act, 2017 w.e.f. 01/04/2017 without any Saving clause. Thus, the effect of said omission without saving would be that it shall be deemed that the said clause never existed in the statute. See Texports Overseas Pvt. Ltd. [ 2017 (12) TMI 1719 - ITAT BANGALORE ] wherein as held that once a particular provision of section is omitted from the statute it shall be deemed to be omitted from its inception unless it is protected by Saving clause or a provision to make it clear that action taken or proceedings initiated under that provision or section would continue and would not be left on account of omission. We find merit in this arguments of the assessee. Once, it is concluded that the transaction between assessee company and M/s. Metallurgical Services is not a specified domestic transaction, there is no question of reporting the same in Form 3CEB. The assessee succeeds on ground No.2 of the appeal. Transaction between assessee and Exova (UK) Ltd. is not a transaction with Associated Enterprises as defined in Chapter-X of the Act, hence, the provisions of section 92B(1) of the Act are not attracted - The transaction of initial allotment of equity shares to Exova (UK) Ltd. was between two independent, unrelated entities. Hence, there was no obligation on the part of assessee to report said transaction in Form 3CEB. It is after initial allotment of equity shares by assessee to Exova (UK) Ltd. (subject to shares holding as specified u/s.92A of the Act) that the entities would be covered by the definition of Associated Enterprises and any transaction between the said entities, thereafter would fall within the realm of Chapter X of the Act. We find merit in ground No.3 of the appeal. The assessee succeeds on the same. Claim of depreciation on goodwill acquired under slump sale agreement - PCIT has disallowed depreciation on Goodwill merely on surmises and conjectures. In so far as the issue of depreciation on Goodwill is concerned, the Hon ble Apex Court in the case of CIT vs. Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT ] has held that Goodwill is an asset under Explanation 3(b)(as applicable to assessment year under appeal) to section 32(1) of the Act and thus, depreciation on Goodwill is allowable. Undisputedly, in the present case the Goodwill has arisen on slump sale of business by partnership firm to the assessee. The said transaction of purchase of business was on mutually agreed terms and conditions. this issue was considered and examined by the Assessing Officer during the assessment proceedings. Thus, after examining the issue the Assessing Officer formed an opinion and accepted assessee s claim of depreciation on Goodwill. The PCIT has erred in invoking provisions of Explanation 2 (a) (b) to section 263 of the Act. We further observe that while deciding this issue of depreciation on Goodwill, the PCIT on one hand gave a conclusive finding that the Goodwill claimed by the assessee is merely an illusory entry in the books of account and, therefore, no depreciation as claimed can be allowed to the assessee, on the other hand PCIT set aside the issue back to the Assessing Officer to examine the facts involved in the light of observations made. The PCIT in fact has given a specific finding on the issue, without examining the assessee s claim of depreciation. Ground No.4 of the appeal, ergo, the same is allowed. PCIT has overstepped in exercising his revisional jurisdiction u/s. 263 of the Act. The two mandatory conditions to be satisfied for exercising revisional powers i.e. the order passed by Assessing Officer should be (i) erroneous and (ii) prejudicial to the interest of Revenue are not concurrently fulfilled in the instant case - Assessee appeal allowed. Case-Laws Income Tax Tue, 13 Sep 2022 00:00:00 +0530