TaxTMI 
TaxTMI 
2012 (7) TMI 686
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....of the Act. Certain other additions were also made. 3. The assessee carried the matter before the first appellate authority wherein the Commissioner (Appeals) granted part relief. Aggrieved, the Revenue is in appeal before the Tribunal, on the following grounds:- "1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the AC. to grant depreciation on goodwill without appreciating that depreciation is not allowable u/s. 36(1)(ii) of the IT. Act since goodwill is not an intangible asset in the nature of know-how, a patents, copyright, trademark, licenses, franchises or any other business or commercial right of similar nature falling within the meaning of Sec. 32(1)(ii) of the IT. Act. 2. On facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AC to give credit for TDS of Rs. 53,97,628/- holding that credit for TDS is allowable in the year of its receipt irrespective of the year in which the corresponding income is offered for taxation. 3a) On the facts and circumstances of the case and in law, the Ld.CIT(A), has erred in relying on the remand report submitted ....
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.... to TDS is not shown during the year, the question of granting TDS credit does not arise. 7. On ground no.3, the learned Departmental Representative relied on the order passed by the Assessing Officer. 8. On club expenditure also, he relied on the order passed by the Commissioner (Appeals). 9. The learned Sr. Advocate, Mr. Firoze B. Andhyarujina, representing the assessee, on the other hand, opposed the contention of the learned Departmental Representative and submitted that on the issue of goodwill, the first characteristic is brought out at Para-(iii)/Page-2 of the order passed by the Commissioner (Appeals) which states that the shares of CGEL amounting to Rs. 7,81,72,000, held by the assessee company was cancelled. The second characteristic, he relied on the provisions of sub-clause (viii)/Page-2 of the Commissioner (Appeals), which reads as follows:- "(viii) The assessee company has entered into a scheme of amalgamation by which the excess of the assessee company's investment in CGEL over the net value of assets and liabilities of CGEL represents goodwill has been treated in the nature of commercial right and depreciation has been claimed under section 32(1....
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....the transactions in question were not with an Associated Enterprises. Thus, he submitted that the Revenue should not have any grievance. On the issue of club expenditure he submitted that the ground is misconceived as the Commissioner (Appeals) had decided the issue against the assessee. 15. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record, as well as the case laws cited before us, we hold as follows:- 16. The facts of the issue are brought at Para-2.2 of the order passed by the Commissioner (Appeals), which is extracted below for ready reference:- "2.2 The facts pertaining to this issue are as under:- (i) Casablancas Gannon Engineering Ltd. (CGEL) was wholly owned subsidiary of the assessee company which got amalgamated with the appellant during the year. (ii) The investment of the assessee company in CGEL as at 31.3.2002 amounted to Rs. 7,81,72,000. (iii) As per the terms of the scheme of Amalgamation, the shares of CGEL amounting to Rs. 7,81,72,000 held by the assessee company were cancelled and the difference between the value of assets and liabilitie....
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....of the petitioner company in the transferor company and the share capital of the transferor company shall stand cancelled as the Transferor Company is wholly owned subsidiary of the petitioner company AND THIS COURT DOTH FURTHER ORDER that on and from the Effective Date as defined in the Scheme, the assets and liabilities appearing in the books of transferor company as on the Appointed Date shall become and be shown as assets and liabilities of the Transferee Company at the same value as they appeared in the books of the Transferor Company and that the difference, if any, between the values of the assets and liabilities taken over from the transferor company shall be transferred to the goodwill of the transferee company." [emphasis own] 19. The assessee states that the scheme of arrangement was accounted for under the "Purchase" method in terms of AS/14. AS/14 reads as follows:- Methods of Accounting for Amalgamations 7. There are two main methods of accounting for amalgamations: (a) the pooling of interests method; and (b) the purchase method. The Purchase Method 12. Under the purchase method, the transferee company accounts for t....
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...., it is frequently difficult to estimate its useful life with reasonable certainty. Such estimation is, therefore, made on a prudent basis. Accordingly, it is considered appropriate to amortise goodwill over a period not exceeding five years unless a somewhat longer period can be justified. 20. Factors which may be considered in estimating the useful life of goodwill arising on amalgamation include: (a) the foreseeable life of the business or industry; (b) the effects of product obsolescence, changes in demand and other economic factors; (c) the service life expectancies of key individuals or groups of employees; (d) expected actions by competitors or potential competitors; and (e) legal, regulatory or contractual provisions affecting the useful life. 20. A perusal of the same does not support the contentions of the assessee that as the assets and liabilities are to be taken over from CGEL at book value the difference between the investment in shares by the assessee is CGEL and the book value of asset in CGEL should be treated as goodwill. CGEL had certain land and buildings which the assessee has taken over at book value. The mark....