AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 622
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....that it being the admitted position that the appellant had neither claimed nor had it been allowed any depreciation on Goodwill in Assessment years 2007-08, 2008-09 and 2009-10, its claim for depreciation in the present assessment year on the basis of written down value arrived at after considering depreciation for A.Y. 2010-11 (which was the first year in which it had claimed depreciation on Goodwill) alone had been correctly allowed in the original assessment order considering that as per the definition of the expression "written down value" contained in clause (G) of Section 43 only such depreciation as had been actually allowed to an assessee was required to be reduced; that, therefore, the assessment order was not erroneous as assumed by the learned Pr. CIT; (b) that his proposal for grant of depreciation on Goodwill this year on the basis of lower written down value after reducing notional depreciation for A.Y. 2007-08, 2008-09 and 2009-10 was bound to entail the Department having to actually grant deduction for depreciation to the appellant in the said A.Y. 2007-08, 2008-09 and 2009-10 with a consequential reduction in the appellant's total income of those far off yea....
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....ee and cancelled the order u/s 143(3) of the Act and directed to make fresh assessment by observing as follows :- 3. I have considered the facts of the case and the submissions made by the assessee. The Goodwill arose due to the demerger of city gas distribution business of Adani Energy Ltd. demerged in Adani Gas Ltd. (UP) Pvt. Ltd., and the resultant company i.e. Adani Gas Ltd. paid consideration to the demerged company and the difference (Rs.33,98,9-0,680/-) between the cost of assets and the amount paid constituted Goodwill. The High Court ordered appointed date as 1st January, 2007 which meant that scheme was effective from appointed date, depreciation on Goodwill was required to be allowed from A.Y.2007-08 relevant to previous year 2006-07. However, the assessee claimed depreciation from A.Y.2010-11 which resulted in excess brought forward of opening WDV of Goodwill in A.Y.2011-12 with consequent excess allowance of depreciation. As depreciation allowable during A.Y.2011-12 was Rs. 3,13,66,865/-, however, the assessee claimed and was allowed depreciation of Rs. 7,43,51,086/- on Goodwill, which resulted into excess allowance of depreciation of Rs. 4,29,84,221/-. Apparently, ....
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....ts and liabilities of T Ltd. were transferred to assessee for a consideration; that difference between cost of an asset and amount paid constituted goodwill and that assessee-company in process of amalgamation had acquired a capital right in form of goodwill because of which market worth of assessee-company stood increased - Accordingly, assessee's claim was allowed - Whether since revenue could not rebut factual findings recorded by authorities below, impugned order passed by them was to be upheld - Held, yes [Para 8] [In favour of assessee]" 7. On the strength of the judgment of Hon. Supreme Court the assessee revised its return of income on 25.9.2012 and claimed depreciation on the w.d.v. of goodwill as on 1.4.2010. The return was revised after the selection of assessee's case for scrutiny assessment vide notice u/s 143(2) of the Act dt. 1st August, 2012. 8. Ld. AR further referred to the notice u/s 142(1) of the Act dated 18/10/2013 placed at page nos.95 to 97 of the paper book in which at sl.no.9 a specific question has been asked by Assessing Officer that "this year, you have amortized goodwill. No such treatment was given last year. Pl. explain the reason for this ....
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....gement provides for transfer with effect from January 1, 2007, being the appointed date, of all the assets and liabilities, the legal proceedings, all the deposits and balances, certain employees and related benefits, all the contracts and agreements in relation to the Gas Distribution business to a distinct identity to Adani Energy (UP) Pvt. Ltd. now known as Adani Gas Ltd. The scheme has accordingly been given effect in books of accounts. Consequently upon giving effect to the scheme an amount of Rs. 33.99 crores was paid towards goodwill which is disclosed separately but was not amortized in the current financial year as the economic benefits there from are expected to accrue over a period of time based on the foreseeable life of the business. From the appointed date i.e. 1st January, 2007, Adani Energy Ltd. (demerged company) conducted the business of CGD in trust for Adani Gas Ltd. (resulting company) as per the scheme and accordingly balances from the appointed date to the effective date were transferred in the resulting company and the figures in the previous year relevant to the asst. year 2010-11 were regrouped/readjusted. 11. We observe that ld. Pr. CIT invoked his pow....
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....assed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; . (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section, or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 13. We find that clause (a) of Explanation-2 to section 263 is relevant to be dealt with in the given facts of the case which reads as to whether the order passed by assessing authority is without making any enquiry or verification relating to assessee's claim of depreciation on goodwill. Ld. AR has submitted at length that the issue of claim of depreciation on goodwill has been exhaustively dealt during the course of assessment proceedings. In the course of examination of the facts narrated by the ld. AR we observe that following events took place :- a) Original return of income was filed on 19.9.2011 claiming depreciation at Rs. 54.74 crores. b) Revised return of income was file....
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....see for a consideration; that difference between cost of an asset and amount paid constituted goodwill and that assessee-company in process of amalgamation had acquired a capital right inform of goodwill because of which -market worth of assessee-company stood increased - Accordingly, assessee's claim was allowed - Whether since revenue, could not rebut factual findings recorded by authorities below, impugned order passed by them was to be upheld - Held, yes [Para 8] [In favour of assessee] II. Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Whether stock exchange membership card is an asset eligible for depreciation under section 32 - Held, yes [Para 1] [In favour of assessee] In view of the above decision, it has to be held that goodwill is an asset within the meaning of section 32 and depreciation on 'goodwill1 is allowable under section 32 of the IT Act. Based on the above decision of the Apex court the assessee company has claimed depreciation on goodwill for A.Y. 2011-12 by way of filing the revised return of income. e) The reply of assessee dated 1.3.2014 in the assessment proceedings for Asst. Year 2011-12 on various points, spec....
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....ying and commissioning of gas connection to industrial, commercial and residential customers of Vadaj area, expenditure during construction period and interest allocation. As data runs into number of pages, we are submitting herewith the same in soft copy vide Annexure-8. 15. Your good self has sought explanation on allowability of depreciation on -goodwill alongwith reason why the entry of the same has been passed during the year under consideration. At the outset, we would like to submit that it is evident from schedule 5 of the Audited Financial Statements that goodwill is appearing as opening balance in the balance sheet and further no addition on account of goodwill was made during the year under consideration. We would like to bring to the notice of your honour that during the Assessment Year 2010-11 the city gas distribution business of Adani Energy Limited was demerged in Adani Energy (UP) Pvt. Ltd and there after name of Adani Energy (UP) Pvt. Ltd. was changed to Adani Gas Limited. The order under section 394 of the Companies Act 1956 was passed by the Hon'ble Gujarat High Court on 9th December, 2009 while appointed date of order was 1st January, 2007. As result of ....
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....tailed reply with necessary evidence. We also observe that the only point of litigation between the view taken by Assessing Officer and that of Pr. CIT was that ld. Assessing Officer allowed assessee's claim of depreciation on goodwill on the WDV calculated by notionally allowing depreciation for Asst. Year 2010-11 because scheme of demerger was approved by Hon. Jurisdictional High Court on 19th November, 2009 whereas Pr. CIT was of the view that the scheme of arrangement for transfer of assets was w.e.f. 1.1.2007 and, therefore, WDV of goodwill as on 1.4.2011 should have been calculated after deducting notional depreciation for Asst. Year 2007-08 to Asst. Year 2010-11 which has resulted in excess brought forward of opening WDV of goodwill for Asst. Year 2011-12. We find that assessee has been filing returns for last many years and even if for the sake of argument if the view of ld. Pr.CIT had been adopted then the assessee would have been able to claim depreciation in earlier years and at the place of higher WDV there would have been brought forward loss or the income of previous Asst. Years from 2007-08 to 2010-11 would have been reduced by the increased depreciation but in any s....