2019 (4) TMI 1471
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.... business strategy, it wanted to further expand its business in North-East Region of the country. As stated, in pursuance of its aforesaid strategy, the assessee company acquired the business of going concern namely Interkraf ts Autocity Pvt. Ltd. which was holding dealership of Mercedes-Benz in Kolkata. The business of the aforesaid concern was claimed to be acquired for a total consideration of Rs. 12.85 crores for all its assets aggregating to Rs. 5,34,61,607/ -. The liabilities of the concern were also acquired and directly paid by the assessee. In the process, the excess consideration of Rs. 7.50 crores over and above the value of the tangible assets was claimed to have been incurred for acquiring various business and commercial rights categorized under the head 'goodwil l' in the books of the assessee. The assessee claimed depreciation on such 'goodwill ' pegged at Rs. 7.50 crores. In the course of the scrutiny assessment , the AO however denied the claim of such depreciation on 'goodwill'. 4. Aggrieved the assessee prefer red appeal before the CIT(A). The CIT(A) af ter consideration of relevant facts found the claim of the assessee to be in consonance with law enunciated b....
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....The AO also observed that in the financial statements of M/s. Interkrafts Autocity Pvt. Ltd., Kolkata for A. Y. 2012-13, the opening balance of the goodwill as on 01/04/201] was at Rs. 1 crore which was at the same value as on 31/03/2012. Thus in a span of 10 to 11 months from 31/03/2012, the transaction of the acquisition of the business would not make the value of the goodwill at Rs. 7.50 crores. Hence, the claim of creation of goodwill falls unacceptable as per the AO. The AO also observed that the appellant has failed to justify the valuation of goodwill and in absence of any justification and certificate of qualified Chartered Accountant, the claim of Rs. 7.50 crores raised through the invoice was held to be erroneous. 3.5. On the other side, the appellant has submitted a detailed written submission during the assessment proceedings and thereafter in the appellate proceedings and the same have been reproduced in the preceding paras of this order. 3.6. Having considered the facts and submission, it is found that the appellant group was already having the dealership of Mercedes Benz in Gujarat and M.P. and as per the business development strategies it wanted to expand its ....
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....dy manpower etc. It has been contended that with this acquisition of the ready to business use including tangible and intangible assets such as business and commercial rights, the appellant could achieve the substantial growth since 2013 till 2015 as evident from the sales effected year wise as under:- Period upto 31.03.2013 8.45 Crores Year Ended 31.3.2014 92.33Crores Year Ended 31.3.2015 136.85 Crores 9 months ended 31.12.2015 117.05 Crores Total 354.68 Crores 3.10. It has been submitted that for acquiring such various business and commercial rights categorized under the head of goodwill comprises of dealership, readymade infrastructure including working process, procedures, trade employees and the approved facilities and other requisites, besides use of premises, business information, business contracts and contacts, use of trade mark "Interkraft" allowed by the appellant company to access data and customer base and similar other business commercial rights relating to business. It is not in dispute that after acquisition of the Interkraft, Kolkata the business of the Landmark group rose to 12% of the All India sales of Mercedes Benz and obviously this is because....
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....gainst the same. 3.13. The appellant also relied upon the Accounting Standard - 14. As per the general accepted accounting principles, the purchase consideration was at Rs. 12.85 crores and the tangible assets acquired were of Rs. 5.35 crores. Therefore, the excess of the purchase consideration over the total value of the assets acquired was determined at Rs. 7.50 crores which was paid obviously for the goodwill. In this regard, reliance has been placed on the judgment of Hon'ble Delhi High Court in the case of Areva T & D India Ltd. Vs. DCIT [345 ITR 421], whereby it has been held that in the case of acquisition of an undertaking the balance amount over and above of the net tangible asset was treated as goodwill and the Delhi High Court has allowed the depreciation claim on such goodwill following the judgment of Hon'ble Supreme Court in the case of Techno Shares and Stock Limited Vs. CIT [2010] 327 ITR 323 and CIT Vs. Hindustan Coco-cola Beverages Pvt. Ltd. [2011] 331 ITR 192. 3.14. Since in the case of appellant, intangible assets in the form of business and commercial rights such as dealership, readymade infrastructure including working process, procedures, traine....
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.... to Inerkraft, Kolkata of which details are noted as under:- Sr. No. Name of the party and address Amount of payment Mode of payment Bank Name Cheque No. Date of payment 1 WB VAT Department 5,000,000 E-Payment SBI - 02/02/2013 2 WB VAT Department 20,844,444 E-Payment SBI - 19/02/2013 3 DPS- Chennai 50,000,000 Cheque KVB 000107 16/02/2013 4 Tata Capital Financial Services Ltd., Kolkata 1,299,828 Cheque KVB 000110 21/02/2013 5 Tata Capital Financial Services Ltd., Kolkata 3,235,868 Cheque KVB 000109 21/02/2013 6 Tata Capital Financial Services Ltd., Kolkata 2,425,187 Cheque KVB 000108 21/02/2013 7 Punjab & Sindh Bank, Kolkata 3,404,444 Cheque KVB 000118 28/02/2013 8 Punjab & Sindh Bank, Kolkata 39,277 Cheque KVB 000122 04/03/2013 9 Kotak Mahindra Prime Limited 631,260 Cheque KVB 000631 29/03/2013 10 Kotak Mahindra Prime Limited 270,540 Cheque KVB 000632 29/03/2013 11 DPS Chennai 24,507,328 Cheque KVB 000111 31/03/2013 12 DFS- Chennai 5,437,927 Cheque KVB 000117 31/03/2013 13 Incentive of Edwin Aviet ....
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....] 46 Taxmann. com 26 & ACIT (OSD) Vs. Sahitya Mudranalaya Pvt. Ltd.[2014] 33 ITR (Trib) 108] (Ahd) have held that depreciation on goodwill, which is an asset as per section 32 is allowable. Hon'ble ITAT, Mumbai in the case of ACIT Vs. Worldwide Media Pvt. Ltd. [2014] 43 Taxmann.com 18(Mum) has held that where assessee acquire business as ongoing concern, and claimed depreciation in respect of amount paid for acquiring intangible assets, the depreciation was allowable on goodwill like any other intangible asset. Hon'ble ITAT, Delhi in the case of Thyssen Kurup Elevators (1) Pvt. Ltd. Vs. ACIT [2014] 50 Taxmann.com, has held that where the assessee acquired business of another company on slump basis, excess consideration paid by assessee over and above value of net assets was to be considered as goodwill under section 32(1 )(ii), eligible for depreciation. Hon'ble ITAT, Mumbai in the case of CIT Vs. Birla Global Asset Finance Co. Ltd. [2014] 41 Taxmann.com 262, have held that even intangible assets constitute goodwill on which depreciation would be allowable. Hon'ble Karnataka High Court in the case of CIT Vs. Manipal Universal Learning Pvt. Ltd. [2013] 34....