TaxTMI 
TaxTMI 
2021 (9) TMI 284
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....The grounds raised in these appeals are common, which are as under, as taken from AY 2009-10: "1. The order of the Commissioner of Income Tax (Appeals)-2, Hyderabad, dated 23.02.2015 on the issue of depreciation on goodwill, is erroneous, contrary to law and facts of the case. 2. a) Commissioner of Income Tax (Appeals)-2 grossly erred in law in confirming the disallowance of depreciation on goodwill brushing aside the decision of the Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Ltd (348 ITR 302) on the ground that the facts of the appellant's case are different from the facts of the case before the Supreme Court. b) Commissioner of Income Tax (Appeals)-2 erred in stating that it is not clear as to how deferred sales tax liability is claimed under the head of Goodwill and sought to be depreciated. Commissioner of Income Tax ought to have seen that deferred sales tax liability and goodwill are two different items and therefore not justified in concluding that depreciation is not allowable on goodwill. c) Commissioner of Income Tax (Appeals) ought to have seen when once goodwill IS accounted for by the appellant in its books....
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....ions of the assessee, the CIT(A) observed that the ratio of the decision of the Hon'ble Apex Court in the case of SMIFS Securities Ltd. (supra) is not applicable to the goodwill claim made by the assessee as the facts and circumstances of the Hon'ble Supreme Court decisions cited by the appellant and the instant case are quite different and confirmed the assessment order by observing as under: "6. The assessment order, submissions of the appellant and facts, issues and circumstances of the case have been gone through. The issue regarding claiming of deferred sales tax liability a goodwill d claiming depreciation on the same is not in consonance with the decision of the Hon'ble Supreme Court in the above cited case. It is not clear as to how deferred sales tax liability is claimed under the head of Goodwill and sought to be depreciated by the appellant. Hence, grounds no. 2 and 3 of grounds' of appeal are dismissed." 6. Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT. 7. Before us, the ld. AR of the assessee filed a petition seeking admission of additional evidence, the contents of which are as under: "1. The appell....
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.....1 The ld. AR of the assessee filed the written submissions, which are as under: "7. The assessee submits that the learned CIT (Appeals) erred in brushing aside the decision of the Hon'ble Supreme Court in the case of CIT vs SMIFS Securities Ltd (24 Taxmann 222- 348 ITR 302 SC. (copy submitted herewith). The assessee submits that the amount in question in the case before the Hon'ble Supreme Court was excess consideration paid which was treated as goodwill. The learned CI.T (Appeals) ought to have allowed the assessee's appeal based on the ratio of the said decision. The assessee also relies on the decision of the Hon'ble Karnataka High Court in the case of CIT vs Manipal Universal Learning (P) Ltd 34 Taxmann.com 9 KAR (copy submitted herewith) In the said case, the assessee claimed depreciation on the excess consideration paid over the value of the net assets. The A.O. treated the same as goodwill and did not allow depreciation on the said amount treated by him as goodwill. The assessee's claim was allowed by the Hon'ble ITAT. In further appeal by the Department, the Hon'ble High Court, following the decision of the Hon'ble Supreme Court in ....
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....has clearly demonstrated that the goodwill was wrongly capitalized instead of clubbing the sales tax liability with the cost of plant & machinery. We do not find any escapement of income to the revenue as the depreciation will be the same when calculated on revised plant & machinery cost as explained below. As per depreciation schedule Additions Depreciation 3. Plant & machinery 250,502,072 31,312,759 7.. Goodwill 110,081,342 13,760,168 360,583,414 45,072,927 As per revised (as explained above) 3. Plant & machinery (After capitalization of sales tax liability) 360,583,414 45,072,927 The assessee submits on the facts and circumstances explained in the preceding paragraphs and the evidence filed, appeal in ITA No.650/Hyd/2015 relating to the Asst.Year 2009-10 may kindly be allowed. Asst Years 2010-11 and 2012-13 12. It is submitted that the facts and circumstances in the appeal in ITA No.651/Hyd/2015 relating to the Asst.Year 2010-11 and ITA No.463/Hyd/2017 for Asst.Year 2012-13 are similar. The assessee prays that the appeals filed by the assessee may kindly be allowed for the said two years also based on t....
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....er except liability due to transfer of sales tax deferment and agrees to indemnify the second part against all such liabilities like Term loan and working capital liabilities, electricity dues, excise duties, sundry creditors, etc." From the above clause, it is clear that the entire assets and Liabilities of the unit have not been taken over by assessee. 9.1 From the submissions made by the Ld. AR is that the value of the goodwill (deferred sales tax liability) is cost of plant and machinery, which has been apportioned in the value of fixed assets is not acceptable for the reason that the assessee has produced annual reports in the form of paper book, which are placed at page No. 28, which is 13th Annual Reporting relating to FY 2014-15 in which, we find that at Note No. 12, the goodwill has been separately shown by the assessee under the fixed assets, which is placed at page 38. We further find that the assessee has produced paper book containing pages 10 to 16 which is a summary of depreciation schedule as per IT Act from AY 2005-06 to 2011-12 where there is no separate description of goodwill. The goodwill is an intangible asset, which cannot be equated with the tangible f....
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....pears that the assessee has tried to pass entry in its books of account only giving corresponding effect in the assets side in the balance sheet of the said liability as goodwill, which is a self-creating in nature. The liability will always remain the liability and the liability cannot change in the form of assets. Therefore, the creation of goodwill in the books of account is completely wrong and charging depreciation on the goodwill is also wrong, hence, the depreciation claim of the assessee on the goodwill is not allowable as per the IT Act. Considering the totality of the facts and circumstances of the case, the assessee is not eligible for claiming depreciation on goodwill since its inception i.e. first year of claiming of depreciation and accordingly, the grounds raised by the assessee on this issue are dismissed. 9.3 Further, the contention of the ld. AR of the assessee's is not acceptable that for AY 2011-12, the revenue has accepted the depreciation on goodwill claimed by the assessee for the reason that res-judicata does not apply in the income-tax proceedings as every assessment year is a separate assessment year. The ld. AR of the assessee also relied on the decisi....