TaxTMI 
TaxTMI 
2023 (5) TMI 1209
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.... the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3. During the course of assessment proceedings, the Assessing Officer noted that Kewill India Pvt. Ltd (herein after referred to as Kewill India) formerly known as Transport IT Solutions Pvt. Ltd. (IPL) was incorporated on 31.07.2013 as a wholly owned subsidiary of Kewill Limited headquartered in UK and ultimately owned by fransico partners, a US based private equity. Kewill India is primarily engaged in provision of software development services and distribution of software products of parent company. 4. He noted that during the year under consideration the assessee company Kewill India entered into a business acquisition agreement to acquire the business of Four Soft Limited (herein after referred to as Four Soft) as a going concern on a slump sale basis for a consideration of Rs.113,53,42,477/- and the acquisition was completed on 4th October 2013. The transaction was accounted as a business acquisition and purchase consideration was allocated to tangible, intangible assets and liabilities at fair value as determined by an independent valuer. The excess of purchase considerat....
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....classified as an intangible asset. It was submitted that in the instant case also, Kewill India acquired Four Soft Limited's business pursuant to a business transfer agreement. The consideration paid in excess of the book value of the assets acquired represents the additional benefits accrued to Kewill India in the form of technical knowledge, designs, and other information available with Four Soft Limited, right to documents, business correspondence of business taken over and the right to enjoy all the advantages of established business of Four Soft Limited. Thus, the consideration paid in excess of the book value of the assets acquired inter alia consists of the attributes of goodwill. Accordingly, it was submitted that goodwill acquired by Kewill India pursuant to business transfer agreement is an "intangible asset" and is eligible for depreciation. Relying on the decision of the Hon'ble Supreme Court in the case of SMIFS Securities Ltd, it was argued that goodwill is an intangible asset and depreciation on goodwill is allowable. The assessee also relied on various other decisions to support his case that the excess amount paid over and above the asset acquired is to be ....
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....d other assets of Rs. 8,11,32,473/- totaling net assets Rs.70,52,09, 768/- vide acquisition agreement dated 10.8.2013. Subsequently the assessee has transferred the intangible assets of Rs.62,40,77,295/-to its holding company Kewill UK at book value. He noted that intangible assets form around 90% of total assets acquired from company Four soft Ltd. The assessee company has transferred valuable underlying asset to the holding company and has retained assets worth Rs.8,11,32,473/- only. Therefore, the assessee has transferred the valuable assets and retained only the balancing figure in the asset schedule and claiming it as Goodwill. According to him, when the underlying asset itself is not available with the assessee then the question of existence of Goodwill doesn't arise in the instant case. Further since the holding company Kewill UK has acquired the asset to which Goodwill, if any, is attached then depreciation on Goodwill should be allowed, if applicable, in the hands of the holding company only and not to the assessee. 12. So far as assessee's reliance in case of CIT Vs Smifs Securities is concerned, he noted that the Hon'ble Supreme Court has categorically menti....
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....self is transferred to the holding company and the assessee is left with no valuable asset?. 3. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT Vs Smifs Securities Ltd?" 4. Any other ground that may be urged during the course of appellate proceedings. " 15. The learned DR while strongly supporting the order of the Assessing Officer opposed the order of the learned CIT (A) in deleting the disallowance of depreciation on goodwill. He submitted that the business acquisition agreement dated 24.10.2013 to acquire the business of Four Soft Ltd as a going concern on a slump sale basis was for a consideration of Rs.113.53 crores. The assessee has considered the excess of purchase consideration over the fair value of the net assets acquired as Goodwill of Rs.43.01 crores and accordingly claimed depreciation proportionately on the goodwill. However, there was no asset of goodwill in the hands of the transferor company and subsequently there is no purchase of the same as an identifiable asset. The acquisition agreement dated 10.8.2016 also does not discuss about t....
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.... 8,11,32,472 and Goodwill of INR 43,01,32,710) to Four Soft India. Therefore, the Goodwill amount of INR 43,01,32,710 paid by Kewill India Pvt Ltd ("Buyer") to Four Soft India ("Seller") would have been the same. 19. The learned Counsel for the assessee referring to the Business Transfer Agreement submitted that Goodwill is not dependent on the Intellectual Property that is purchased by Appellant from Seller and sold to its Parent entity. Goodwill is the excess consideration paid and negotiation by the Appellant with the Seller for acquiring its business which has awarded the assessee with the following rights: a) Right to take over employees; b) Right to use technical knowledge, designs and other information available with Four Soft Limited; c) Rights to documents and business correspondence of business taken over; and d) Right to enjoy all advantages of established trade. 20. He submitted that the assessee has reduced the value of sale consideration of the Intellectual Property paid to Blujay Solutions Limited, UK from the block of fixed assets. Thereby there is no depreciation claimed on the Intellectual Property purchased from Four Soft India and sold to its Parent Co....
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....Hyd/2013. 10) Hyderabad Bench of the ITAT Apna Incable Broad Band Services (P) Ltd vs. Dy.CIT in ITA 800/Hyd/2016. 11) Dy.CIT vs. Zydus Wellness Ltd (ITA 1959/Ahd/2013) 12) ACIT vs. Dorma India (P) Ltd (ITA Nos.1664 to 1666/ Chny/2019 13) India Capital Markets (P) Ltd vs. DCIT (ITA No.2948/Mum/2010) 14) Skyline Caters (P) Ltd vs. Income Tax Officer (ITA 2965/Mum/2007) 15) Tam Media Research (P) Ltd vs. Income Tax Officer (ITA 6035/Mum/2009) 16) Dy.CIT vs. Toyo Engg. India Ltd (ITA 3279/Mum/2008) 17) Johnson Mathey Chemicals India (P) Ltd vs. Dy.CIT in ITA No.1507/PUN/2012. 18) CIT vs. RFCL Ltd (ITA 4, 12, 13 & 15 of 2014) Himachal Pradesh. 19) ITAT Delhi in Continental Device India Ltd vs. ACIUT (2015) 63 Taxmann.com 364 (Del.) 20) Hon'ble Kerala High Court in the case of B. Raveendran Pillai vs. CIT (ITA 1741 of 2009) 21) Hon'ble Bombay High Court in the case of CIT vs. Birla Global Asset Finance Co. Ltd (ITA 6835 of 2010) 22) ITAT Delhi in the case of Cyber India Online Ltd vs. ACIT (ITA 1299 of 2010) 23) ITAT Delhi in the case of Hindustan Coca Cola Beverages (P) Ltd vs. DCIT (ITA 1884 of 2006) 24) ITAT Ahmedabad in the case of Urmin Marketi....
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....et assets of INR 8,11,32,472 and goodwill of INR 43,01,32,710 to Four Soft India. Therefore, the goodwill amount of INR 43,01,32,710 paid by Blujay Solutions India (P) Ltd (buyer) to Four Soft India (seller) would have been the same. 26. We find some force in the above arguments of the learned Counsel for the assessee. We find Blujay India acquired the business of Four Soft on slump sale basis through a Business Transfer Agreement. A perusal of the business transfer agreement, copy of which is placed at page 149 of the Paper Book filed by the Revenue shows that as per clause 6.2.2. the above acquisition has constituted transfer of entire business of Four Soft consisting of the following: 1. All the business assets 2. All the Business Contracts as on the date of acquisition 3. Existing Permits and support for fresh application for Permits 4. All the Employees 5. Registered Trademarks and Copyrights 6. Business Intellectual Property 7. Books and Records 8. Original Deeds and documents of title 9. Business Liabilities, duties and Obligations 10. Insurance Policies 27. We therefore, find merit in the argument of the learned Counsel for the assessee that the purcha....
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....of goodwill as the Goodwill is rightly attributed to all the assets acquired from Four Soft and benefits accrued to BluJay India. Once the existence of Goodwill is established, Depreciation on such goodwill cannot be questioned further. 31. We find an identical issue had come up before the Tribunal in the case of M/s. Avis Hospitals India Ltd vs. ACIT in ITA No.1390/Hyd/2019 order dated 27.06.2022 and the Tribunal has allowed the claim of depreciation on goodwill by observing as under: 13. We have considered the rival arguments made by both the sides, perused the orders of the AO and ld.CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has acquired Hyderabad business of Beams Hospitals Private Limited as a going concern and on a slump sale basis by paying a consideration of Rs. 7.94 crores as per the slump sale agreement between AVIS Hospitals India Limited and Beams Hospitals Private Limited dated 30.03.2015 copy of which is placed in the paper book at page at 78 to 99. We find the assessee in the return of income filed has taken the value of fixed assets at Rs. 3,31....
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.... amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased. This finding has also been upheld by Income Tax Appellate Tribunal['ITAT', for short]. We see no reason to interfere with the factual finding. 7. One more aspect which needs to be mentioned is that, against the decision of ITAT, the Revenue had preferred an appeal to the High court in which it had raised only the question as to whether goodwill is an asset under section 32 of the Act. In the circumstances, before the High Court, the Revenue did not file an appeal on the finding of fact referred to hereinabove. 8. For the afore-stated reasons, we answer Question No.[b] also in favour of the assessee. 15. We find the Hon'ble Supreme Court in the case of PCIT vs. Zydus Wellness Ltd.(supra) has observed as under:- 3. The remaining questions no. (E) to (I) relate to the assessee's claim of depreciation. In the return filed for the assessment year 2010-11, the assessee had not raised such a claim. However, during the course of assessment proceedings, the assessee presented revised computation which included the assessee'....
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....ssioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income. 39. This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer. 40. Therefore, any ground, legal contention or even a claim would be permissible to be r....
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....ising on an acquisition is neither an asset like other assets nor an immediate loss in value. Rather, it forms the bridge between the cost of an investment shown as an asset in the acquirer's own financial statements and the values attributed to the acquired assets and liabilities in the consolidated financial statements". 16. The abovementioned Financial Reporting Standard 10 also provides for accounting of purchased goodwill as "the difference between the cost of an acquired entity and the aggregate of the fair values of that entity's identifiable assets and liabilities. Positive goodwill arises when the acquisition cost exceeds the aggregate fair values of the identifiable assets and liabilities. Negative goodwill arises when the aggregate fair values of the identifiable assets and liabilities of the entity exceed the acquisition cost." 17. At this stage, it is also relevant to refer to Accounting Standard 10 as issued by the Institute of Chartered Accountants of India. The relevant extract of which reads as under:- "16.1 Goodwill, in general, is recorded in the books only when some consideration in money or money's worth has been paid for it. Whenever a busine....
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....able and not applicable to the facts of the present case. In that case, the Tribunal while rejecting the claim of depreciation on goodwill has given certain observations, which are not present in the instant case. The Tribunal in the said case has reproduced the valuation made by an independent valuer, who have given their report based on the information provided by the client and have not independently verified or checked the accuracy or timeliness of the same as per para 7.4 of the order. Similarly, the Tribunal at para 7.13 of the order has observed that the basis for transfer price is in the individual knowledge of the transferor and transferee and both the parties are under the control of same management, which indicate that the claim of fictional goodwill is nothing but deriving undue benefit out of oneself at the cost of the revenue. Similarly, the Tribunal observed at para 7.14 of the order that the parent company appointed the valuer and not the assessee and there is unfair fixation of transfer price to benefit the transferor at the cost of the assessee, the matter being an affair between parent of the assessee and the assessee. At para 7.18 of the order, the Tribunal had ....