TaxTMI 
TaxTMI 
2023 (12) TMI 631
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....g concern. Pursuant to approved scheme of arrangement when all assets and all liabilities were pulled in the books of account, the assessee recorded the resultant debit figure of Rs.2,99,42,138/- as goodwill. A claim of depreciation u/s 32(1)(ii) of the Act thereon @25% was made in return of income filed by the assessee was disallowed by the Ld. AO while framing regular scrutiny assessment u/s 143(3) of the Act. 2.2 The assessee unsuccessfully agitated the aforestated disallowance in an appeal before the first appellate authority. Aggrieved appellant instituted present appeal u/s 253(1) of the Act on a substantive & solitary ground against the denial of claim for depreciation on goodwill claimed to have arisen to it on acquisition of its subsidiary. 3. At the physical hearing, the Ld. AR Mr. Naniwadekar adverting to scheme of arrangement, share valuation report detailing the swap ratio and relevant part of Accountings Standards-14 [for short 'AS-14'], submitted that, pursuant to approved scheme of amalgamation, the assessee acquired its subsidiary company at a price exceeding net assets value which resulted into purchase of goodwill. The said goodwill was arisen in terms of '....
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....ch in 'DCIT Vs Toya Engineering India Ltd. (ITA No 3279/Mum/2008)' and 'Sanyo BPL Pvt Ltd. Vs DCIT (ITA No. 1395/Bang/2014), and 'United Breweries Ltd. Vs ACIT' (ITA 722/Bang/2014'. 6.3 On the other hand, when the assessee agitated aforestated disallowance vis-à-vis creation/purchase of goodwill in an appeal before first appellate, the Ld. CIT(A) countenanced the views of the Ld. AO and dismissed the claim for depreciation dislodging the acquisition and purchase of any such goodwill finding that; 12. I have considered the facts of the case and the submissions made by the appellant. It is an undisputed fact that no goodwill was recorded in the books of accounts of amalgamating company. It is also not in dispute that no separate specific amount was paid by the assessee company towards goodwill recorded in its books of accounts. It is also not in dispute that the quantification of goodwill was not based on any method prescribed by ICAl or any Accounting Standard or valued by any expert or valuer. As explained by the appellant, the value of goodwill has been determined being excess of company's investment in RMIPL over net asset taken over. 13. One of th....
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....sts that there was no self-generated goodwill by M/s RMIPL. 15. The accounting entries done by the appellant suggests that it made a total investment of Rs. 3,19,51,000/- in M/s RMIPL. The Fair Market Value of said investment as on 01/01/2017 was much lower than its cost of investment. The appellant has simply recognised the balancing figure (excess of cost of investment in RMIPL over Net Assets taken over) as 'goodwill acquired'. As discussed above, the amalgamating company did not have any self-generated goodwill and the assessee company has recognised the 'goodwill only to claim deduction of the capital loss incurred by it on the investment made by the company in RMIPL. As discussed in detail by the Assessing Officer, the goodwill can never be a balancing figure and it is something which is earned or built by a person or a business concern over a period of time. It is also a well settled legal position that the goodwill has to be valued by the recognised method and in the present case no such valuation report has been filed by the appellant. Rather in the valuation report dated 30th April 2017 vide which the FMV of shares of RMIPL was valued, no value has be....
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....5 raised by the appellant are DISMISSED. 7. Basically, goodwill comes into existence in two scenarios i.e., either acquired or purchased and more specifically (1) Acquisition: when a company (acquirer/transferee) acquires any other company (transferor) which has goodwill in its books prior to its acquisition by acquirer, and (2) Purchased: when a company (acquirer/transferee) acquires any other company (transferor) at a payment consideration in excess of net assets value of transferor. Under Income tax laws it is a settled proposition that, acquirer/transferee company subject to provisions of section 43 r.w.s 32 of the Act is entitled to claim depreciation u/s 32(1)(ii) of the Act on goodwill which is either acquired or purchased by an excess payment of consideration over net asset value taken over or by former combined modes and this finds force in the ratio laid down by the Hon'ble Supreme Court (supra). 8. In the instant case, we note that, the assessee company was holding 95% of total equity share capital of its subsidiary RMIPL prior to execution of scheme of arrangement. It remained an undisputed fact that, the subsidiary company RMIPL had no goodwill in its books of ac....