TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 982
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....rrect in assuming jurisdiction u/s 263 treating the order of AO as erroneous and prejudicial to the interest of revenue merely stating on the basis that AO failed make inquiry whether the seller has paid taxes on the profits realized on 'Slump Sale' u/s. 50B(1) of the Income Tax Act for the purpose of allowing depreciation in the hands of Purchaser(Appellant). 3. Whether on the facts and in the circumstances of case and in law, Principal Commissioner of Income Tax, Mumbai-6, was correct in arriving at conclusion that appellant is not eligible for depreciation on 'Goodwill' acquired under 'Slump Sale'." 3. In the present appeal, the assessee is aggrieved against the invocation of revisionary proceedings under section 263 of the Act by the learned PCIT. 4. The brief facts of the case pertaining to this issue, as emanated from the record, are: The assessee is a private limited company and is engaged in software development. For the year under consideration, the assessee filed its original return of income on 29.11.2018 declaring a total income of Rs. 11,18,54,440/-. The return filed by the assessee was selected for scrutiny through CASS and statutory notice....
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.... was also asked to furnish the bills/vouchers in respect of the purchase of above referred intangible assets and the bank account from which payment against the purchase of the said intangible asset was made. The assessee submitted that in response to the queries raised by the AO, the assessee filed details and after consideration of the same, the assessment order was passed under section 143(3) r.w. section 144B of the Act. Further, the assessee submitted that the consideration paid for the acquisition of the business of Vernallis Systems Pvt. Ltd. was allocated to various tangible and intangible assets and balance amount was treated as Goodwill of the business. Further, by placing reliance upon the decision of the Hon'ble Supreme Court in CIT vs. Smifs Securities Ltd., reported in (2012) 348 ITR 302 (SC), the assessee submitted that Goodwill is an intangible asset eligible for claiming depreciation under section 32 of the Act. 8. The learned PCIT, vide impugned order, passed under section 263 of the Act disagreed with the submissions of the assessee and held that there was a complete lack of inquiry on the part of the AO and the claim of Depreciation on Goodwill was accepted by ....
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....' through a 'Business Transfer Agreement' dated 28.06.2017 for a total consideration of Rs. 72,69,50,000/-. The sale consideration plus stamp duty was allocated towards the assets acquired via Slump Sale as follows: - "Assets Current Assets Rental Advance 59,65,444.00 Fixed Assets Computer A/C 2,76,44,230.17 Electrical & fittings A/C 67,63,854.36 Furniture A/C 1,57,32,772.14 Interior & Design A/C 1,76,09,081.93 Office Equipment A/C 57,79,650.38 Plant & Machinery A/C 28,68,709.00 Building 26,18,340.00 Fa Temporary Partitions (100) Investments Subsidiary Company Investment 599.00 Goodwill 67,82,56,801.02 Total 76,32,39,44100 12. Accordingly, the assessee considered the payment of sale consideration in excess of the assets acquired by way of Slump Sale amounting to Rs. 67,82,56,801/- as Goodwill and claimed depreciation @ 25% on such Goodwill under section 32(1)(ii) of the Act. From the perusal of statutory notices issued during the assessment proceedings, forming part of the paper book, we find that the return of income filed by the assessee was selected for scrutiny through CASS for examination of the issues as....
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....of investigation by the AO, during the assessment proceedings, was only qua the examination of investment in intangible assets, i.e., Goodwill and various queries raised by the AO and information sought vide notices issued under section 142(1) were also confined to the examination of the said aspect. At this stage, it is pertinent to note that the examination of the investment in intangible assets and the examination of the claim of Depreciation on Goodwill are two different aspects, which may have some overlapping features but examination/inquiry in respect of first cannot lead to the conclusion that the second aspect of claim of Depreciation on Goodwill was also examined during the assessment proceedings. In the present case, undoubtedly there is an examination of the earlier one but no query or examination was made by the AO in respect of the latter. Once there is no examination or inquiry by the AO as regards the claim of Depreciation on Goodwill, we find merits in the submissions of the learned DR that there was no formulation of any opinion by the AO on this aspect. In this regard, gainful reference can be made to the provisions of Explanation 2 to section 263(1) of the Act, ....