TaxTMI 
TaxTMI 
2025 (7) TMI 440
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....llocation of the shares to the share holders of the transferor company whose value was considered for calculating the quantum of consideration paid by transferee company during the year under consideration and when the same was not incurred for the purpose of business attracting provisions u/s 37(1). 3. Whether the ld. CIT(A) erred in law and on facts in allowing the claim of depreciation on goodwill considering assessee's claim that he has followed purchase method of AS-14 even though the contours and characteristics suggests that they have followed pooling of interest method where consideration is paid over and above the net assets need to be credited into capital reserve and not as goodwill. 4. Whether the ld. CIT(A) erred in law and on facts in allowing the claim of goodwill of assessee considering assessee's claim that goodwill was generated during the process of amalgamation is only based on net consideration calculated by transferee company and is over and above the net assets of the transferor company without matching assets or rights constituting the goodwill transferred. 5. Whether the ld. CIT(A) erred in law and on facts in allowing the....
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....s sent and further, show cause notice was issued on 05.11.2019 which was sent to the assessee. In response to notices issued, the assessee filed reply on various dates. The case was selected for complete scrutiny with one of the reasons of "Amalgamation or Demerger during the year". In response to the notices issued u/s 143(2) & 142(1), the assessee submitted its reply and filed details. 3.1 During the year under consideration, the assessee was engaged in the business of manufacturing Reactive Dyes. The Assessing Officer observed that during the year under consideration, the assessee has shown addition of intangible asset in the form of Goodwill of Rs. 70,70,54,913/- and claimed depreciation of Rs. 9,59,57,452/- @ 25% on the Goodwill so added in the block of intangible asset in the year under reference. Details were called for by the Assessing Officer to examine whether the claim of the assessee regarding creation of goodwill, its valuation and depreciation thereon is in accordance to provisions of Income Tax Act. The assessee has submitted details. The Assessing Officer after perusal of the balance sheet of assessee company for AY 2017-18, noticed that during the year under con....
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....the company has not started significant business operations at present". Intangible assets and or goodwill in the books of both amalgamating and amalgamated company before and after amalgamation is as under: Goodwill MEPL MROPL As on 01-04-2016 0 0 As on 31-03-2017 (i.e. after the appointed date of amalgamation) Not in existence 70,70,54,913/- The scheme of amalgamation was approved by the Hon'ble National Company Law Tribunal (NCLT) vide order dated 06.06.2017 with appointed date as 01.04 2016. Immediately thereafter, the name of the company was converted from MR Organosys P Ltd to Mcfills Enterprises P Ltd. There is no major business operations done by MR Organosys P. Ltd as mentioned in assessee's submission dated 12.09.2019 in point no.2(b). There are no Brands owned or managed by MR Organosys P Ltd as mentioned in assessee's submission dated 12.09.2019 in point no.2(d). The amalgamation did not involve any cash payout at all. The shares were issued at a huge premium and share capital/net worth raised by way of series of accounting entries. 3.3 The Assessing Officer further held that under the scheme of amalgamation, the amalgamating....
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....n the business prior to claim. The primary conditions are not fulfilled by the assessee to claim depreciation. The valuation of M R Organosys P Ltd was done on the basis of assets. NO future projection has been made strangely. More peculiar is that Mcfills Enterprise P Ltd amalgated with MR Organosys P. Ltd after getting approval from NCLT and soon after that it changed its name to Mcfills Enterprise P Ltd. These type of arrangement shows that the purpose of amalgamation was to avoid income tax. Tax planning is always acceptable but this type of tax avoidance is not healthy practice for economic growth of Nation. Given this scenario, the credibility of entire valuation report is questionable. Thus, even on facts it can be seen that the valuation report has several contradictions, discrepancies, and is inconsistent. It appears that the same has been prepared only to suit the interests of assessee to claim depreciation on goodwill. Thus huge amount of valuation of Goodwill is not justified. 3.6 The Assessing Officer held that by creating good-will of Rs. 70,70,54,913/- and thereafter claiming depreciation on the same in this year and subsequent years, assessee has reduced taxabili....
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....on 32(1) of the Income Tax Act, Explanation 7 to section 43, section 49(1)(iii)(e), Explanation 2(b) to section 43(6)(c) and section 55(2)(a)(ii) of the Act to the present case. The ld. D.R. relied upon the decision of the Tribunal in case of United Brewery Ltd. vs. ACIT (2016) 76 taxmann.com 103 (Bangalore Tribunal). The ld. D.R. also relied upon the decision of the Tribunal in case of Millennium Engineers & Contractors Ltd. in ITA No. 668/Pun/2022 order dated 30th October, 2023. The ld. D.R. also relied upon following decision of the Tribunal: (a) M/s. Dosti Realty Ltd. in ITA No. 2043/Mum/2022 order dated 13- 04-2023 (b) Pfizer Ltd. in ITA 2108/Mum/2018 order dated 22-09-2023 (c) Borkar Packing Pvt. Ltd. vs. ACIT (2010) 131 TTJ 99 (Panji) 6. The ld. A.R. submitted that the scheme of arrangement was entered into between McFills Enterprises Pvt. Ltd. (transferor company) and MR Organosys Pvt. ltd. (transferee company). As per the said scheme, the transferor company was amalgamated with transferee company w.e.f. 01-04- 2016. Name of a transferee company was changed McFills Enterprises Pvt. Ltd. (i.e. assessee) post amalgamation. Entire consideration wa....
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....ion duly approved by the competent authority being NCLT is allowable in the facts and circumstances of this case as well as in view of the settled legal position. The ld. A.R. relied upon the following decisions:- (i) CIT vs. Smifs Securities Ltd. -(2012) 348 ITR 302 (SC); (ii) PCIT vs. Zydus Wellness Ltd.-(2017) 87 taxmann.com 82 (Guj); (iii) PCIT vs. Zydus Wellness Ltd. -SLP 29859 of 2018 (SC); (iv) Urmin Marketing P. Ltd. -(2020) 122 taxmann.com 40 (Ahd); (v) AIA Engineering Ltd. vs. DCIT-ITA 397/Ahd/2024 & (vi) Dow Chemical International P. Ltd. -169 taxmann.com 290 (Mum) 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer has totally ignored the decision of Hon'ble Apex Court/NCLT which categorically approved the scheme of amalgamation/scheme of arrangement at which point the Revenue/A.O. has not objected the valuation report regarding the difference between the net acquisition of assets and total consideration. The same was recorded as goodwill by the assessee at the said point of time through valuation report. Looking into the d....