AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1891
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.... learned Deputy Commissioner of Income-tax-15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside. 2. Ground 2 Depreciation on contracts Acquisition from Glaxosmithkline Pharmaceuticals Ltd (GSK) in AY 2008-09 2.1. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 2,38,71,679 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2014 under section 32(1) r.w.s. 2(11) of the IT Act. 2.2. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 57,58,217 on the written down value of business or commercial rights being the supply contracts as on 1 April 2014 under section 32(1) r.w.s. 2(11) of the IT Act. 2.3. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts: ● Manufacturing and s....
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.... per return of income. 4.2. On the facts and in the circumstances of the case and in law, the learned DCTT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 18,73,52,790 on Goodwill purchased from GSK. 4.3. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 262,345 relating to software expenses treated as capital expenditure in AY 2007-08. 5. Ground 5 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2009-10 5.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 17,82,24,085 as per the original return of income. 5.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009- 10 of Rs. 14,05,14,593 on the written down value of Goodwill purchased from GSK as on 1 April 2008. 5.3. ....
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.... and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2012-13 of Rs. 26,32,11,490 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs.6,716 relating to software expenses treated as capital expenditure in AY 2007-08 9. Ground 9 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2013-14 9.1. On the facts and in the circumstances of the case and in law, the learned DCTT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2013-14 of Rs. 16,66,17,345 as per return of income. 9.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs.2,686 relating to software expenses treated as capital expenditure in AY 2007-08. 10. Ground 10-Allowance of brought forward unabsorbed depreciation pertaining to AY 2014-15 10.1. The Learned AO has erred in not allowing correct amount of brought forward unabsorbed depreciation of AY 2014-15 aggregating of Rs. 16,31....
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....um/2015, dated 16/07/2025] and placed on record a copy of the aforesaid decision. On perusal of the said decision we find that Ground No.2 and Ground No.3 raised in the present appeal are identical to Ground No.2 and Ground No.3 raised in appeal for the Assessment Year 2010-2011 and the same were directed against the denial of depreciation claimed by the Assessee on manufacturing, supply and maintenance contracts. 5.1. During the previous year relevant to the Assessment Year 2008-09, the Assessee had the Qualigens Fine Chemicals Division from GSK Pharma Ltd. Thereafter, during previous year relevant to the Assessment Year 2009-10, the Assessee had acquired Analytical Technologies and Environmental Instrumentation Division from Chemito Technologies Pvt. Ltd. Thus, the Assessee acquired, as part of the aforesaid acquisitions, certain business/commercial rights in the form of certain manufacturing contracts, supply contracts and maintenance contracts. The aforesaid business/commercial rights were recognised by the Assessee as intangible assets in the financial statements of the relevant previous years in accordance with the asset recognition criteria as stipulated under "Accounting....
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.... allowability of claim of depreciation on manufacturing contracts and supply/maintenance contracts. In its response, the assessee placed reliance upon the Business Transfer Agreements, Valuation Report, and some judicial rulings. The Assessing Officer ("AO"), vide draft assessment order dated 24/03/2014 passed under section 143(3) read with section 144C of the Act, disagreed with the submissions of the assessee on the following basis: - (a) No such intangible assets, such as manufacturing contracts, and supply/maintenance contracts have been transferred to the assessee company in a slump sale. (b) No evidence of these intangible assets being self generated, and the same were transferred to the assessee in a slump sale. (c) Manufacturing contract, and supply/maintenance contracts are not akin to the assets identified under the provision of section 32(1)(ii) of the Act. (d) From the valuation report, "future economic benefits" and "cost measurement" cannot be measured reliably. (e) Regarding the supply contracts purchased from GSK Pharma Ltd, it is seen from the valuation report that the agreements are valid only for one year; thus, such c....
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....assets) acquired in the slump sale as goodwill in its financial statements. In support of the submission that the impugned contracts qualify as intangible assets as per the Accounting Standard-26 and were accordingly recorded in the assessee's books of accounts as separate intangible assets, the assessee placed reliance upon the valuation reports from Bansi S. Mehta and Company, Chartered Accountants for acquisition of undertakings from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. During the hearing, reliance was also placed on the response to comments of the AO by Bansi S. Mehta and Company and additional opinion on the valuation report from M/s Anmol Sekhri Consultants Private Limited. Without prejudice to the aforesaid submission, the learned AR, inter-alia, submitted that even assuming without accepting that the consideration paid for these contracts does not constitute a separate intangible asset, the same would be liable to be considered as goodwill, i.e. the difference between the purchase consideration and the net assets value, and the depreciation is allowable on goodwill being an intangible asset. 11. On the contrary, the learned Departmental Representative ....
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....alued on the basis of the discounted net contribution arising from the maintenance contracts. Further, the learned AR by referring to the sample copy of these contracts submitted that these contracts continued between the parties and the assessee beyond the period mentioned in the Business Transfer Agreements, which clearly demonstrates that the future economic benefits have flowed to the assessee from the impugned contracts. 13. From the perusal of the details of manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee pursuant to the above-mentioned slump sale acquisitions, forming part of the paper book from pages 73-83 and pages 214-220, we find that only few of these contracts continued in the year under consideration. Further, the maintenance contracts were all entered into on a yearly basis. However, as noted above, as per the assessee, the relationship with the manufacturer/customers/distributors has continued for many years, and these contracts are likely to continue in future. Further, as noted above, it is the plea of the assessee that these are specialty chemicals that enjoy a leadership position and due to continuing long-st....
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....-Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business. Explanation 7A.-Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting company is an Indian company, the actual cost of the transferred capital asset to the resulting company shall be taken to be the same as it would have been if the demerged company had continued to hold the capital asset for the purpose of its own business : Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company." 5.20 On perusal of the above Explanation, we find that same is in relation to transactions of amalgamation and not related to slump sale transactions, which is the case of the assessee. 5.21 The learned Assessing Officer has fu....
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....esulting company, as the case may be, in the ratio of the number of days for which the assets were used by them." 5.24 On plain reading of the above proviso, it is clear that same is in relation to allocation of the depreciation on the asset between predecessor and successor entities, whereas in the instant case goodwill was not in existence as intangible asset in the case of predecessor companies from whom the assessee has acquired corresponding units under slump sale. Therefore, the said provision is also not applicable of the facts of the instant case. 5.25 The ratio is in the case of United Breweries (supra) is also not applicable over the facts of case as in the said case there was amalgamation of the three wholly owned subsidiaries whereas in the instant case there is a acquisition of units of third parties by way of slump sale. 5.26 The learned DR before us submitted that allocation of values to the fixed asset acquired has been on lower side for creating goodwill as intangible asset. But in our opinion, if the quantum of goodwill is reduced, the valuation of the fixed asset will increase, which are also eligible for depreciation and thus in the ex....
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....d in the appeal preferred by the Assessee for the Assessment Year 2010-2011. The Revenue has failed to bring on record any material to differentiate the above decision of the Tribunal either on facts or in law. Therefore, respectfully following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2010-2011 [ITA No.2458/Mum/2015, 16/07/2025], we direct the Assessing Officer to allow deprecation of INR.3,07,88,534/- claimed by the Assessee in respect of business/commercial rights arising from the manufacturing contracts, supply contracts and maintenance contracts. Thus, Ground No. 2 & 3 raised by the Assessee are allowed. Ground No.4 to 10 6. Next we will take up Ground No.4 to 10 raised by the Assessee pertaining to the claim for brought forward unabsorbed depreciation for Assessment Years 2008-2009 to Assessment Years 2014-2015. 6.1. The Learned Authorized Representative for the Assessee, placing reliance on the chart of issues filed during the course of hearing, submitted that the Assessing Officer has erred in not allowing brought forward unabsorbed depreciation on account of disallowance of depreciation on intangible assets in several precedi....