TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1891
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.... 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 supply contracts are not selfgenerated by GSK and have not been transferred to the ....
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....ing 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. 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 o....
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....red 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. 16,31,40,005 which was claimed by the Assessee Company in the return of income for AY 2014-15 11. Ground 11-Failure to grant partial credit of Tax Deducted at Source (TDS) of Rs. 10,75,900 11.1. On the facts and in the circumstances of the case and in law, the learned AO has erred in ....
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.... 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 Standard -26: Intangible Assets'. The Assessee also treated the difference between the purchase consideration paid and the value of all assets (tangible and intangible assets) acquired in the slump sale as goodwill in its financial statements. The Assessee has been claiming depreciation on the goodwill and busine....
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....3(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 contracts cannot be said to be enforceable in a court of law. Hence, these contracts are not going to create defined future economic benefits, and thus, fail to qualify the definition of intangible assets as per Accounting Standard-26. (f) Regarding the maintenance contracts purchased from Chemito Technologies Pvt. Ltd., from the valuation report, it is ....
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....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 ("learned DR") submitted that as per the provisions of the Accounting Standard-26, manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee pursuant to the above-mentioned slump sale acquisitions cannot be recognised as intangible assets. The learned DR further submitted that the Accounting Standard-26 specifically requires the capacity of an enterpr....
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....sessee 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-standing relationships, the assessee continued to enjoy future economic benefits. 14. In any case, it is pertinent to note that in the present case, the total consideration paid by the assessee for the aforementioned slump sale acquisitions from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. includes consideration paid for manufacturing contracts, supply contracts and maintenance contracts acq....
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....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 further relied Explanation-2 to section 43(6) of the Act, which reads as under: "Explanation 2.-Where in any previous year, any block of assets is transferred,- (a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a scheme of a....
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....ore, 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 exercise of reallocation of values among the goodwill and other fixed asset, will be a revenue neutral exercise. 5.27 In view of the above discussion, we concur with the arguments of the learned counsel of the assessee that goodwill arising from transactions of acquisition of units of GSK and CTPL, is eligible for depreciation under the provisions of the Act. As far as claim of the assessee for allowing depreciation on said goodwill corresponding to assessment year 2008-09, we are of the opinion ....
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....ing 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 preceding years. However, the Assessee is in dispute for the same. Therefore, the Assessing Officer be directed to consider the revised amounts as per the order giving effect passed by the Assessing Officer as per the orders passed by the Tribunal in the appeals preferred by the Assessee. The Learned Departmental Representative also submitted that the relief claimed by the Assessee was consequential in nature. 6.2. On perusal of record we find that the Assessing Officer did not allow Assessee's claim of brought forwar....