TaxTMI 
TaxTMI 
2025 (12) TMI 595
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....law, the learned AO has erred, both on facts and in law, in confirming the disallowance of depreciation claimed on goodwill, addition on account of free of cost assets and addition under Section 40(a)(i) of the Act without providing any cogent reasoning and without taking into consideration any submissions filed by the Appellant. 2. Disallowance of depreciation claimed on Goodwill 2.1. The learned AO has erred, in law and on facts, by confirming disallowance of INR 3,08,21,235 made under Section 32 of the Act, in relation to the depreciation claimed on goodwill. 3. Addition on account of Free of Cost Assets 3.1. The learned AO has erred, in law and on facts, by confirming addition of INR 1,93,90,395 made under Section 28(iv) of the Act, in relation to the assets received free of cast by the Appellant. 3.2. The learned AO has erred, in law and on facts, assets made free of cost do not satisfy section 28(iv) and in any case the addition of full amount is based on incorrect presumptions and not justified in law. 4. Addition under Section 40(a)(i) of the Act 4.1 . The learned AO has erred, in law and on facts, by confirming....
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....er passed by the Assessing Officer on the ground that the same is bad in law. The aforesaid ground is general in nature. Since specific grounds have been raised by the Assessee, Ground No.1 raised by the Assessee is disposed of as being general in nature. Ground No.2 7. Ground No.2 raised by the Assessee pertains to disallowance of claim of depreciation amounting to INR.3,08,21,235/- made by the Assessee during the relevant previous year under Section 32(1)(ii) of the Act in respect of goodwill on intangible assets. 7.1. On perusal of records, we find that during the relevant previous year, the Assessee had entered into two separate Business Transfer Agreements to acquire business undertaking of Global Foundries Engineering Pvt. Ltd. (GFEPL) and Aquifina Semi-Conductors India Pvt. Ltd. by way of slump sale transactions. It has been contended on behalf of the Assessee that under the aforesaid BTAs, the Assessee had acquired intangible assets on which assessee was eligible to claim deduction @25% u/s 32(1)(ii) of the Act. During the course of assessment proceedings, the Assessee filed submissions, dated 25/08/2023, furnishing following explanation/details: "1. In th....
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....sessee and objections were filed before the DRP in relation to the same. The DRP rejected the objections raised by the Assessee observing that the provisions of Section 32(1) of the Act were amended w.e.f. 01/04/2021 to specifically exclude goodwill from the category of asset/depreciable assets. The aforesaid amendment introduced by Finance Act, 2021 was clarificatory in nature, and the same also applied to Assessment Year 2020-2021. 7.5. The Assessing Officer passed the Final Assessment Order rejecting Assessee's claim for depreciation of INR.3,08,21,235/- in respect of goodwill. 7.6. Being aggrieved, the Assessee has carried the issue in appeal before this Tribunal. 7.7. We have considered the rival submissions and perused the materials available on record. 7.8. Finance Act, 2021 amended Explanation 3 to Section 32 of the Act to provide that 'goodwill of a business or profession' shall not be considered as an asset for the purposes of the Section 32(1) of the Act. The relevant extract of the memorandum in relation to the above amendment stated as under "Depreciation on Goodwill - Section 2 of the Act provides the definitions for the purposes of the A....
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....sion; (b) amend clause (ii) of sub-section (1) of section 32 of the Act to provide that goodwill of a business or profession shall not be considered as an asset for the purpose of the said clause and therefore not eligible for depreciation. Further, it is also proposed to amend Explanation 3 to subsection (1) of the said section to provide that goodwill of a business or profession shall not be considered as an asset for the said sub-section. xx xx These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.[Clauses 7, 18 and 20]" 7.9. Thus, a bare reading of the above extract of Memorandum to the Finance Bill, 2021 shows that amendment made in Section 32 of the Act would apply to Assessment Year 2021-2022 and subsequent assessment years. This become clear on perusal of the following extract of Notes to Clauses to Finance Bill, 2021: "Clause 7 of the Bill seeks to amend section 32 of the Income tax Act relating to depreciation. Sub-section (1) of the said section provides for deduction on account of depreciation on tangible assets (building, mach....
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....re is that depreciation on goodwill is allowable prior to the said Amendments, is manifest from the adjustment mechanism. If the legislative intention was to deny depreciation for the past years as well, then there was no need for any adjustment to the cost of acquisition of the goodwill. Such an interpretation would lead to a provision of the law being redundant or otiose and such interpretation should be rejected." 7.11. In view of the above, we hold that the basis on which the objections raised by the Assessee were rejected by DRP cannot be sustained. 7.12. As regards observations made by the Assessing Officer regarding failure of the Assessee to furnish relevant supporting documents and evidences, we find that the Assessee has now filed additional evidences by placing on record the following additional evidences/submissions: (a) Bank payment approval and invoice of Global Foundries Engineering Private Limited (Global Foundries) evidencing proof of payment (in relation to Ground 2) (b) Relevant extract of Bank statement of Marvell India Private Limited evidencing proof of payment made to Aquantia Semiconductor India Private Limited (Aquantia India) and Gl....
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....95 Annexure 4 3 Less: FOC returned during the AY 2020-21 Nil Annexure 4 4 Closing balance of cumulative FOC assets as on 31.3.2020 2,44,92,719 Annexure 4 Further, the company would like to bring your goodself's attention to the fact that Hon'ble ITAT in the company's own case for the AY 2014-15 has granted relief to the extent to which the company has re-exported the assts received during the year (copy of the order is enclosed as Annexure 5)" 8.2. Thereafter, the Assessee filed another Letter, dated 21/09/2023, in response to show cause notice issued by the Assessing Officer whereby the assessee had provided following explanation: "3. Free of cost assets amounting to INR 1,93,90,395 received by the company during the subject AY During the year, the assessee had received tangible assets from its group company (ies) on loan basis towards testing, analysing and validating of the software. The assessee wishes to humbly submit the following in respect of assets/computer supplies received free of cost during the subject AY from its group companies: * The company wishes to humbly submit that the Marvell group is resp....
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....d for. Thus, in the Final Assessment Order, the Assessing Officer made the above addition of INR.1,93,90,395/-. 8.5. Being aggrieved, the assessee has carried the appeal before this Tribunal. 8.6. We have heard the rival submissions and perused the materials available on record. During the course of bearing both sides reiterated the stand taken before the authorities below. On perusal of record, we find that before the Assessing Officer, it was contended on behalf of Assessee that identical issue had come up for consideration before this Tribunal in the case of the Assessee for the Assessment Year 2014-15, and the Tribunal was pleased to grant relief to the Assessee by deleting the addition to the extent the same pertained to free of cost assets received by the Assessee re-exported during the relevant previous year. Accordingly, respectfully following the above decision of the aforesaid decisions of the Tribunal in the case of the Assessee [IT(TP)A No.3082(Bang)/2018, AY 2014-15] we direct the Assessing Officer to delete the additions to the extent the Assessee is able to establish that free of cost goods received by the Assessee during the relevant previous year re-exported.....