TaxTMI 
TaxTMI 
2025 (12) TMI 783
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....er section 263 is without jurisdiction, unwarranted and bad in law 1. erred in invoking revision proceedings under section 263 of the Income Tax Act, 1961 ('the Act') without appreciating that assessment order passed by the National e-Assessment Centre ('NeAC') ('Assessment Order') was neither erroneous nor prejudicial to the interest of the revenue; 2. failed to appreciate that the Assessment Order was passed after verification of relevant details and documentary evidence and application of mind vis-à-vis issues pertaining to depreciation on goodwill and carry forward of losses; 3. failed to appreciate that the NeAC had taken a plausible view supported by judicial precedents and prospective amendment in Section 32 of the Act and had allowed depreciation on goodwill; Without prejudice to above, the learned PCIT has: Disallowance of Depreciation on Goodwill 4. erred in directing the learned Jurisdictional Assessing Officer ('AO') to verify and disallow the claim of depreciation on goodwill as consistently disallowed by the Department in other years; 5. failed to appreciate that in v....
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....orrect allowance of depreciation on 'goodwill' acquired on amalgamation which was denied in earlier assessment years 2016-17 and 2017-18 by the Assessing Officer (ii) incorrect determination of carry-forward of business losses 2.3 In view of above observations, the learned PCIT issued a show cause notice dated 22/11/2024 calling upon the assessee as why the assessment order should not be revised on above two issues. The Authorised Representative(AR) of the assessee submitted that the faceless assessment unit after due consideration of the submission of the assessee and carrying out required enquiries, accepted the claim of depreciation on goodwill, which arose on amalgamation of Prism TV P Ltd' with the assessee. It was contended that revisionary proceedings against assessment order cannot be initiated unless conjunctive conditions of section 263 are satisfied. It was further contended that Assessing Officer had duly examined all the records at the time of assessment proceeding with due application of mind and therefore even the deeming conditions under Explanation- 2 to section 263 are not fulfilled. The assessee also filed submissions on the merit of the b....
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....erification of the various issues including one of the issues as depreciation claim of the assessee. The learned counsel, further referred to paperbook pages 16 to 22, which is a copy of notice under section 142(1) of the Act and submitted that the Assessing Officer vide query No. 8 (Paper Book page-18) asked the details of claim of depreciation. The learned counsel submitted that assessee duly responded to the queries raised by the Assessing Officer. He referred to copy of the reply filed by the assessee which is available on paperbook pages 23-32 along with notes to financial statement available on paperbook page 289. Further the learned counsel referred to a show cause notice issued by the Assessing Officer, a copy of which is available on paperbook pages 33 to 37 and submitted that the Assessing Officer specifically asked the assessee to support claim of depreciation on goodwill with documentary evidences. The Assessing Officer in said show cause notice also referred to large business loss set off against other heads of income. In the submission filed in response to the show cause notice, a copy of which is available on paperbook page 38 to 45, the assessee provided compl....
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....ay be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal ^53[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made ^48; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] 5.1 On plain reading of the above provision, we find that clauses (a) and (b) specify that if Assessing Officer fails in carrying out the inquiries, which he ought to have carried out in the facts and circumstances of the case, then the assessment order is deemed to be erroneous insofar as prejudicial to the interest of the revenue. Therefore for invoking of the deeming Explanation, we have to examine whether ....
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...., permits, trademarks, copyrights, patents, quotas, approvals, lease. tenancy rights, permissions, incentives, grants and various other rights, title, interest, certificates, registrations under various legislations, contracts, agreements, consents) acquired by the Company (reflected as goodwill in the books of the Company). The assessee submits that it is eligible for depreciation @ 25% on the written down value of the aforesaid goodwill based on the following decisions: * CIT, Kolkata v. Smifs Securities (24 taxmann.com 222(SC)] * Areva T & D India Ltd vs DCIT ((2012) 345 ITR 421 (Delhi High Court) * Viacom 18 us ACIT (ITA No. 7336/Mum/2012) [Mumbai Tribunal] * B. Raveendran Pillai vs CIT ((2010) 194 Taxman 477 (Kerala HC)] * CIT vs. Hindustan Coca Cola Beverages Put. Ltd (2011) 198 TAXMAN 104 (Delhi HC) * CIT vs. Hindustan Coca Cola Beverages Put. Ltd [(2009) 34 SOT 171 (Delhi Tribunal)) * Skyline Caterers (P.) Ltd. vs. ITO ((2008) 20 SOT 266 (Mumbai Tribunal)] * Bosch Ltd. vs. CIT (2009-TIOL-736-ITAT-Bang (Bangalore Tribunal)) * Kotak Forex Brokerage Ltd. vs. ACIT ((2009) (33 SOT 237) (Mumbai Tribu....
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.... Rs. 53,86,79,186/- (long term capital loss) whereas you have shown in ITR for the A.Y. 2015-16 in computation of total income Part-B, it is losses carried forward is Rs. 53,86,79,186/- and no set off of losses during the year. 5. As per ITR Schedule-CFL (ITR-2019-20) you have shown carried forward losses of Rs. 3,27,30,79,767/- whereas you have shown in ITR for the A.Y. 2016-17 in computation of total income, part-B it is Rs. 3,27,30,79,767/- after setoff of losses Rs. 2,86,34,759/-. 6. As per ITR Schedule -CFL ITR-2019-20 you have shown carried forward loss of Rs. 2,84,72,69,524/- where as you have shown in ITR for the A.Y. 2017-18 in computation of total income, Part-B, it is Rs. 2,84,72,69,524/- after setoff losses of Rs. 1,63,93,113/-. 7. As per ITR Schedule-CFL ITR -2019-20, you have shown carried forward losses of Rs. 63,45,24,113/- whereas you have shown in ITR for the A.Y. 2018-19 in computation of total income part-B it is Rs. 63,45,24,113/- after setoff of losses Rs. 119148725/- in many years setoff of losses have been taken by you but non reduce this amount and show carried forward and set off losses of Rs. 7,39,70,30,887/- upto assessment yea....
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....of acquisition of Studio 18 is already decided in favour of the assessee by the Hon'ble Mumbai Tribunal in the assessee's own case for AY 2008-09 (the first year of claim of depreciation on such goodwill). A copy of the said order is attached herewith as Annexure 3. Further, we understand that the Department has accepted the order of the Hon'ble Mumbai Tribunal and not preferred an appeal before the Hon'ble Bombay High Court. Accordingly, the assessee submits that the aforesaid issue is now settled and hence deprecation of Rs. 85,655/- should be allowed to the assessee arising on account of acquisition of Studio 18. Note B In AY 2016-17, as per the Hon'ble Bombay High Court Order dated 12 August 2016 Prism TV Private Limited has merged with Viacom18 Media Private Limited with effect from 1 April 2015 on a going concern basis. The merger was not a tax neutral merger as the consideration i.e. shares were issued to the parent company of Prism TV. As per the said High Court order, the Company has paid a consideration of Rs 19,340,040,368 for the acquisition of Prism TV Private Limited by issue of shares at fair value. Out of the said consideration ....
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....count of acquisition of Prism TV is decided in favour of the assessee by the Facelsss Assessment Unit in the assessee's own case for AY 2018-19. A copy of the said order is attached herewith as Annexure 7. Accordingly, the assessee submits that the deprecation of Rs. 1,87,75,81,932/- should be allowed to the assessee arising on account of acquisition of Prism TV. 5.6 In this submission, the assessee explained depreciation on goodwill comprised of two items, firstly, depreciation amounting to Rs. 85,655/- on goodwill resulting on account of acquisition of studio 18 in assessment year 2008-09 with a complete note separately. Secondly, depreciation amounting to Rs. 1,87,75,81,932/- on goodwill resulting on account of amalgamation of 'Prism TV Pvt Ltd' with the assessee in assessment year 2016-17 along with a detailed note. Regarding the second item the assessee also enclosed copy of the order of the Hon'ble Bombay High Court dated 12/08/2016 approving the merger of Prism TV Pvt Ltd into the assessee with effect from 01/04/2015; copy of valuation report obtained from Ernst & Young merchant banking services Private Limited dated 02/02/2016 determining the fair exchang....
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.... A.Y. 2012-13 and AY 2013- 14 is as under and the same are carried forward to subsequent year: AY Total losses as per ITR (A) Losses set off as above (B) Net losses available for carry forward (A-B) to subsequent AY 2009-10 2,39.14.74,491 239,14,74,491 Nil 2012-13 35,86,04,360 32,56,80,871 3,29,23.489 2013-14 60,14,50,061 31,90,59,777 28,23,90,284 2014-15 32,68,43,712 0 32,68.43,712 2015-16 0 0 m 2016-17 327,30,79,767 0 327,30,79,767 2017-18 284,72,69,524 0 284,72,69,524 2018-19 63,45,24,113 0 63,45,24,113 Total losses of earlier year b/f (A) 1043,32,46,028 303,62,15,139 739,70,30,887 Losses of current year ie. 2019- 20 282,64,81,723 0 282,64,81,723 Total losses c/f as per ITR 1325,97,27,750 303,62,15,138 1022,35,12,612 On examination of submission of the assessee, reply of the assessee is found considerable hence, accepted." 5.9 In view of the aforesaid discussion, we are of the opinion that Assessing Officer had thoroughly examined both the issues of depreciation on the goodwill as well as amount of business loss to be carried....
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....ment is fallacious. Further, without prejudice, even if we presume that consistent stand of the department is not followed, we are of the opinion that this action of the AO might be prejudicial to the interest of the Revenue, but it is not erroneous, because in assessment year 2008-09, the Tribunal in the case of the assessee in ITA No. 7336/Mum/2012 allowed the depreciation on the goodwill generated on account of merger of the studio 18 division with the assessee as going concern. Said decision has not been reversed by the Hon'ble jurisdiction High Court and therefore the Assessing Officer has followed a binding precedent on the issue in dispute, which action cannot be termed as erroneous. Since for invoking section 263 both the conditions i.e. the assessment order should be erroneous as well as prejudicial to the interest of the Revenue are to be satisfied cumulatively, but on this issue the condition of the assessment order to erroneous is not fulfilled and therefore the learned PCIT cannot invoke revision proceeding on this issue. This argument of the learned Departmental Representative is accordingly rejected. 7. Now we take up the grounds on the merit as to whether the....
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....he order of the Assessing Officer as erroneous in so far as depreciation on the goodwill on acquisition of the Studio 18 is concerned. 8.3 The next ground on merit relates to depreciation on the goodwill in respect of amalgamation of Prism TV. The material facts are not in dispute. The assessee amalgamated Prism TV Pvt. Ltd. with effect from 01.04.2015 on a going concern basis pursuant to a scheme duly sanctioned by the Hon'ble Bombay High Court by order dated 12.08.2016. The amalgamation was accounted for in the financial statements for the year ended 31.03.2016, wherein the assessee disclosed, in full transparency, the net assets acquired, the consideration paid, and the resultant goodwill arising as the excess of consideration over the net book value of the assets and liabilities taken over. It is further an admitted position that the amalgamating company, Prism TV Pvt. Ltd., did not have any goodwill recorded in its books, nor had it claimed any depreciation thereon at any time. This fact stands acknowledged by the Assessing Officer himself in the assessment order for A.Y. 2016-17. 8.4 In assessment year 2016-17, The Assessing Officer, however, disallowed depreciation....
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.... but has arisen in the process of amalgamation. The parallel with the present case is complete; the ratio squarely applies. 8.8 Moreover, reliance was placed on the decision of the Hon'ble Supreme Court in CIT vs. Smifs Securities Ltd. [2012] 348 ITR 302 (SC), holding that goodwill constitutes a "business or commercial right of similar nature" eligible for depreciation under section 32(1)(ii). This principle has been consistently followed in subsequent decisions, including Padmini Products (P.) Ltd. (Karnataka HC), Thermo Fisher Scientific India (P.) Ltd. (ITAT Mumbai), Urmin Marketing (P.) Ltd. (ITAT Ahmedabad), and even in the assessee's own case for A.Y. 2008-09 relating to depreciation on goodwill arising from the acquisition of Studio18. 8.9 Further, the Ld. counsel for the assessee submitted that moreover, in view of amendments brought in by the Finance Act, 2021, curtailing depreciation on Goodwill w.e.f. 1.4.2021, made it clear that depreciation on goodwill was allowable upto AY 2020-21. Hon'ble Bangalore ITAT in case of I & B Seeds (P.) Ltd. v. DCIT [2022] 142 taxmann.com 274 observed that the intention of the Legislature is that depreciation on goodwill ....
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...., the assessee being amalgamated company could not claim or be allowed depreciation on the assets acquired in the scheme of amalgamation of an amount more than the depreciation which was allowable to the amalgamating company. The Tribunal noted that ruling of the Hon'ble Supreme Court in the case of Smif Securities Ltd. (supra) was only on the point whether the goodwill fall in the category of intangible assets and the said judgement would not override the provisions of the said proviso to section 32(1)(ii), which restricted the claim of depreciation in the cases specified there under. 9.2 Subsequently, identical issue came before the Co-ordinate Bench of Hyderabad Tribunal in the case of Mylan Laboratories Ltd. v. DCIT TS-691-ITAT-2019 (Hyd). In the case the assessee following the principle of purchase method of accounting, considered the difference between the amount of investment in the fair market value of net assets as goodwill arising of amalgamation. The Assessing Officer disallowed the depreciation on goodwill relying upon the decision of the Bengalurur Bench of the Tribunal in the case of United Breweries Ltd. (supra). The Co-ordinate Bench of the Tribunal after con....
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....ngible asset that came into existence only upon amalgamation and qualifies for depreciation under section 32(1)(ii). The Assessing Officer has, in our view, correctly appreciated the legal position and allowed depreciation accordingly. 9.5 Further, an amendment brought by the Finance Act, 2021 curtailing depreciation of goodwill is prospective and does not apply in the year under consideration. Thus the Assessing Officer has allowed the depreciation of the goodwill consciously and following the settled legal position. We find no infirmity in the order of the Assessing Officer. The action of the PCIT in seeking to substitute his own interpretation for a legally tenable view adopted by the Assessing Officer is unsustainable. The assessee succeeds on this ground 10. The third ground on merit is related to depreciation on Voot Platform. The Ld. counsel for the assessee submitted that the Ld. PCIT committed error in setting aside depreciation on intangible assets, being Voot platform, by misunderstanding the same as part of the goodwill. He submitted that depreciation on Voot Platform was not even a subject matter of disallowance in assessment year 2016-17 and 2017-18. In our opin....