TaxTMI 
TaxTMI 
2025 (12) TMI 853
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....oner of the Income Tax is invalid as it does not bear the Document Identification Number (DIN). Consequently the revision over passed u/s 263 of the Income tax Act is also bad in law, invalid and unsustainable in law. 3. The Ld. Pr. Commissioner of Income Tax has erred in holding that the Assessing Officer has not applied his mind to the issue of depreciation of Rs. 1,86,95,184/- on the intangible asset in the shape of goodwill. 4. The Ld. Pr. Commissioner of Income Tax has erred in holding that no inquiry, examination or verification has been done in the assessment proceedings regarding the claim of the depreciation on goodwill, without specifying as to which inquiry/examination or verification has not been done by the Assessing Officer. 5. The Ld. Pr. Commissioner of Income Tax has erred in holding that the assessee is not entitled to the claim of depreciation on goodwill generated on amalgamation. 6. The Ld. Pr. Commissioner of Income Tax has proceeded on the incorrect assumption that the depreciation is not allowable to the assessee in respect of the impaired intangible asset (goodwill), without appreciating the submissions of the assessee ma....
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....3.2021 disclosing total income at Rs. 1,81,42,02,980. Case selected for scrutiny through CASS followed by validly serving statutory notices u/s.143(2) and 142(1) of the Act. The assessee submitted the information as called for in the questionnaire issued u/s.142(1) of the Act. Ld. AO completed the assessment after making disallowance of at Rs. 1,85,95,370 on account of Education Cess, addition for income u/s.43C(A) at Rs. 23,91,847/- and disallowance u/s.14A r.w. Rule 8D at Rs. 3,82,623, and assessed the income at Rs. 1,83,60,35,564. 5. Subsequently, ld. PCIT (Central) invoked provisions of section 263 of the Act regarding the claim of depreciation on intangible assets at Rs. 1,86,95,184 giving reference of the generation of goodwill at the time of amalgamation in the A.Y. 2015-16 and also observed that during the year under consideration the written down value of Goodwill in the books at Rs. 18,89,24,584 has been impaired during the year and written off in the profit and loss account but still the assessee has claimed depreciation u/s.32 of the Act on the said impaired intangible asset, i.e. Goodwill based on the Block of Asset concept under section 32 of the Income Tax Act. Sh....
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....ciple of resjudicata is not applicable to income-tax proceedings and has directed the Ld.AO to separately examine the claim of the assessee in the earlier years in accordance with the provisions of law. With these observations, ld. PCIT held that the assessment order dated 31.03.2022 is erroneous and prejudicial to the interest of revenue. 7. Now the assessee is in appeal before this Tribunal assailing the order of ld. PCIT dated 19.03.2024. 8. Ld. Counsel for the assessee vehemently argued referring to the following written submissions : "By way of this appeal the assessee has challenged the revision order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income-tax Act. The assessee has claimed depreciation of Rs. 1,86,95,184/- on the brought forward WVD in respect of the Block of intangible asset (goodwill). This claim of the assessee has been allowed vide assessment order dated 31-03-2022 passed under section 143(3) of the Income-tax Act. The said assessment order has been revised by holding that depreciation on goodwill is not allowable for the following reasons :- A. (i) The Assessing Officer has allowed the cl....
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.... company will be the WVD of such asset in the hands of the amalgamating company. (v) There was no goodwill appearing in the balance sheet of the amalgamating company, just before amalgamation. Hence, if the amalgamating company had continued to hold the goodwill, its actual cost would have been 'nil' and as a natural corollary, the actual cost of goodwill for the amalgamated company shall also be 'Nil'. No depreciation is allowable to the amalgamated company on the goodwill created at the time of amalgamation, as the actual cost of goodwill to the amalgamated company is 'Nil'. 3.(a) As can be seen from para 2B above, the Principal Commissioner of Income Tax (PCIT) has passed the revision u/s 263 of the Act inter- alia on the basis/premise that the opening WVD of the Block of intangible asset (goodwill) has been acquired/generated as a result of amalgamation of M/s Gera Realty India Pvt. Ltd. (GRIPL) with the assessee. However such facts that the opening WVD of the Block of intangible asset (goodwill) has been acquired/generated as a result of amalgamation of M/s Gera Realty India Pvt. Ltd. (GRIPL) with the assessee, does n....
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.... by the Assessing Officer 235-239 (b) Replies/submissions dated 11.03.2024 and 24.03.2024 in response to the above notice 240-249 8. Show cause notice dated 26.02.2024 issued by the Principal Commissioner of Income Tax (A) u/ s.263 of the I.T. Act 250-251 9 Reply/ submissions dated 05.03.2024 to the PCIT along with the summary of depreciation as Annexure-1 252-257 10. Indian Accounting Standards referred to in para 2.2 on page 4 of the revision order of the Principle CIT dated 19.03.2024 passed u/ s.263 of the Act. 258-333 11. Judgment of the Supreme Court in the case of Smifs Securities Ltd. 348 ITR 302 (SC) 334-337 12. Judgment in Xerox India Ltd. 55 taxmann.com 29 (Delhi Tribunal) 338-346 13. Judgment of the High Court in Hindustan Coca Cola Beverages (P) Ltd. 331 ITR 192 (Delhi) 347-356 14. Judgment of Karnataka High Court in the case of Hewlett Packard India Sales (P) Ltd. 463 ITR 329 (Karnataka) 357-360 15. Judgment of Supreme Court in Hewlett Packard India Sales (P) Ltd. (2024) 161 taxmann.com 46 (SC) 361-362 16. Judgment of Hon'ble Jaipur Tribunal in Utsav Cold Storage (P) Ltd. ....
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....d to the claim made by the assessee and allowing the claim only on satisfaction after verification/enquiry on his part. A view in the absence of examination is no view but only a chance result." Hon'ble Pune Bench of the Tribunal while deciding the validity of the order passed u/s. 263 of the Act in ITA No. 562/PUN/2019 dated 03.08.2020 has held that "when no view has been taken, no inquiry has been conducted, when no reasons on facts has been placed on record, the order of assessment is bound to be erroneous in so far as prejudicial to the interest of the revenue." On merit also PCIT has held that no actual cost has been incurred by the appellant for acquiring the goodwill and the cost of acquisition of self-generated asset was nil. In the process of amalgamation was is transferred is net assets, which consists of existing tangible assets as well as other existing intangible assets. There was no intangible asset shown in the books of accounts of the amalgamated/transferor company. Mere accounting entries do not give rise to the appellant to claim depreciation on goodwill contrary to the provisions of law. So, the appellant created a fictitio....
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....on'ble Supreme Court. Reliance is placed on the decision of ITAT, Bangalore Bench in the case of United Breweries Ltd. Vs. Additional Commissioner of Income Tax, Range-12, Bangalore [2016] 76 taxmann.com 103 (Bangalore- Trib), 30.09.2016. The Hon'ble Tribunal after referring the decision of Hon'ble Supreme Court in the case of M/s. Smifs Securities Ltd. (supra) has held that "By virtue of 5th proviso to section 32(1), assessee being amalgamated company could not claim or be allowed to claim depreciation on assets acquiring in scheme of amalgamation more than depreciation that was allowable to amalgamating company." In the additional ground filed before the Hon'ble bench, the Ld. AR, stated that the PCIT has the powers to examine the record of any proceedings under this Act available before him before issuing show cause notice and the information on the basis of which the PCIT has passed the revision order was not available on records before issuing the show cause notice u/s. 263 of the Act and same was furnished by the appellant for the first time in response to notice issued /s. 263 of the Act. The revisionary powers of the PCIT are not r....
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....lly submitted that, the 5th proviso to section 32(1) of the Income Tax Act mandates that in the event of the amalgamation or demerger, the amount of depreciation shall not exceed, in any previous year, the depreciation calculated, as if the amalgamation or demerger has not taken place, and that the depreciation shall be apportioned between the predecessor and the successor in the ratio of the number of days for which the asset were used by the predecessor and the successor. It is thus clear that, the 5th proviso to clause (ii) of section 32(1) comes into the picture only, if the asset in question was already existing in the books of accounts of the Predecessor (Amalgamating Company). It is only then that the question of apportioning the depreciation, in the ratio of the number of days for which the assets were held by the Predecessor (Amalgamating Company) and the successor (Amalgamated Company), will arise. (iii). It is further respectfully submitted that, as per explanation 5 to the said clause (ii) for the purpose of restricting the depreciation, (by applying 5th proviso to clause (ii) of sub section (1) of section 32 of the Income Tax Act,) the intangible asse....
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....an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any findi....
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....aid down following ratio with regard to provisions of section 263 of the Act: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainab....
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....e submitted that assessee added back the depreciation as per the books to be considered separately and thereafter reduced the depreciation calculated as per the Block of Asset under the Income Tax Act. Ld. Counsel for the assessee also claimed that all these details of Fixed Assets chart as per the Income Tax Act are shown in the Tax Audit Report and impairment is just an exercise for the year under consideration where for the Companies Act and under the Fair Market Value concept assessee has impaired the asset but the same can be added back as per the Fair Market Value of such intangible asset in subsequent period. 16. We find that admittedly the Audited balance sheets were there before the ld. AO but then as per the Fixed Asset chart attached to the Audited balance sheet indicate that on account of impairment closing balance of the Goodwill has been brought down to Nil value. The opening written down value of Goodwill in books of account standing at Rs. 18,89,24,584 has been scaled down to Nil amount due to impairment of Goodwill. Impairment of an asset comes into picture if the assets have been permanently impaired whether by damage, negligence or obsolescence or change in th....
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....s which took place during F.Y. 2015-16 when there was amalgamation of Gera Realty India Private Limited with the assessee and under the scheme of arrangement the amount paid over and above the book value of the net assets of amalgamating company has been treated as Goodwill. Ld. PCIT has observed that such excess payment has been treated as self generated Goodwill by the assessee and the same is not as per the Accounting principles. Ld. PCIT has also observed that the assessee ought to have reduced the amount from the Reserves and Surplus rather than treating it as self generated intangible asset, i.e. Goodwill and thereby claiming depreciation thereon. Observation of ld. PCIT in para Nos. 9.2 to 9.9.7 of the impugned order reads as under : "9.2 Claim is not in accordance to the provision of the Act 9.2.1 Explanation 3 to section 32 of the Act whereby 'asset includes an intangible asset, being know-how, patents, copyrights, trademarks, licenses. franchises or any other business or commercial rights of similar nature. That goodwill is included in the definition of intangible assets being any other business or commercial right of a similar nature has been settle....
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....clear that the total claim of depreciation shall not exceed the deduction calculated as if the amalgamation had not taken place and such deduction shall be apportioned between the amalgamating company and the amalgamated company in the ratio of number of days for which the assets/businesses were used by them. 9.9.6 Further, Explanation 3 to section 43(1), which provides specific anti-abuse provisions in the event the Assessing Officer is satisfied that the main purpose of the transfer of assets previously used for the purposes of business was the reduction of tax liability by way of an increased depreciation claim. Thus, cost of acquisition of goodwill acquired as a result of amalgamation/demerger in the hands of amalgamated/resulting company shall be deemed to be the cost for which the previous owner (amalgamating/demerged company) acquired it, i.e. NIL. 9.9.7 From the discussion made in foregoing paragraphs, it can be concluded that in the hands of the Resulting Company, in the amalgamation with respect to the instant case, the cost of the transferred capital asset to the amalgamated company shall be the same as the cost to the amalgamating company. The WDV of t....
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....ich took place during F.Y. 2015-16 is uncalled for. Therefore, so far as the impugned order is concerned, we find that the assessment order is erroneous and prejudicial to the interest of Revenue only to the extent of non examination of issue of depreciation claimed on Goodwill at Rs. 1,86,95,184 and ld. PCIT has rightly directed the AO to carry out the necessary exercise for examining this issue. Ground Nos. 3, 4 and 6 raised by the assessee are dismissed. To this extent, the impugned order is sustained. 21. So far as Ground No.2 raised by the assessee regarding the validity of the impugned order on the ground that show cause notice dated 05.03.2024 do not contain any DIN Number, we note that in the impugned order in Para No.3 reference has been made to the DIN No.1061484781(1)/3809 in the notice issued u/s.263 of the Act dated 26.02.2024. Even in the impugned order also DIN Number has been mentioned. We therefore fail to find any merit in Ground No.2 raised by the assessee and same is dismissed. 22. We find that assessee has not made out the grounds of appeal in a proper way. The issues have been mixed in the grounds of appeal Nos. 5, 7, 8 and Additional ground. We observe ....