TaxTMI 
TaxTMI 
2026 (5) TMI 1619
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....t the assessee company is engaged in the business of (i) manufacturing of solid Bio-Fuel and Wood Pallet (ii) Trading in solar Rooftop and Renewal Energy Devices (iii) trading in tissue culture plants and (iv) Product Development Services. For the Asst. Year 2017-18, the assessee filed its original return of income declaring Nil total income on 06.11.2017. Thereafter, pursuant to the Composite Scheme of Arrangement (Scheme) approved by Ahmedabad Bench of National Company Law Tribunal (NCLT) vide order dated 29.10.2018 the Assessee revised its return of income for A.Y. 2017-18 on 30.11.2018 declaring loss of Rs. 752,51,42,451/-. The return was revised to give effect of the Scheme of Amalgamation approved by Ahmedabad Bench of NCLT vide order dated 29.10.2018. 2.1. Assessee's case was selected for Limited Scrutiny assessment and regular assessment was completed u/s. 143(3) of the Act on 29.12.2019 by disallowing the claim of depreciation on Goodwill of Rs. 771,66,20,460/- under section 32(1) r.w.s. 43(1) r.ws. 43(6)(c) r.w.s. 49(1)(iii)(e) r.w.s. 55(2)(a)(ii) of the Act and total income was determined at Rs. 19,14,86,009/-. 3. Aggrieved against the order, the assessee filed....
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....me for companies is wolf as for the shareholders and not to provide a tax planning mechanism to either of them. However, a conjoint reading of the above provisions reveal that the assets which were transferred by the amalgamating company to the amalgamated company in the process of amalgamation were not made subject to the capital gain tax. Furthermore, the 6th proviso to section 32 of the Act has limited the amount of depreciation available to the amalgamated company post amalgamation to the extent of the amount of depreciation which would have been available to the amalgamating company, had there not been any amalgamation, Indeed there was no entry in the books of the transferor/amalgamating company for the intangible assets/goodwill being self-generated assets. However, we note that all the relevant provisions of the Act as discussed above deal with respect to the assets available/recorded in the books of the transferor/ amalgamating company. In other words, the assets which have boon acquired by the assessee in tum scheme of amalgamation would continue at the book value in the books of the amalgamated company. The question arises whether the goodwill shown by the asses....
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....ion 32(1) states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading of the words "ally other business or commercial rights of similar nature in clause (b) of Explanation 3 indicates that goodwill would fall under the expression any other business or commercial rights of a similar nature. The principle of ejusdern generis would strictly apply while interpreting the said expression which finds place in Explanation 3 (b). (Para 4) In view of the above, it is opined that 'Goodwill' is an asset under Explanation 3(b) to section 32(1). (Para 5) In view of the above judgment, there remains no ambiguity that the goodwill is part and parcel of intangible assets. Hence, the assessee is eligible for depreciation on the goodwill. Moving further, we note that for claiming the depreciation, among other conditions as provided under, section 32 of the Act, one of the condition is that the assessee con claim depreciation on the goodwill being intangible asset if acquired on or after 1st day of April 1993, in oth....
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....applying 5th proviso (now 6th proviso) to section 32(1) of the Act and other relevant provisions of section Explanation 7 to section 43(1) and/or Explanation 2(b) to section 43(6)(c). After going through the decision of United Breweries case, I find that in the said case the amalgamating company had shown goodwill value of Rs. 7.45 crores in its books whereas the amalgamated company had valued the goodwill at Rs. 62.30 crores and the Hon'ble Bangalore ITAT ruled in favour in the revenue by applying 5th proviso to section 32(1) of the Act. Thus, the AO's reliance on this decision is not permissible due to entirely different sets of facts. d) In the assessment order, the AO had commented about the valuation of the amalgamating companies (related to each other) in order to emphasize that the said valuation was with the purpose of creating higher value of goodwill for claim of depreciation by the amalgamated company(the appellant). In the submissions made by the appellant, it has been contended that the valuation were made by and independent valuer ( reputed international firm) by following DCF method which has been held as appropriate method of valuation as per decisi....
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.... mode of payment for acquisition of goodwill. Hon'ble ITAT Ahmedabad Bench had relied on the decision of Hon'ble Delhi High Court in CIT vs Mira Exim Ltd (2014) 220 Taxman 156 while deciding the case of Urmin Marketing Pvt. Ltd. f) On the issue of AO's reliance on decision of Hon'ble SC in the case of Kedarnath Jute Mfg. Co. Ltd. (Supra) to state that the entries in the books of account are not conclusive to determine the true nature of transaction for taxation purpose, appellant referred to the decision of Hon'ble Apex Court in the case of Challapalli Sugars Ltd 98 ITR 167, wherein it was held that the term 'actual cost' is to be construed in accordance with the normal rules of accountancy. It was contended that the appellant having followed AS-14 with respect to goodwill value accounted in the books as excess of consideration and net assets of transferor company should have been accepted by the AO. This contention of the appellant as also decision of Apex Court in Smifs Securities Ltd. and Gujarat High Court in Zydus Wellness Ltd., I. don't find any force in the AO's findings on this issue. In view of the above factual finding....
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.... amalgamation passed by the NCLT and name of the transferee company M/s Altheon enterprises Ltd on whose name shares were exchanged as per NCLT order came in to existence in the F.Y 2018-19. 6. The Ld CIT(A) has erred in law and on facts in considering the claim of depreciation of the assessee against the capital gains of M/s Claris life sciences in the FY 2017-18 even though demerger of demerged entity M/s Treasury & investment undertaking and trading undertaking was approved by the share holders in the F.Y 2018-19 and compliance affidavit filed by the assessee before NCLT in the F.Y 2018-19. 7. The Ld CIT(A) has erred in law and on facts in allowing the claim of depreciation of the assessee on the value of good will calculated on fictitious basis and set off against the long term capital gain income obtained by M/s Claris life sciences in the F.Y 2017-18 shown to be transferred to the assessee in view of amalgamation of demerged undertaking of M/s Claris life sciences Ltd. Even though approval for demerger by the shareholders of M/s Claris life sciences Ltd in FY 2018-19 which is essential for demerger as noted by NCLT in its order, assessee erroneously back dat....
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....s of M/s Claris life sciences in the FY 2017-18 even though demerger of demerged entity M/s Treasury & investment undertaking and trading undertaking was approved by the share holders in the F.Y 2018-19 and compliance affidavit filed by the assessee before NCLT in the F.Y 2018-19. 7. The Ld CIT(A) has erred in law and on facts in allowing the claim of depreciation of the assessee on the value of good will calculated on fictitious basis and set off against the long term capital gain income obtained by M/s Claris life sciences in the F.Y 2017-18 shown to be transferred to the assessee in view of amalgamation of demerged undertaking of M/s Claris life sciences Ltd. Even though approval for demerger by the shareholders of M/s Claris life sciences Ltd in FY 2018-19 which is essential for demerger as noted by NCLT in its order, assessee erroneously back dated the demerger w.e.f 1.4.2017, there by using the scheme of composite arrangement as colorable device for shifting income in one company to another company and setting off against artificially inflated fictitious good will and there by denying government of due taxes. 5. We have heard both the parties and perused all the r....
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....etailed submissions before Ld. A.O. providing all relevant explanation/ information sought by the Ld. A.O. with documentary evidences. After considering the same, the Ld. A.O. passed the final assessment order u/s.143(3) on 29-12-2019 disallowing the depreciation of Rs. 771.66 crores claimed u/s.32(1)(ii) of the Act on the good will of Rs. 3086.65 crores recognized pursuant to the amalgamation of AEL and Dorizoe with Altheon. Further the valuation provided in the valuation report as well as the consideration discharged by the assessee as per the share exchange ratio provided in the Scheme/valuation report have not been disputed by the Ld. AO. Further, Dorizoe had paid advance tax of Rs. 13,05,150 and self-assessment tax of Rs. 18,29,000 during previous year 2016-17. Also, Dorizoe and AEL had TDS credit of Rs. 2,06,151/ and Rs. 10,94,122/- respectively for previous year 2016-17. However, necessary credit of the said advance tax, self-assessment tax and TDS have not been granted by the Ld. A.O. despite the fact that income earned by AEL and Dorizoe from appointed date was offered to tax by Altheon. 6. It is pertinent to note that the issue of depreciation is sell settled by the Ho....
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....ight of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 6.4 We find that Section 32(1)(ii) 'Goodwill of a Business or Profession' has been specifically excluded from the definition of assets on which depreciation shall be calculated. Explanation 3(b) of Section 32(1): 'Goodwill of a Business or Profession has been specifically excluded from the definition of intangible assets. The Finance Act, 2021 has amended following provisions of the IT Act: Section 2(11): Definition of 'Block of Assets' has been amended to specifically provide that 'Goodwill of a Business or Profession' shall not form part of block of assets comprising of 'Intangible Assets'. * Section 32(1)(ii): 'Goodwill of a Business or Profession' has been specifically excluded from the definition of assets on which depreciation shall be calculated. * Explanation 3(b) of Section 32(1): 'Goodwill of a Business or Profession' has been specifically excluded from the definition of intangible assets. * Section 43(6)(c)....