TaxTMI 
TaxTMI 
2026 (7) TMI 404
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....luru-2 [ld. PCIT] for the AY 2020-21 dated 31.3.2025 wherein it is held that the assessment order passed u/s 143(3) r.w.s. 144B of the Act dated 28.9.2022 is erroneous and prejudicial to the interests of the revenue and therefore the assessment order was set aside for the purpose of making fresh assessment where the ld. AO is directed to revise the assessment after disallowing the assessee's claim for depreciation on goodwill after verifying the allowability of business acquisition expenses. 2. The assessee is aggrieved with the same and has preferred this appeal. 3. Briefly stated the facts of the case show that assessee is engaged in the business of providing packaging solutions, manufacturing and selling PET, plastic performs and c....
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....Rs. 2,391 lakhs and intangible assets are Rs. 5,903 lakhs and balance sum of Rs. 8,000 lakhs is goodwill. Further the expenses paid of Rs. 2.56 Crores is valuation fees paid to Ernst & Young for structuring & consultancy fees along with consultancy fees paid to KPMG and Khaitan & Co. LLP as legal fees. The assessee submitted that the actual cost of goodwill is Rs. 8,000 lakhs and therefore depreciation is allowable to the assessee. 6. The ld. PCIT after considering the provisions of depreciation u/s. 32 of the Act and the provisions of section 43(6) of Written Down Value [WDV], held that the actual cost of goodwill to the amalgamating company shall be the same as it would have been if that company had continued to hold the capital assets....
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....Thus, the ld. PCIT has misdirected himself by considering that there is an amalgamation. He submits that in the case of business acquisition by BTA, the assessee purchased the business of National Plastics wherein tangible assets of Rs. 23 crores and intangible assets other than goodwill of Rs. 59 crores as well as goodwill of Rs. 80 crores was purchased on the total purchase consideration of Rs. 162.94 Crores. Thus it was further stated that there is no amalgamation. He further referred to the assessment order stating that the ld. AO has also referred to the valuation report of the assets & liabilities acquired. The total issue was examined of depreciation and based on that, a show cause notice dated 14.9.2022 was issued. Based on that, th....
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...., he submitted that the expenditure incurred by the assessee for effecting business reorganization cannot be disallowed u/s. 37(1) of the Act as it is necessary for the smooth and efficient conduct of the assessee's business. This issue is squarely covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of CIT v. Bombay Dyeing Manufacturing Co. Ltd., 219 ITR 521. Accordingly he submitted that the order passed by the ld. PCIT is not sustainable. 11. The ld. DR vehemently supported the order of the ld. PCIT. It was submitted that the ld. PCIT has correctly held that the order passed by the ld. AO is incorrect as erroneous and prejudicial to the interests of the Revenue as it has allowed depreciation claim....
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....he value of net assets at Rs. 23,90,54,643, goodwill at Rs. 80 Crores, Intellectual Property Rights at Rs. 40.57 Crores, Customer Relationship of Rs. 13.28 Crores and Non-compete fees of Rs. 5.19 Crores. As there was a slump sale agreement by entering into BTA, the individual value of assets was assigned by the assessee for recording in the books of account on the basis of valuation report of individual assets. The assessee claimed depreciation on tangible and intangible assets. This was allowed by the ld. AO after verifying the valuation report pointing out discrepancies therein and thereafter disallowing the depreciation to the extent of Rs. 5,34,68,611. 13. The ld. PCIT on revision referred to the provisions of section 32 of the Act a....
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....the Revenue is not sustainable. 16. On the second issue of certain professional charges paid to various firms for the purposes of valuation, legal fees, structuring and consulting fee of Rs. 2.56 Crores allowed by the ld. AO considering them as revenue expenditure, but the ld. PCIT was of the view that this expenditure is capital in nature. The ld. PCIT in para 12 of his order has only in one line has given his decision that allowing these expenditure without carrying out necessary verification makes the assessment order erroneous. However, we find that where the assessee pays such kind of fees, the Hon'ble Supreme Court has held that acquisition of a company for necessary and smooth conduct of the assessee's business incurring certain e....