2015 (12) TMI 836 - HC - Income Tax

Allowability of depreciation on goodwill - whether the Tribunal was justified in permitting the respondent assessee to for the first time raise an additional ground on the issue of liability of depreciation on goodwill before it? - Held that - Any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the tribunal when the facts necessary to examine such ground, contention or claim are already on record. In such a case, the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. Adverting to the facts of the present case, the Tribunal has, on facts found that the additional ground raised by the assessee is purely a legal ground. Moreover, as pointed out by the learned counsel for the assessee, the additional ground does not require further facts other than the facts which are already available on record. Under the circumstances, the above decision of this court in the case of Commissioner of Income Tax v. Mitesh Impex (2014 (4) TMI 484 - GUJARAT HIGH COURT ) would be squarely applicable to the facts of the present case. The impugned order passed by the Tribunal, being in consonance with the principles laid down in the above decision, the question is required to be answered in the affirmative, that is, in favour of the assessee and against the revenue.

Summary

Issues Involved:
1. Admissibility of additional ground for depreciation on goodwill raised for the first time before the Tribunal.
2. Tribunal's decision to remit the issue to the Commissioner (Appeals) instead of the Assessing Officer.

Detailed Analysis:

1. Admissibility of Additional Ground for Depreciation on Goodwill:

The primary issue in this case was whether the Tribunal was justified in law and on facts in admitting an additional ground raised by the assessee regarding the allowability of depreciation on goodwill, which was raised for the first time before the Tribunal. The assessee, a company engaged in manufacturing fertilizers, chemicals, and IT business, filed its return of income electronically for the assessment year 2007-08. The matter went through scrutiny, and the total taxable income was determined. The assessee appealed to the Commissioner of Income-tax (Appeals), who granted partial relief. Both parties then appealed to the Tribunal.

The assessee argued that due to the merger with Narmada Chematur Petrochemicals Co. Limited, effective from April 1, 2005, goodwill was acquired. The claim for depreciation on goodwill was not initially made due to lack of clarity in the legal position. However, following the Delhi High Court's decision in CIT v. Hindustan Coco Cola Beverages Private Limited, the assessee raised this issue before the Tribunal, asserting it was a purely legal ground requiring no new facts beyond those already on record.

The Tribunal admitted the additional ground, identifying it as a purely legal issue, and remitted it to the Commissioner (Appeals) for adjudication. The revenue objected, arguing that the additional ground was a new claim requiring factual investigation, which was not permissible without proper reasons recorded by the Tribunal, as mandated by rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963.

The court referred to the decision in Commissioner of Income Tax v. Mitesh Impex, which held that new grounds or legal contentions could be raised for the first time before the appellate authority or Tribunal if the necessary facts were already on record. The Supreme Court's decision in National Thermal Power Company Limited v. Commissioner of Income Tax supported this view, emphasizing that the Tribunal has jurisdiction to consider questions of law arising from facts already on record.

2. Tribunal's Decision to Remit the Issue to the Commissioner (Appeals):

The Tribunal initially remitted the issue to the Commissioner (Appeals). However, both parties later agreed that it would be more appropriate to remit the matter to the Assessing Officer. The court concurred with this suggestion, modifying the Tribunal's order accordingly.

Conclusion:

The court upheld the Tribunal's decision to admit the additional ground, finding it to be a purely legal issue with all necessary facts already on record. The court emphasized that appellate authorities and the Tribunal have the power to entertain new grounds or legal contentions if they are based on existing facts. The appeal was dismissed, and the matter was remitted to the Assessing Officer for a decision in accordance with the law, ensuring a reasonable opportunity for hearing to all parties involved.