2020 (10) TMI 279 - AT - Income Tax

FAA admitting fresh claim of the assessee - Depreciation on goodwill - CIT- A directed AO to allow depreciation on the same @12.5% - main contention of the revenue is that Ld. CIT(A) could not admit the claim and further, if the claim was to be admitted, the matter should have been remanded back to the file of Ld. AO for verification of valuation of goodwill and computations thereof - HELD THAT - Assessee had made this claim during the course of assessment proceedings itself before Ld. AO by way of letter dated 11/09/2012 along with supporting documents but the same were not admitted by Ld. AO since the assessee did not revise its return of income. CIT(A), being an appellate authority, was empowered to do so. Furthermore, this claim of the assessee has been accepted by the Tribunal in AY 2011-12 2018 (9) TMI 615 - ITAT MUMBAI which has been followed by Ld. CIT(A). Therefore, this plea of the revenue was to be rejected and we find no infirmity in the action of Ld. CIT(A) in admitting assessee s claim by relying upon the cited decision of the Tribunal in assessee s own case for AY 2011-12. Assessee s new claim arises out of business transfer agreement dated 17/11/2009 and this was the first year of claim which would have consequential impact on subsequent years. AO had no occasion to consider the assessee s claim since the claim was not admitted and no verification as to quantification / computations / valuation of goodwill has been done at the level of AO. To dispel the concerns raised by revenue and keeping in view the fact that this was first year of claim, while in principal holding that the assessee was entitled to claim the depreciation on goodwill in terms of the decision of Hon ble Supreme Court in the case of Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT as well as in terms of decision of Tribunal for AY 2011-12 in assessee s own case, the limited matter of verification of valuation of goodwill stand remitted back to the file of Ld. AO. The Ld. AO is directed to allow the depreciation after due verification of quantification of amount of goodwill after appreciating the relevant documents. For the said limited purpose, the matter stand restored back to the file of Ld. AO. Appeal stands partly allowed for statistical purposes

Summary

Issues involved:
- Admitting fresh claim of the assessee for depreciation on goodwill
- Whether the appellate authority erred in granting relief to the assessee based on a previous tribunal decision
- Verification of valuation of goodwill and computations thereof

Detailed Analysis:
1. Admitting Fresh Claim of the Assessee:
The main issue in the judgment revolves around the admission of a fresh claim by the assessee for depreciation on goodwill. The Revenue contended that the claim was made after the expiry of the time allowed for filing a revised return of income, and thus should not have been admitted. However, the CIT(A) opined that the claim could be made before appellate authorities. The Tribunal held that the CIT(A) was empowered to admit the claim, citing relevant legal precedents. The claim had been accepted in a previous year by the Tribunal, and therefore, the plea of the Revenue was rejected.

2. Relief Granted Based on Previous Tribunal Decision:
The judgment also addresses whether the relief granted to the assessee on account of depreciation on goodwill was valid. The Revenue argued that the CIT(A) erred in relying on the decision of the Tribunal in the assessee's own case for a previous year. However, the Tribunal found no infirmity in the CIT(A)'s action, as the claim had been accepted in the previous year by the Tribunal. The Tribunal upheld the CIT(A)'s decision to grant the relief based on the previous tribunal decision.

3. Verification of Valuation of Goodwill:
Another crucial issue was the verification of the valuation of goodwill and computations thereof. The Tribunal noted that the claim for depreciation on goodwill arose from a business transfer agreement and had a consequential impact on subsequent years. As the Assessing Officer had not verified the quantification, valuation, and computations of goodwill, the Tribunal remitted the matter back to the AO for due verification. The Tribunal directed the AO to allow depreciation after verifying the quantification of goodwill and relevant documents, emphasizing the importance of proper verification in such cases.

In conclusion, the judgment partially allowed the appeals for statistical purposes, addressing the issues of admitting fresh claims, granting relief based on previous decisions, and the verification of goodwill valuation and computations. The Tribunal upheld the CIT(A)'s decision to admit the claim and grant relief while emphasizing the need for proper verification by the Assessing Officer in such cases.