2021 (3) TMI 758 - AT - Income Tax

Claim of deprecation on goodwill - goodwill arised on amalgamation of Fame India Ltd. into Inox Leisure Ltd. - assessee submitted before the ld. CIT(A) that Assessing Officer had not at all discussed its claim of goodwill arising on account of amalgamation of its subsidiary company in the assessment order in spite of that fact that its claim of depreciation on account of amalgamation was made vide letter dated 20th January, 2016 during the course of assessment proceedings - HELD THAT - During the course of assessment proceedings, the assessee has given a complete detail along with supporting documents demonstrating that goodwill was arised on account of amalgamation of companies, however, the Assessing Officer has not made any discussion to the claim of the assessee. At the appellate stage, the ld. CIT(A) has held in a unwarranted manner that the claim of the assessee is not permitted under the existing law on the pretext that the issue raised requires investigation and verification. We consider that the decision of the ld. CIT(A) is unjustified and he had not made any discussion to the legal findings and not substantiated his decision with any material to come to the conclusion. As per law it is required to carry out the required investigation and verification of the facts to tax the real income. In the light of the above facts and judicial findings, we direct the ld. CIT(A) to consider the claim of the assessee on merit after verification/examination of the material to be produced by the assessee with reference to claim of goodwill arsied on account of amalgamation of companies. Therefore, we restore this issue to the file of ld. CIT(A) for adjudicating the impugned issue of claim of depreciation on goodwill afresh on merit after examination as per the direction laid down in the decision of Zydus Wellness Ltd. 2017 (10) TMI 373 - GUJARAT HIGH COURT . Disallowance on account of delay payment of employee contribution towards PF ESIC - not crediting the amount on or before due date as prescribed u/s. 36(1)(va) - HELD THAT - Hon ble Jurisdictional High Court of Gujarat in the case of CIT vs. Amoli Organics P. Ltd 2013 (11) TMI 971 - GUJARAT HIGH COURT held that assessee was entitled to make payment within grace period under the provident fund act and if within that grace period employees contribution have been deposited by the assessee, it cannot be said that assessee has not deposited the amount within due date prescribed under the provident fund act - we restore this issue to the file of CIT(A) for deciding afresh after examination of the claim of assessee that amount was deposited within the grace period as provided in the provident fund act. Therefore, this ground of appeal of the assessee is also allowed for statistical purposes.

Summary

Issues Involved:
1. Depreciation on Goodwill arising on amalgamation.
2. Disallowance of ?19,65,397/- on account of delayed payments of Employee's Contribution.

Issue-wise Detailed Analysis:

1. Depreciation on Goodwill arising on amalgamation:

The assessee claimed depreciation on goodwill arising from the amalgamation of its subsidiary, Fame India Ltd., into Inox Leisure Ltd. The claim was not included in the original return but was made during the assessment proceedings via a letter dated 20th January 2016. The Assessing Officer (AO) did not address this claim in the assessment order. The CIT(A) dismissed the claim, stating it required extensive investigation and revision of the books, which he believed was not permitted under the existing law.

During the appellate proceedings, the assessee presented detailed submissions and supporting documents, including the composite scheme of amalgamation approved by the High Court of Gujarat. The assessee argued that the goodwill amounting to ?56.7 crores arose from the amalgamation and claimed depreciation at 25%, amounting to ?14.19 crores. The CIT(A) dismissed the claim without specific consideration of the submissions, relying on a presumptive view that the claim was not permissible under the law.

The Tribunal observed that the CIT(A) did not discuss or reference the material furnished by the assessee. The Tribunal cited the Hon’ble Supreme Court's decision in CIT vs. Smifs Securities Ltd., which held that goodwill arising from amalgamation is an asset under Explanation 3(b) of Section 32(1) of the Income Tax Act and eligible for depreciation. The Tribunal also referenced the Gujarat High Court's decisions in Pr. CIT vs. Zydus Wellness Ltd. and CIT vs. Mitesh Impex, which supported the assessee's claim for depreciation on goodwill.

The Tribunal concluded that the CIT(A)'s decision was unjustified and lacked substantive discussion or material support. It directed the CIT(A) to consider the claim on merit after verification and examination of the material provided by the assessee. The issue was restored to the CIT(A) for fresh adjudication as per the directions laid down by the Gujarat High Court in the Zydus Wellness Ltd. case.

2. Disallowance of ?19,65,397/- on account of delayed payments of Employee's Contribution:

The assessee's claim for employee’s contribution towards PF & ESIC was disallowed for not crediting the amount on or before the due date prescribed under Section 36(1)(va) of the Income Tax Act. The CIT(A) upheld the disallowance following the Gujarat High Court's decision in CIT vs. Gujarat State Road Transport Corporation.

During the appellate proceedings, the assessee cited the Gujarat High Court's decision in CIT vs. Amoli Organics P. Ltd., which held that payments made within the grace period under the Provident Fund Act are considered timely. The Tribunal restored the issue to the CIT(A) for fresh examination to verify if the payments were made within the grace period. The ground of appeal was allowed for statistical purposes.

Conclusion:

Both appeals were allowed for statistical purposes. The Tribunal directed the CIT(A) to reconsider the claim for depreciation on goodwill and the disallowance of employee’s contribution after proper verification and examination of the facts and supporting documents. The decision emphasized the need for thorough investigation and adherence to judicial precedents in determining the real income for taxation.