Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2024 (11) TMI AT This

  • Login
  • Cases Cited
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2024 (11) TMI 816 - AT - Income Tax


  1. 2021 (9) TMI 566 - SC
  2. 2021 (8) TMI 520 - SC
  3. 2019 (1) TMI 757 - SC
  4. 2018 (3) TMI 805 - SC
  5. 2012 (8) TMI 713 - SC
  6. 2010 (7) TMI 15 - SC
  7. 2005 (11) TMI 25 - SC
  8. 2002 (5) TMI 5 - SC
  9. 2001 (7) TMI 1243 - SC
  10. 1997 (5) TMI 2 - SC
  11. 1996 (12) TMI 2 - SC
  12. 1995 (5) TMI 2 - SC
  13. 1985 (7) TMI 1 - SC
  14. 1981 (3) TMI 250 - SC
  15. 1979 (10) TMI 2 - SC
  16. 1978 (10) TMI 133 - SC
  17. 1973 (1) TMI 1 - SC
  18. 2022 (10) TMI 613 - SCH
  19. 2022 (7) TMI 1510 - SCH
  20. 2019 (5) TMI 725 - SCH
  21. 2019 (3) TMI 1571 - SCH
  22. 2018 (10) TMI 2027 - SCH
  23. 2018 (7) TMI 567 - SCH
  24. 1999 (4) TMI 6 - SCH
  25. 1997 (12) TMI 9 - SCH
  26. 2024 (9) TMI 1571 - HC
  27. 2024 (7) TMI 1528 - HC
  28. 2024 (6) TMI 987 - HC
  29. 2024 (5) TMI 168 - HC
  30. 2024 (2) TMI 1436 - HC
  31. 2024 (8) TMI 116 - HC
  32. 2023 (12) TMI 713 - HC
  33. 2023 (2) TMI 868 - HC
  34. 2023 (1) TMI 1434 - HC
  35. 2023 (1) TMI 70 - HC
  36. 2022 (9) TMI 886 - HC
  37. 2022 (8) TMI 361 - HC
  38. 2022 (7) TMI 1093 - HC
  39. 2022 (7) TMI 293 - HC
  40. 2022 (7) TMI 797 - HC
  41. 2022 (2) TMI 286 - HC
  42. 2021 (1) TMI 1046 - HC
  43. 2021 (2) TMI 340 - HC
  44. 2020 (11) TMI 277 - HC
  45. 2020 (10) TMI 1168 - HC
  46. 2020 (3) TMI 1024 - HC
  47. 2019 (7) TMI 473 - HC
  48. 2018 (10) TMI 1041 - HC
  49. 2018 (12) TMI 1145 - HC
  50. 2017 (10) TMI 373 - HC
  51. 2017 (8) TMI 732 - HC
  52. 2017 (1) TMI 318 - HC
  53. 2017 (1) TMI 513 - HC
  54. 2016 (4) TMI 219 - HC
  55. 2015 (9) TMI 1424 - HC
  56. 2015 (2) TMI 1263 - HC
  57. 2014 (11) TMI 554 - HC
  58. 2014 (9) TMI 434 - HC
  59. 2015 (5) TMI 810 - HC
  60. 2014 (8) TMI 119 - HC
  61. 2014 (5) TMI 592 - HC
  62. 2014 (7) TMI 44 - HC
  63. 2014 (3) TMI 856 - HC
  64. 2013 (12) TMI 607 - HC
  65. 2013 (12) TMI 547 - HC
  66. 2013 (7) TMI 701 - HC
  67. 2013 (7) TMI 697 - HC
  68. 2013 (1) TMI 720 - HC
  69. 2012 (7) TMI 158 - HC
  70. 2009 (8) TMI 220 - HC
  71. 2009 (1) TMI 4 - HC
  72. 1989 (12) TMI 8 - HC
  73. 1989 (7) TMI 309 - HC
  74. 1986 (2) TMI 38 - HC
  75. 1984 (7) TMI 68 - HC
  76. 1980 (7) TMI 81 - HC
  77. 1980 (2) TMI 62 - HC
  78. 1977 (9) TMI 24 - HC
  79. 2023 (9) TMI 1439 - AT
  80. 2023 (5) TMI 1417 - AT
  81. 2023 (5) TMI 994 - AT
  82. 2022 (11) TMI 842 - AT
  83. 2022 (9) TMI 152 - AT
  84. 2022 (7) TMI 451 - AT
  85. 2022 (7) TMI 23 - AT
  86. 2022 (5) TMI 1574 - AT
  87. 2021 (11) TMI 763 - AT
  88. 2021 (2) TMI 1397 - AT
  89. 2020 (10) TMI 1202 - AT
  90. 2020 (11) TMI 47 - AT
  91. 2019 (6) TMI 1438 - AT
  92. 2019 (1) TMI 1853 - AT
  93. 2017 (6) TMI 1124 - AT
  94. 2017 (2) TMI 557 - AT
  95. 2015 (11) TMI 277 - AT
  96. 2012 (3) TMI 118 - AT
  97. 2013 (5) TMI 116 - AT
  98. 2009 (8) TMI 126 - AT
  99. 2009 (5) TMI 615 - AT
  100. 2008 (5) TMI 693 - AT
Issues Involved:

1. Disallowance under Section 14A read with Rule 8D.
2. Claim of depreciation on goodwill arising from amalgamation.

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A read with Rule 8D:

The primary issue was whether disallowance under Section 14A of the Income Tax Act, 1961, read with Rule 8D, could be made when no exempt income was earned during the relevant assessment year. The assessee argued that no disallowance is warranted in the absence of exempt income, citing various judicial precedents including the Hon'ble Gujarat High Court's judgment in CIT Vs. Corrtech Energy Pvt. Ltd. The assessee also contended that investments were made from its own funds, which exceeded the investments, and therefore, no disallowance should be made. Additionally, it was argued that the investments were strategic in nature for holding controlling interest in subsidiaries, which should not attract disallowance under Section 14A. The assessee further contended that Section 14A disallowance should not apply while computing book profit under Section 115JB.

The Assessing Officer (AO) held that disallowance under Section 14A is applicable even if no exempt income is earned, relying on CBDT Circular No.5/2014 and the Supreme Court's judgment in Maxopp Investment Ltd. The AO made a total disallowance of Rs. 35,11,35,800/- under Section 14A and included it in the book profit under Section 115JB.

The Tribunal, however, held that the provisions of Section 14A cannot be applied for computing book profit under Section 115JB, relying on the Special Bench decision in ACIT vs. Vireet Investments Pvt. Ltd. and various High Court judgments. It was concluded that the CBDT Circular No.5/2014 cannot override the expressed provisions of Section 14A read with Rule 8D, and the amendment to Section 14A by the Finance Act, 2022, is prospective and not applicable to the assessment years under consideration. The Tribunal also noted that the assessee had sufficient own funds to cover the investments, and the AO had not recorded dissatisfaction as required under Section 14A(2). Thus, the disallowance made by the AO was deleted.

2. Claim of Depreciation on Goodwill:

The second issue was whether the assessee was entitled to claim depreciation on goodwill arising from the amalgamation of its subsidiaries. The assessee argued that the scheme of amalgamation was approved by the National Company Law Tribunal (NCLT), and the excess consideration paid over the net assets acquired should be treated as goodwill, eligible for depreciation under Section 32. The assessee relied on the Supreme Court's judgment in CIT vs. Smifs Securities Ltd., which held that goodwill is an asset eligible for depreciation.

The AO denied the claim, arguing that the goodwill did not exist in the books of the transferor companies prior to amalgamation and relied on various statutory provisions to deny depreciation. The CIT(A) confirmed the AO's view.

The Tribunal, however, held that goodwill arising from amalgamation is eligible for depreciation, following the Supreme Court's judgment in Smifs Securities Ltd. and other precedents. The Tribunal noted that the NCLT's order approving the amalgamation was not challenged by the Revenue, and thus, the Revenue could not dispute the claim of depreciation on goodwill. It was also observed that the amendments to the provisions regarding goodwill by the Finance Act, 2021, are prospective and do not affect the assessment years in question. Therefore, the Tribunal allowed the claim of depreciation on goodwill.

Conclusion:

The appeals filed by the Revenue were dismissed, and the appeals filed by the Assessee were allowed, with the Tribunal ruling in favor of the assessee on both issues.

 

 

 

 

Quick Updates:Latest Updates