2021 (8) TMI 1090 - AT - Income Tax

Rectification u/s 254 - recognition of goodwill required or not - pooling of interest method in the scheme of amalgamation - assessee in the scheme of amalgamation did not specify whether it was following pooling of interest method or purchase method of amalgamation - HELD THAT - The provisions of section 254(2) of the Act empowers the ITAT to rectify the mistake committed by it. But such a mistake aassessee in the scheme of amalgamation did not specify whether it was following pooling of interest method or purchase method of amalgamation.s to be apparent from record. There are various judicial precedents on the concept what a mistake apparent from record is. Generally, wherever two views are possible with respect to any issue/question, it is implied that the mistake cannot be said as apparent. In this respect we find support and guidance from the observationt in the case of ACIT-Rajkot vs. Saurashtra Kutch Stock Exchange Ltd. 2008 (9) TMI 11 - SUPREME COURT where the Hon ble Apex Court defined the term apparent mistake in context of section 254(2). This fact has not been disputed. The relevant finding of the ITAT is on para 31.7 to 31.9 of the order. It was also recorded that there is no dispute qua the fact of making the payment by way of issuing the shares which is a valid mode of payment as held by the Hon ble Delhi High Court in case of CIT vs. Mira Exim Ltd 2013 (10) TMI 228 - DELHI HIGH COURT . Accordingly, the ITAT after considering all these facts have recognized the goodwill in the books of accounts of the assessee. Revenue has not pointed out any mistakes with respect to the above finding of the ITAT. Therefore it cannot be said that there is a mistake apparent from record arising from the order of the ITAT. Principles laid down by the Hon ble Supreme Court in the case of CIT vs. Smifs Securities Ltd 2012 (8) TMI 713 - SUPREME COURT are not applicable in the case on hand. In this regard, we note that once the ITAT has recognized the goodwill in the books of the assessee which is a tangible assets as held by the Hon ble Supreme Court. Therefore the reference made to the above judgment of the Hon ble Supreme Court was not made in the context of AS 14 and AS 103. But it was referred to hold that the goodwill being intangible asset is eligible for the depreciation. We do not find that there is any mistake in the order of the ITAT which is apparent from record. Hence, we disagree with the contention of the learned DR. Thus the MA filed by the Revenue is dismissed.

Summary

Issues involved:
1. Recognition of goodwill in the scheme of amalgamation.
2. Allowance of depreciation on goodwill.
3. Mistake apparent from the order passed by ITAT.

Analysis:
1. The Revenue filed a miscellaneous application to recall the ITAT order, arguing that the assessee followed the pooling of interest method in the scheme of amalgamation, where the concept of goodwill does not arise. The ITAT allowed depreciation on goodwill despite the admission of following the pooling of interest method. The Revenue contended that the ITAT's reasoning for recognizing goodwill based on the approval of the scheme by the High Court was flawed, as the scheme did not specify the method of amalgamation. The Revenue raised questions on the ITAT's decision regarding the recognition of goodwill and eligibility for depreciation.

2. The Revenue further submitted that the ITAT relied on a Supreme Court judgment for allowing depreciation on goodwill, but there was no specific issue raised on the applicability of accounting standards in that case. The Revenue questioned the self-contradictory nature of the ITAT's order and sought its recall based on a mistake apparent from the record.

3. The ITAT examined the contentions of both parties and the record. It referred to judicial precedents on defining a mistake apparent from the record. The ITAT found that the Revenue did not point out any mistakes in the findings regarding goodwill recognition and depreciation. The ITAT upheld its decision, stating that the recognition of goodwill was supported by the scheme of amalgamation approved by the High Court and the absence of objections from the Revenue during the approval process. The ITAT dismissed the Revenue's application, concluding that there was no apparent mistake in its order.

In conclusion, the ITAT rejected the Revenue's application, affirming its decision on recognizing goodwill and allowing depreciation in the scheme of amalgamation. The judgment highlighted the importance of clarity in the scheme of amalgamation and the need for objections to be raised at the appropriate stages to avoid disputes later on.