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2024 (6) TMI 1021 - AT - Income TaxIssues Involved: 1. Jurisdiction u/s 263 of the Income-tax Act, 1961. 2. Depreciation claim on goodwill and other intangible assets. 3. Disallowance on account of inventory amortization. Summary: Jurisdiction u/s 263 of the Income-tax Act, 1961: The appeal by the assessee challenges the order of the Learned Principal Commissioner of Income-Tax (Ld. Pr.CIT) dated 27.03.2023 framed u/s 263 of the Income-tax Act, 1961. The Ld. Pr.CIT assumed jurisdiction under section 263, holding that the assessment order dated 18.03.2021 framed u/s 143(3) r.w.s. (3A) and 143(3B) was "erroneous" and "prejudicial to the interest of the revenue." Depreciation Claim on Goodwill and Other Intangible Assets: The Ld. Pr.CIT believed the sixth proviso to section 32(1) applied to the facts of the amalgamation, disallowing the depreciation claimed on goodwill and trade name by the assessee company. The Tribunal examined sections 32(1), 43(6)(c), and Explanation 7 of section 43(1), concluding that the actual cost of goodwill to the amalgamated company (assessee) should be zero since it was zero for the amalgamating company (UHEPL). However, the Tribunal disagreed, referencing the Supreme Court case of CIT v. Smifs Securities Ltd., which allowed depreciation on goodwill arising from amalgamation. The Tribunal held that the assessment order could not be considered "erroneous" and "prejudicial to the interest of the revenue" regarding this issue. Disallowance on Account of Inventory Amortization: The Ld. Pr.CIT found an error in the disallowance amount for inventory amortization, resulting in an under-assessment of Rs. 6.17 crores. However, the Tribunal noted that the assessee had substantial losses, and the business loss for assessment year 2009-10 amounting to Rs. 61.30 crores would have lapsed during the year under consideration. Therefore, the error did not result in revenue loss, failing the twin conditions of being "erroneous" and "prejudicial to the interest of the revenue." Conclusion: The Tribunal concluded that the assessment order dated 18.03.2021 was neither "erroneous" nor "prejudicial to the interest of the revenue." Consequently, the order of the Ld. Pr.CIT dated 27.03.2023 was set aside, and the assessment order dated 18.03.2021 was restored. Result: The appeal filed by the assessee was allowed. The order was pronounced in the open court on 24th April, 2024.
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