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TMI Blog2019 (10) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no action either under section 263 or 147 of the Act by the revenue. Therefore we can safely presume that the claim of the depreciation of the assessee in the 1st year has attained finality. Admittedly the 1st year is the base assessment year from where the issue of depreciation is emanating. The question arises once the depreciation has been allowed in the 1st year then the same can be disturbed in the subsequent year without having any change in the facts and circumstances. In our considered view, in such a case the principles of consistency shall be applied as held by the Hon ble Bombay High Court in the case of PCIT Vs. Quest Investment Advisors Ltd. [ 2018 (7) TMI 479 - BOMBAY HIGH COURT] - the assessee succeeds on the principle of consistency. Accordingly we set aside the order of the learned CIT (A) and direct the AO to allow the depreciation to the assessee. Hence the ground of appeal of the assessee is allowed. - ITA No.1439/Ahd/2011, ITA No.42/Ahd/2012, ITA No.597/Ahd/2014, ITA No.2249/Ahd/2018, IT(SS)A No.357/Ahd/18 - - - Dated:- 16-10-2019 - Shri Waseem Ahmed, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Ms. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities acquired in the scheme of amalgamation. The assessee acquired all the assets and liabilities/ general reserve/ investment allowance reserve/ balance of profit and loss account at the book value as shown by the amalgamating company in its books of accounts. However, the assessee paid more consideration against the net assets acquired by it from amalgamating company by way of issuing shares. As such, the excess consideration paid by the assessee amounted to ₹ 10,13,82,620/-, which was treated by it in its books of accounts as goodwill. The assessee accordingly claimed depreciation on such goodwill @ 25% at its written down value amounting to ₹ 1,90,09,241/- (25% of 7,60,36,965.00). The assessee stated that it has acquired all the assets/ liabilities of the amalgamating/ transferor company including the intangible assets such as licenses, trademark and other commercial rights of the similar nature. Accordingly, the assessee contended that it is eligible for the depreciation u/s 32 of the Act. However, the AO during the assessment proceedings observed that there was no intangible asset shown by the amalgamating/ transferor company in its ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the transferor company. As such it doesn t deal about the intangible assets acquired in the scheme of amalgamation. Similar is the case with the provisions of section 43(1) and its explanation 7 of the Act. However the learned CIT(A) disregarded the contention of the assessee by observing that the provisions of section 43(1) and 43(6) of the Act requires to take the actual cost of the amalgamating company in the books of the amalgamated company. As there was no block of assessee for the intangibles in the books of the amalgamating company, therefore the same cannot be recorded in the books of the amalgamated company. The learned CIT (A) accordingly confirmed the order of the AO. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 7. The learned AR before us filed a paper book running from pages 1 to 104 and submitted that the value of the good will was duly approved by the order of Hon ble High Court in the scheme of amalgamation dated 12-04-2006 which is placed on page 57 to 68 of the paper book. All the facts were brought to the notice of the authorities below and no defect of whatsoever was pointed out. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue can deny the deduction claimed by the assessee on the written down value in the year under consideration. In our view, the answer stands in favour of the assessee. It is because, the revenue once allowed the deduction for the depreciation claimed by the assessee, then it is debarred to reject the claim of the assessee in the subsequent year on the WDV carried forward from the earlier assessment year. As such, in our considered view the Revenue was required to disturb the claim of the assessee in the 1st year itself. Therefore, we are of the view that claim of the assessee should be allowed on the basis of principles of consistency. In this regard we find support and guidance from the judgment of Hon ble Supreme Court in the case of CIT versus Excel Industries Ltd reported in 358 ITR 295 wherein it was held as under: 28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the transferor/ amalgamating company exceeding the net asset value (NAV), the excess amount was recorded as goodwill. Admittedly, the assessee incurred the cost more than the NAV acquired by it which has also been approved by the Hon ble Gujarat High Court in as discussed above. The relevant finding of the Hon ble High Court reads as under: 9.4 Any excess of the amount of the consideration over the value of the net assets of the Transferor company acquired by the Transferee Company shall be recognized in the Transferee Company s financial statements as goodwill arising on amalgamation. If the amount of the consideration is lower than the value of the net assets acquired the difference shall be created as the Amalgamation Reserve and the same shall be treated as the Free Reserve of the Transferee Company available for the distribution of dividend. Similarly, there is also no dispute in the amount of the purchase consideration and the NAV determined between the companies, as available in the order of the AO, which was also approved by the Hon ble Gujarat High Court as well. 11. Now, to resolve the controversy whether the assessee is entitled for the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essions assets and block of assets shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. The above provision of section 32 of the Act requires allowing the depreciation to the amalgamated company in the same manner which would have been allowed to the amalgamating company in the event had there not been any amalgamation. Similarly, the actual cost of the assets acquired in the scheme of amalgamation in the hands of the amalgamated company will continue to be the same as it would have been in the hands of the amalgamating company in the event, had there not been any amalgamation. The relevant extract of the explanation 7 to section 43(1) reads as under: Definitions of certain terms relevant to income from profits and gains of business or profession. 43. In sections 28 to 41 and in this section, unless the context otherwise requires 3 - 4 (1) actual cost means the actual cost 3 of the assets to the assessee, reduced by that portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amalgamating company continued to hold the capital asset for the purposes of its own business. A combined reading of the above provisions reveals that the intention of the legislature behind the introduction of the amalgamation scheme was to achieve tax neutrality. Besides the above, the intention of the legislature is reflecting from the following provisions: i. There is no capital gain in the hands of the amalgamating company on the transfer of capital assets in the scheme of amalgamation under the provisions of section 47(vi) of the Act. ii. The cost of stock-in trade in the hands of amalgamated company shall remain the same as in the hands of amalgamating company either as capital asset or stock in trade as provided under section 43C of the Act. iii. Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc under the provisions of section 72A of the Act. iv. Exemption of capital gains in the hands of shareholders of amalgamating company on transfer of shares of amalgamating company in the scheme of amalgamation under the provisions of section 47 (vii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out to the Tribunal when it passed the impugned order. None of this has happened. In fact, all have proceeded on the basis that there is no change in the principle which has been consistently applied for the earlier assessment years and also for the subsequent assessment years. Therefore, the view of the Tribunal in allowing the respondent's appeal on the principle of consistency cannot in the present facts be faulted with, as it is in accord with the Apex Court decision in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273. [Para 9] In view of the above, the assessee succeeds on the principle of consistency. Accordingly we set aside the order of the learned CIT (A) and direct the AO to allow the depreciation to the assessee. Hence the ground of appeal of the assessee is allowed. 14. As, we have decided the main ground of appeal in favour of the assessee, we are not inclined to adjudicate the issue raised in ground 3 as alternate claim for the valuation of the goodwill. Hence, we dismiss the same. 15. In the result, the appeal of the assessee is partly allowed. Coming to the Revenue s appeal in ITA No. 597/AHD/2014 for the Assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the detailed discussion, please refer the relevant paragraph. Respectfully following the same we dismiss the ground of appeal of the assessee. 22. In the result, assessee s appeal is partly allowed. Coming to the assessee s and Revenue s appeals in ITA No. 2249/AHD/2018 and IT(SS)A No. 397/AHD/2018 for the Assessment Year 2009-10 : 23. The assessee has raised the following grounds of appeal: 1.1 The order passed u/s 250 on 04.09.2018 for A.Y. 2009-10 by CIT(A)- 11, Ahmedabad confirming the disallowance of depreciation on Goodwill of ₹ 1,13,10,975/- and not adjudicating the ground of appeal relating to addition of ₹ 40,76,854/- towards unutilized CENVAT credit is wholly illegal, ulawful and against the principles of natural justice. 1.2 The Ld.CIT(A) has grievously erred in law and or on facts in adjudicating the ground of appeal against the order u/s 143(3) r.w.s. 153A dated . Instead of the order of regular assessment passed u/s 143(3) on 27.12.2011. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in confirming the disallowance of deprecation on Goodwill of ₹ 1,13,10,975/- and not adjudicating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A of the Act but the learned CIT(A) has passed the order recording the fact that the appeal was filed by the assessee before him against the assessment order framed under section 143(3) of the Act. The relevant observation of the learned CIT (A) in his order dated 4th of September 2018 stands as under: Instituted on 30-01-2012 from the assessment order u/s 143(3) of the ACIT Central Circle-1(1) Ahmedabad [ Shri R.K. Dhanesta] We also find from the order of the learned CIT (A) wherein it was recorded that in column No. 5 reproduced as under: 5 Section and subsection under : 143(3) of the Act, 1961 which the appealed order is passed We also note that the learned CIT (A) has recorded in his order that the appeal has been preferred against the assessment order framed under section 143(3) of the Act. The relevant finding of the CIT (A) stands as under: This appeal is filed on 30-01-2012 against the assessment order u/s. 143(3) of the I.T. Act, 1961 dated 27-12-2011 passed by ACIT, Central Circle-1(1), Ahmedabad for A.Y. 2009-10. In view of the above, we hold that the observation made by the learned CIT (A) in his order dated 4th of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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