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TMI Blog2020 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... bai passed under section 263 of the Income Tax Act, 1961 ('the Act') in so far as it is against the Appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case . 2. The Assessing Officer ('AO') has passed an order in accepting the submissions of the Appellant after verifying various evidences & facts produced before. Thus there is no error, much less an error, prejudicial to the interests of the Revenue to warrant a revision u/s 263 and therefore the order passed by the Pr.CIT in ultravires the provisions of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. 3. The Pr.CIT failed to appreciate the facts that the Appellant had filed the details of amount of 25% depreciation claimed on goodwill arising out of amalgamation of a company with the Appellant Company and the claim made was well within the provision of the section 32 of the Act. 4. Without prejudice, the Pr.CIT ought to have dropped the revisional proceedings u/s 263 after considering the submissions made by the appellant, both on legal issues as well as merits, in response to the show cause notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said issue was clearly ousted. Apart therefrom, it was submitted by the assessee that its claim for depreciation on 'goodwill' generated in the course of amalgamation was in conformity with the judgment of the Hon'ble Supreme Court in the case of CIT, Kolkata Vs. Smifs Securities Limited [Civil Appeal No. 5961 of 2012 (arising out of SLP(C) No. 35600 of 2009), dated 22.08.2012]. Also, support was drawn by the assessee from the order of the ITAT, Pune in the case of The Cosmos Co-op Bank Limited Vs. Dy.CIT, Circle 7, Pune [ITA No. 460 & 461/PN/2012, dated 23.01.2014]. It was submitted by the assessee that as the amount of the 'goodwill' was the value of the liability in excess of the assets for which the shares were allotted or exchanged on the merger, as per the courts approval, therefore, it could not be said that there was no price or consideration for the same. However, the aforesaid explanation of the assessee did not find favour with the Pr. CIT. The Pr.CIT was of the view that the introduction by the assessee of the balancing figure of excess of liabilities over the assets as 'goodwill' and claiming depreciation on the same under the Act was in violation of 'Proviso 5' of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In order to drive home his aforesaid contention, the Ld. A.R had drawn support from the judgment of the Hon'ble Supreme Court in the case of CIT, Kolkata Vs. Smifs Securities Limited (2012) 348 ITR 302(S.C) and the order of the ITAT, Pune in the case of The Cosmos Co-op Bank Limited Vs. Dy.CIT, Circle 7, Pune [ITA No. 460 & 461/PN/2012, dated 23.01.2014] (copies placed on record). On the basis of his aforesaid contentions, it was averred by the Ld. A.R that as the Pr.CIT had exceeded his jurisdiction under Sec. 263 for dislodging a balanced and well reasoned view taken by the A.O while framing the assessment under Sec. 143(3), therefore, his order may be 'set aside' and that of the A.O be restored. 6. Per contra, the Learned Departmental Representative (for short 'D.R') relied on the order passed by the Pr.CIT under Sec. 263 of the Act. It was submitted by the Ld. D.R, that as the A.O had failed to make any enquiry as regards the entitlement of the assessee towards claim of depreciation on 'goodwill' as per the 'Proviso 5' of Sec. 32(1) of the Act, therefore, the Pr.CIT had rightly 'set aside' his order with a direction to redo the assessment after disallowing the aforesaid clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,63,95,340 (b) Liabilities taken over Loans taken 7,84,22,17,894 Other Liabilities & Provisions 1,21,63,97,420 Share Application Money received 1,11,37,65,000 Total (b) 10,17,23,80,314 (c) Investments in Equity shares of Amalgamating Companies 1,00,000 (d) Issue of Preference shares to share holders of transferring Company as a purchase consideration 7,41,900 (e) Inter Company Balances 6,67,60,84,027 Capital Reserve / (Goodwill) on Amalgamation (a-b-c-d-e) 1,45,29,10,901 As per the records, the assessee company had amortised the entire amount of 'goodwill' created pursuant to the scheme of amalgamation with M/s Premier Finance Trading Co. Pvt. Ltd. as approved by the Hon'ble High Court of Bombay, vide its order dated 20.09.2013, in the first year of creation. 8. As is discernible from the records, the A.O vide his notice dated 14.09.2016 had called upon the assessee to justify its claim of depreciation. Also, the A.O had directed the assessee to furnish the details about scheme of amalgamation viz. (i) last two years copies of returns of the amalgamated company along with computation, balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing company] should be considered as 'goodwill' arising on amalgamation. Infact, it was the claim of the assessee that the extra consideration was paid towards the reputation which the amalgamating company i.e. M/s YSN Shares & Securities Pvt. Ltd. was enjoying in order to retain its existing clientele. However, the A.O declined the assessee claim for deprecation for two fold reasons viz (i) that, the 'goodwill' as per him was not an asset falling under 'Explanation 3' to Sec. 32(1) of the Act; and (ii) that, no amount was actually paid by the assessee on account of 'goodwill'. As observed by us hereinabove, the Hon'ble Apex Court had negated the first observation of the A.O and had held that 'goodwill' is an asset under 'Explanation 3(b)' to Sec. 32(1) of the Act. As regards the second observation of the A.O, the Hon'ble Apex Court did not find any infirmity with the view taken by the lower authorities, which had approved the claim of the assessee that the difference between the cost of the assets and the amount paid constituted 'goodwill' which the assessee company had acquired in the process of amalgamation. In sum and substance, the Hon'ble Apex Court had approved the assesses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction for depreciation on assets shall be inter alia apportioned between the amalgamating company and the amalgamated company in the ratio of the number of days for which the assets were used by them. In our considered view, in the case before us the 'goodwill' had arisen in the books of the assessee company in the course of the process of the scheme of amalgamation of M/s Premier Finance Trading Company Private Limited with the assessee company, that was approved by the Hon'ble High Court of judicature at Bombay, vide its order dated 20.09.2013, pursuant whereto the assets and liabilities of the amalgamating company were transferred to and vested with the assessee company from the appointed date i.e. 01.04.2013. In our considered view, the aforesaid claim of depreciation raised by the assessee on the value of 'goodwill' is in conformity with the judgment of the Hon'ble Supreme Court in the case of M/s Smifs Securities Ltd. (supra). Also, we are unable to comprehend as to how the aforesaid claim of depreciation raised by the assessee is found to be in violation of 'Proviso 5' to Sec. 32(1) of the Act. Further, we find that the claim of the assessee towards depreciation on 'goodwill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions of the Appellant after verifying various evidences & facts produced before. Thus there is no error, much less an error, prejudicial to the interests of the Revenue to warrant a revision u/s 263 and therefore the order passed by the Pr.CIT in ultravires the provisions of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. 3. The Hon. Pr.CIT failed to appreciate the facts that the Appellant had filed the details of amount of 25% depreciation claimed on goodwill arising out of amalgamation of a company with the Appellant Company and the claim made was well within the provision of the section 32 of the Act. 4. Without prejudice, the Pr.CIT ought to have dropped the revisional proceedings u/s 263 after considering the submissions made by the appellant, both on legal issues as well as merits, in response to the show cause notice issued u/s 263. 5. The appellant crave leave to add, alter, delete or substitute any of the grounds urged above. 6. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed in the interest of jus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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