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TMI Blog2020 (4) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... he proprietor of erstwhile firm has taken net worth as per books of accounts of firm as on the date of acquisition. From the above, it is very clear that the assessee has taken different values for the purpose of accounting of acquisition of business and the proprietor has followed different method for computation of net-worth for the purpose of computation of capital gain on slump sale. Since, the seller of assets i.e proprietor of erstwhile firm and the director of the present assessee are one and the same and also, fact that the director has holding more than 21% in present company, it is undoubtedly clear that the assessee has followed a different method for accounting goodwill in books of accounts, so as to claim higher depreciation, although such method has been followed in accordance with prescribed accounting standard. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were right in, coming to the conclusion that the assessee has arrived at inflated value of goodwill to claim higher depreciation on intangibles. Since, the assessee has taken different values for different purposes, we are of the considered view that the ratio laid down C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45,40,157/- u/s 115JB of the I.T.Act, 18961. The case was selected for scrutiny and during the course of assessment proceedings, the Ld. AO noticed that the assessee has claimed depreciation @25% applicable to intangible assets on goodwill and hence, called upon the assessee to file necessary evidences, including acquisition/purchases of goodwill and claim of depreciation @25% as applicable to intangible assets. In response, the assessee submitted that it has acquired the business of Shri Rakesh Tainwala, by way of slump sale w.e.f 01/04/2012 and the acquisition has been accounted for under the purchase method, as prescribed by the Accounting Standard AS-14 Accounting For Amalgamation notified under Companies (Accounting Standards) Rules, 2006 and accordingly, difference between assets and liabilities of the proprietorship firm and consideration paid for acquisition of business has been treated as goodwill in books of accounts of the assessee. The assessee, further submitted that although, the net-worth of proprietorship firm is less than full value of consideration paid for acquisition of business, but the assessee has revalued certain assets, for which necessary valuation repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65/- and the difference between full value of consideration paid for acquisition of business and the networth of the undertaking acquired as on the 31/03/2012 has been recognized as goodwill in the books of account of the assessee and depreciation on said amount has been claimed @ 25% as applicable to intangible assets.. The Ld.CIT(A) after considering relevant submission of the assesse and also taken note of the decision relied upon by the assessee in the case of Chowgule Company Pvt.Ltd. vs Addl.CIT ( 2016) ( 95 CCH 021) (Mum. HC) observed that since, the seller of the assets have shown the net -worth of the undertaking acquired at ₹ 2,13,61,293/-, the assessee is only eligible for depreciation on goodwill amounting to ₹ 6,38,707/- ( 2,20,00,000-2,13,61,320) and accordingly, upheld additions made by the Ld. AO towards disallowances of excess depreciation claimed on goodwill. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us. 6. The Ld. AR for the assessee, at the time of hearing submitted that the Ld.CIT(A) has erred in confirming additions made by the Ld. AO towards depreciation on goodwill by re-computing the amount of goodwill, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Companies (Accounting Standard) Rules, 2006,for accounting for amalgamations. No doubt, AS-14 prescribed method of accounting for acquisition of business under amalgamations, as per which any difference in full value of consideration paid for acquisition of business and net value of assets and liabilities shall be treated as goodwill of the business. But, fact remains that whether, an assessee can follow different method of valuation or computation of net-worth for different purposes and such method has been prescribed by AS-14 or not has to be seen. Admittedly, AS-14, nowhere prescribed for different method of computation of net worth of undertaking acquired by way of slump sale for different purposes. In this case, the assessee although, followed AS-14 for accounting of acquisition of business, while arriving at goodwill, it has revalued its assets, which is different from value of assets, as per books of accounts of erstwhile proprietorship firm. However, when it comes to payment of capital gain on slump sale, the proprietor of erstwhile firm has taken net worth as per books of accounts of firm as on the date of acquisition. From the above, it is very clear that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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