9911796707
TMI Blog2018 (5) TMI 2076X X X X Extracts X X X X X X X X Extracts X X X X ..... n disallowing the claim of depreciation. Orders of the lower authorities are set aside. Depreciation claimed by the assessee stands allowed. - I.T.A. No. 2410/CHNY/2017 - - - Dated:- 30-5-2018 - Shri N.R.S. Ganesan, Judicial Member And Shri Abraham P. George, Accountant Member For the Appellant : Shri. M. Karunakaran, Advocate. For the Respondent : Dr. S. Pandiyan, Addl. CIT. ORDER Per Abraham P. George, Accountant Member Assessee in this appeal filed against an order dated 23.08.2017 of ld. Commissioner of Income Tax (Appeals)-8, Chennai, is aggrieved on disallowance of depreciation of ₹ 20,94,801/- claimed on goodwill. 2. Facts apropos are that one M/s.Mtandt Ltd, through a scheme of demerger approved by Hon ble Jurisdictional High Court on 19th October, 2012 with effective date 1st January, 2012, had hived off one of its division engaged in rental of equipment, to the assessee company. M/s.Mtandt Ltd had three segments of business, depicted hereunder:- (a) Sale of tools, equipments and safety products (b) Sale of access machines and equipments; and (c) Rental of access equipments (hereinafter referred to as the Demerged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 11,04,23,770/9.75). Paid up capital of the demerged company namely M/s. Mtandt Ltd was 12 lakhs shares of ₹ 10 each. Hence the ratio of allotment of the shares to the share holders of M/s. Mtandt Ltd was 1,13,25,515: 12,00,000. This came to 9.43: 1. In other words the assessee company had to issue 9.43 equity shares for every equity share held by the shareholders M/s. Mtandt Ltd in M/s. Mtandt Ltd. Since 9.43 had a decimal, assessee company allotted 10 fully paid up equity shares for each share held by shareholders of M/s. Mtandt Ltd in M/s. Mtandt Ltd. Thus, the value of the shares allotted came to ₹ 12 Crores, against value of ₹ 11,04,23,771/- of the rental division taken over. Balance sum of ₹ 95,76,229/- was treated by the assessee as goodwill. Depreciation claimed by the assessee on such goodwill for assessment year 2013-14 was allowed in a proceeding completed u/s.143(1) of the Act. However claim of depreciation on the written down value of such goodwill, was disallowed by the ld. Assessing Officer for the impugned assessment year and such disallowance was confirmed by the ld. Commissioner of Income Tax (Appeals). Ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cost in the year in which the increase or decrease in liability arises on account of the fluctuation in the rate of exchange, irrespective of the date of actual payment in foreign currency. In CIT Vs Doom Dooma India Ltd. (310 ITR 392) Supreme Court held that the words depreciation actually allowed mentioned in sec.43(6) (b) means depreciation actually granted i.e. in tea business only 40% of income is taxed and hence only proportionate depreciation can be treated as allowed which is to be deducted from WDV. Subsequently Expl.7 was inserted below sec. 43(6) by Finance (No.2) Act, 2009 w.ef. 01-04.2010 so as to treat the entire depreciation computed as actually allowed. During the year assessee acquired by way of amalgamation the entire business of MPL - MPL did not have asset as goodwill in its balance sheet - High Court in its order merely gave approval to the amalgamation scheme and did not order to pay any specific amount of goodwill - There was thus no cost of acquisition on account of goodwill to the assessee Mere accounting entries did not give a right to the assessee to claim depreciation on goodwill (intangible asset). Chowgule Co. P. Ltd. Vs ACIT (ITAT, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. It was further explained that excess consideration paid by the assessee over the value of net assets acquired of YSN Shares and Securities P. Ltd. (amalgamating company) should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards the reputation which the amalgamating company was enjoying in order to retain its existing clientele. 8. The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to section 32(1) of the Income-tax Act, 1961 ( the Act , for short). 9. We quote hereinbelow Explanation 3 to section 32(1) of the Act : Explanation 3.-For the purposes of this sub-section, the expressions '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 : 10. Explanation 3 states that the expression asset shall mean an intangible asset, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
