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TMI Blog2021 (9) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it cannot be treated that it is a intangible asset and cannot be treated as a goodwill. Before us the assessee has not produced any details in regard to how he has arrived the value of assets and entry in the books of accounts. Therefore the contention of the assessee is rejected. Entire assets and liabilities were not taken over by the assessee as per MOUs therefore, the assets and deferred sales tax liabilities which are not in the nature of amalgamation. In the impugned case, it appears that the assessee has tried to pass entry in its books of account only giving corresponding effect in the assets side in the balance sheet of the said liability as goodwill, which is a self-creating in nature. The liability will always remain the liability and the liability cannot change in the form of assets. Therefore, the creation of goodwill in the books of account is completely wrong and charging depreciation on the goodwill is also wrong, hence, the depreciation claim of the assessee on the goodwill is not allowable as per the IT Act - assessee is not eligible for claiming depreciation on goodwill since its inception i.e. first year of claiming of depreciation and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goodwill. c) Commissioner of Income Tax (Appeals) ought to have seen when once goodwill IS accounted for by the appellant in its books of account which is not disputed, depreciation on goodwill is allowable as deduction. 3. For all of the above and such other grounds as may be urged at the time of hearing it is prayed that the appeal be allowed and suitable directions be issued to grant depreciation on goodwill. 2.1 The assessee has also raised the following Additional ground of appeal and requested to adjudicate the same: Without prejudice to Ground Nos.2(a), 2(b) and 2(c), the learned Commissioner of Income Tax (Appeals) ought to have allowed the depreciation c1aimed by the Appellant holding that such claim is allowable even otherwise treating deferred sales tax liability as part of cost of various fixed assets. 3. Briefly the facts of the case as taken from AY 2009-10 are that the AO during the course of assessment proceedings noticed from the MOU dated 27.09.2004 between the M/s SAGAR CEMENTS LIMITED as party NO. 01 and the ASSESSEE party NO. 02 , that the assessee company agreed to purchase the Assets consisting the Immovable properties at &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITAT. 7. Before us, the ld. AR of the assessee filed a petition seeking admission of additional evidence, the contents of which are as under: 1. The appellant company has filed the above numbered appeals which are pending disposal before the Hon'ble Income Tax Appellate tribunal, Hyderabad. 2. The appellant is seeking relief, by way of allowance of depreciation on plant and Machinery which has been partly disallowed by the Assessing Officer and which has been upheld by the C.I.T (Appeals). 3. The appellant entered into an agreement in November, 2004 for purchase of plant and machinery. It agreed to take over the sales tax deferral liability to the extent of ₹ 11,OO,81,342/- from the seller. It has discharged the liability taken over by it along with further liability that arose after the plant and machinery were purchased by it. The relevant payments were made subsequent to the date of assessment. The, correspondence with the sales tax department took place in the year 2016. These documents constitute important evidence supporting the grounds of appeal raised by the appellant in the appeal before the Hon'ble Appellate tribunal. The said do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nipal Universal Learning (P) Ltd 34 Taxmann.com 9 KAR (copy submitted herewith) In the said case, the assessee claimed depreciation on the excess consideration paid over the value of the net assets. The A.O. treated the same as goodwill and did not allow depreciation on the said amount treated by him as goodwill. The assessee's claim was allowed by the Hon'ble ITAT. In further appeal by the Department, the Hon'ble High Court, following the decision of the Hon'ble Supreme Court in the case of CIT vs SMIFS Securities Ltd., (Supra), held that goodwill is an asset and entitled to depreciation and upheld the decision of the Hon'ble ITAT and dismissed the appeal filed by the Department. The assessee relies on the ratio of the decisions cited above and submits that even if the amount of ₹ 11,00,81,342/- were treated as goodwill, the assessee is entitled to depreciation on the same. 8. The learned CIT (Appeals) ought to have appreciated that the amount of ₹ 11,00,81,342/- in fact represented part of cost of the assets acquired and should have allowed the claimed of depreciation as such. 9. The assessee has filed additional evidence on 31-03-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (as explained above) 3. Plant machinery (After capitalization of sales tax liability) 360,583,414 45,072,927 The assessee submits on the facts and circumstances explained in the preceding paragraphs and the evidence filed, appeal in ITA No.650/Hyd/2015 relating to the Asst.Year 2009-10 may kindly be allowed. Asst Years 2010-11 and 2012-13 12. It is submitted that the facts and circumstances in the appeal in ITA No.651/Hyd/2015 relating to the Asst.Year 2010-11 and ITA No.463/Hyd/2017 for Asst.Year 2012-13 are similar. The assessee prays that the appeals filed by the assessee may kindly be allowed for the said two years also based on the submissions made in the preceding paragraphs. 8. The ld. DR, on the other hand, besides relying on the orders of revenue authorities submitted that the deferred sales tax liability claimed by the assessee under the head of goodwill sought to be depreciated by the assessee is not proper and not in accordance with law. This is the liability which was existed on the date purchase and it was known liability ,therefore, it cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred sales tax liability) is cost of plant and machinery, which has been apportioned in the value of fixed assets is not acceptable for the reason that the assessee has produced annual reports in the form of paper book, which are placed at page No. 28, which is 13th Annual Reporting relating to FY 2014-15 in which, we find that at Note No. 12, the goodwill has been separately shown by the assessee under the fixed assets, which is placed at page 38. We further find that the assessee has produced paper book containing pages 10 to 16 which is a summary of depreciation schedule as per IT Act from AY 2005-06 to 2011-12 where there is no separate description of goodwill. The goodwill is an intangible asset, which cannot be equated with the tangible fixed assets. We observe that on the one hand the assessee submits that it is a part of fixed assets included in the cost of the fixed assets and on the other hand, he submits that it is a goodwill which has been arisen towards excess consideration paid for the discharging of liabilities in future date, therefore, it is goodwill and to be named as intangible assets, which are contrary in nature. Further, we observe that the assessee has paid 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also wrong, hence, the depreciation claim of the assessee on the goodwill is not allowable as per the IT Act. Considering the totality of the facts and circumstances of the case, the assessee is not eligible for claiming depreciation on goodwill since its inception i.e. first year of claiming of depreciation and accordingly, the grounds raised by the assessee on this issue are dismissed. 9.3 Further, the contention of the ld. AR of the assessee s is not acceptable that for AY 2011-12, the revenue has accepted the depreciation on goodwill claimed by the assessee for the reason that res-judicata does not apply in the income-tax proceedings as every assessment year is a separate assessment year. The ld. AR of the assessee also relied on the decision coordinate bench of this Tribunal in assessee s own case for AY 2005-06 and 2006-07 in ITA Nos. 184 185/Hyd/2015 vide order dated 30th October, 2015, is not acceptable because it was decided on the legal issue regarding challenging the reopening of the case. 9.4 Direction: Since the assessee has claimed depreciation since its acquisition of the deferred sales tax liabilities to which we have decided the issue against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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