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TMI Blog2022 (7) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3,96,87,209/-(after deducting the value of the fixed assets and the value of security deposits from the sale consideration) is treated as Goodwill and depreciation thereon is claimed at @25%. He, therefore asked the assessee to submit the valuation report for the assets acquired by way of slump sale, if any made. Although, the assessee filed the details regarding the fixed tangible assets, which are taken at the depreciated values in the books of the transferor company, however, he noted that there is no submission of the valuation report of the intangible assets, i.e Goodwill. He, therefore asked the assessee to explain as to why depreciation on goodwill should not be disallowed, since the assessee could not prove the actual cost of sale. The assessee explained the circumstances in which the slump sale was carried out and why goodwill had to be paid. However, since the assessee has not given any valuation report for the valuation of the goodwill, the AO rejected the contention of the assessee. He noted that as per provision of section 32 r.w.s. 43(6)(a) depreciation is allowable on the actual cost of the asset acquired during the previous year. He referred to the provision of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Counsel for the assessee strongly challenged the order of the ld.CIT(A) in sustaining the disallowances made by the AO on account of depreciation on goodwill. He submitted that the assessee company acquired the Hyderabad business of Beams Hospitals Private Limited as a going concern and on a slump sale basis by paying a consideration of Rs. 7.94 crores. Referring to the copy of agreement dated 30.03.2015 between Beams Hospital Private Limited and Avis Hospitals India Limited, copy of which is placed in paper book at page No.78 to 99, he submitted that as per the agreement, the purchase consideration is Rs. 7.94 crores. He submitted that in the return of income filed and as per schedule of depreciation, the value of fixed assets has been taken at Rs. 3,31,23,000/- and the difference amount of Rs. 3,96,87,209/- after deducting the value of security deposits etc. was treated as Goodwill on which depreciation @25% was claimed. He submitted that the value of fixed assets and other assets were taken at WDV of transferor company which was not disputed by the AO in the assessment order. Referring to various decisions filed in the paper book, he submitted that when a person acquires a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them was upheld. 7. Referring to the decision of Hon'ble Supreme Court in the case of PCIT vs.Zydus Wellness Ltd. [2020] 113 taxmann.com 154(SC)/269 Taxman 57, he submitted that the Hon'ble Supreme Court in the said decision has dismissed the SLP filed by the revenue against the order of the Hon'ble High Court, wherein the Hon'ble High court upheld the decision of the Tribunal allowing assessee's claim for depreciation on goodwill. 8. Referring to the decision of Hon'ble Delhi High court in the case of Triune Energy Services(P.) Ltd. vs. DCIT[2016] 65 taxmann.com 288, he submitted that the Hon'ble High Court in the said decision has held that where assessee purchased business as going concern, consideration paid in excess of value of tangible assets was classifiable as goodwill eligible for depreciation and, therefore, further exercise to value goodwill was not warranted. In that case, assessee purchased business of another company as going concern-It claimed depreciation on goodwill being excess of amount paid over net value of assets. Assessing Officer rejected claim for depreciation-Tribunal held that depreciation must be allowed on goodwill but remanded matter back to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IS Hospitals India Limited and Beams Hospitals Private Limited dated 30.03.2015 copy of which is placed in the paper book at page at 78 to 99. We find the assessee in the return of income filed has taken the value of fixed assets at Rs. 3,31,23,000/- as per the depreciation schedule and the difference amount of Rs. 3,96,87,209/- after deducting the value of security deposits etc. was treated as goodwill on which depreciation @ 25% has been claimed. We find the AO rejected the claim of depreciation on goodwill by relying the provision of section 32 r.w.s. 43(1) and 43(6). We find the ld.CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the ld.counsel for the assessee that when a purchaser acquires a business on a going concern basis by paying more than the fair market value of the net tangible asset, the difference in the purchase consideration and the net value of the assets and liabilities is attributable to the commercial benefit which is nothing but goodwill on which depreciation has to be allowed. It is also his argument that the intangible assets, i.e business claims, business information, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn filed for the assessment year 2010-11, the assessee had not raised such a claim. However, during the course of assessment proceedings, the assessee presented revised computation which included the assessee's claim of depreciation of Rs.7.19 crores on the goodwill expanded at the time of amalgamation of the companies. The assessee pointed out that such claim would be allowable by virtue of the judgement of the Supreme Court in case of Commissioner of Income-Tax, Kolkata vs. Smifs Securities Ltd. reported in 348 ITR 302. The Assessing Officer disallowed the claim on two grounds. Firstly, that the claim was not made in the original return nor did the assessee file the revised return. The second ground was that the claim was fictitious and the goodwill has been accounted as a balancing factor in the hands of the assessee without acquisition of an intangible asset as contemplated under Section 32 of the Act. 4. The assessee carried the matter in appeal. The CIT(Appeals) as well as the Tribunal both ruled in favour of the assessee. With respect to raising an additional claim without revising the return the Tribunal relied on the decision of the Bombay High Court in case of Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the first time before the appellate authority without resorting to revising the return before the assessing officer. 40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor HC-NIC Page 5 of 6 Created On Sat Oct 07 09:32:50 IST 2017 O/TAXAP/779/2017 ORDER did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under section 80IB and 80HHC of the Act." 6. With respect to the claim of depreciation, the decision of Supreme Court in case of Smifs Securities Ltd. (supra) would squarely apply. There is no material referred to by the Assessing Officer to hold that the claim of depreciation was fictitious. If we read his entire expression in this respect, he seems to be suggesting that bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard 10 as issued by the Institute of Chartered Accountants of India. The relevant extract of which reads as under:- "16.1 Goodwill, in general, is recorded in the books only when some consideration in money or money's worth has been paid for it. Whenever a business id acquired for a price (payable either in cash or in shares or otherwise) which is in excess of the value of the net assets of the business taken over, the excess id termed as 'goodwill'. Goodwill arises from business connections, trade name or reputation of an enterprise or from other intangible benefits enjoyed by an enterprise." 18. It is also relevant to note that Smifs Securities Ltd. (supra) was a case where assets of company - YSN shares and Securities (P.) Ltd. were transferred to Smifs Securities Ltd. under a scheme of amalgamation. And, the excess consideration paid by the Assessee therein over the value of net assets of YSN Shares and Securities (P.) Ltd. acquired by the Assessee, was accounted as goodwill. 19. In view of the above, we are inclined to accept the contention advanced on behalf of the Assessee that the consideration paid by the Assessee in excess of its value of tangible as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company appointed the valuer and not the assessee and there is unfair fixation of transfer price to benefit the transferor at the cost of the assessee, the matter being an affair between parent of the assessee and the assessee. At para 7.18 of the order, the Tribunal had given a clear finding that clause 10.2 of the second valuation report clearly indicate that the purchase consideration is for acquisition of 100% equity. Therefore, the price is paid for 100% control of equity and more in the nature of premium for acquisition of 100% equity control and therefore, the balancing charge is not in the nature of goodwill. It has observed that allowing depreciation on fictional goodwill in such a case would be a case of one making profit/loss out of oneself. In such circumstances, the Tribunal held that it was wholly unreal and artificial to separate the business from its owner and treat them as if they were separate entities trading with each other and then by means of a fictional sale introduce a fictional profit which in truth and in fact is non-existent. The Tribunal further observed that the valuation report is faulty and in contradiction to the "Business Transfer Agreement" in work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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