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TMI Blog2024 (5) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is arising on account of the aforesaid amalgamation. In any case, since the year under consideration is the second year of the claim of depreciation on Goodwill by the assessee, which has already been allowed to the assessee in the first year of its claim, therefore the entire exercise of determining the eligibility of claim in the year under consideration is merely academic, as in this year the depreciation on Goodwill is to be calculated on its opening WDV. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A), and the same is upheld. As a result, the grounds raised by the Revenue are dismissed. - Shri Amarjit Singh, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, Ld CIT(A)/NFAC failed to appreciate that the existence of Goodwill itself in question and cannot be justified 3. Whether on the facts and circumstances of the case and in law, Ld CIT(A)/NFAC failed to appreciate that as per Proviso 6 to Section 32, the amalgamated company cannot claim depreciation higher than what was actually allowed in the amalgamating company 4. Whether on the facts and circumstances of the case and in law, Ld CIT(A)/NFAC failed to appreciate the fact that the decision of Hon ble Supreme Court in the case of Smifs Securities Ltd wherein the goodwill was created due to extra consideration paid towards the Goodwill is not applicable in this case , 5) Whether on the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of amalgamation as sanctioned by the Hon ble High Court of Bombay with effect from 01.05.2015. After amalgamation, the name of the assessee was changed from M/s. K. V. Arochem Pvt. Ltd to M/s. Keva Fragrances Pvt. Ltd. The value of the amalgamating entity was arrived at Rs. 381.72 cr using the Discounted Cash Flow ( DCF ) Method. The assessee issued 6,21,029 fully paid-up equity shares of Rs. 100/- each at a premium of Rs. 6,046.50/- to M/s. S. H. Kelkar and Co. Ltd., i.e. the 100% shareholder of the amalgamating company, for the aforementioned purchase consideration. The assessee accounted for the amalgamation under the purchase method as prescribed in AS-14 and the difference of total consideration and value of assets over liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od for determining the value of the amalgamating company, even in the scenario of the DCF Method representing the market value, it would be incorrect to consider the difference between the market value and the identifiable net assets value as Goodwill . The AO held that the generation of Goodwill and the claim of depreciation is not genuine but only a means to reduce the tax liability. Accordingly, the AO disallowed the depreciation claimed on Goodwill on account of amalgamation on the basis that the existence of Goodwill itself is in question and cannot be justified, since the entire exercise of amalgamation amongst the group companies is for the purpose of evasion of tax. 7. In the appellate proceedings before the learned CIT(A), the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2015-16, relevant to the assessment year 2016-17. We find that the claim of depreciation on Goodwill on account of amalgamation was disallowed by the Revenue in the assessment year 2016-17. The learned CIT(A) also dismissed the appeal filed by the assessee on this issue. In further appeal by the assessee, the Co-ordinate Bench of the Tribunal in M/s. Keva Fragrances Pvt. Ltd Vs. DCIT, ITA. No.334/Mum./2020, vide order dated 02.08.2021 allowed the appeal filed by the assessee and deleted the disallowance of depreciation claimed on Goodwill . We find that the Co-ordinate Bench further held that the 5th proviso to section 32 of the Act, which is now the 6th proviso to section 32 of the Act, is not applicable to the present case as the amalga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us decisions as discussed above, the order of the ld CIT(A) upholding the order of AO on this issue can not be sustained. Accordingly we set aside the order of ld CIT(A) on this issue and direct the AO to allow the depreciation on goodwill. The appeal of the assessee is allowed. 9. Thus, from the perusal of the aforesaid decision of the Co-ordinate Bench of this Tribunal, we find that the claim of depreciation on Goodwill arising on account of amalgamation amongst group companies was allowed in a similar factual matrix. Therefore, respectfully following the decision of the Co-ordinate Bench rendered in assessee s own case in the preceding year, we are of the considered view that the assessee is entitled to claim the depreciation in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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