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TMI Blog2024 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... olding pattern, submitted by assessee. Perusal of the above chart would show that both the parties are not related parties and hence the AO has erred in making adverse comments. Observation of the AO that there was no intangible asset transferred to the assessee by the seller company is also not correct because law in this regard has already been settled in the case of CIT Vs. SIMS securities [ 2012 (8) TMI 713 - SUPREME COURT] wherein the Hon ble Supreme Court has held that excess amount paid over and above to the net asset value would be treated as goodwill. Hon ble Supreme Court in this case has further held that goodwill is in the nature of any other commercial or business right under the category of intangible assets. Recipient company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- i.e disallowance of depreciation on goodwill the AO took a view that assessee is not entitled for depreciation on goodwill because there was no valuation report on the date of transfer of the business. The AO also referred to the business transfer agreement dated 29/07/2016 and held that there is no mention of any good will in that agreement. The Ld AO has also alleged that M/s M/s Doosan Infraacore Construction Equipment India Private Limited (DICEIPL) and the assessee are related parties. 5. The second disallowance made by the AO is the disallowance on account of provisions for warranty. This amount has been disallowed by the AO on the ground that the transactions were between the related parties and hence provisions of 40A(2)(b) are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased the business of the DICEIPL for an amount of Rs. 11,93,57,990/-. The counsel for the assessee further pointed out that this purchase consideration was determined on the basis of valuation report obtained and the same was based on discounted cash flow method (DCF). The counsel for the assessee further submitted that the net asset value of the business was 7,04,85,661/- and the excess price amounting to Rs. 48187642 was the price for the goodwill and hence the AO was not correct in disallowing depreciation on goodwill. The counsel for the assessee further argued that the observation of the AO that excess consideration paid to the alleged related company does not pertain to any tangible and intangible asset is factually and legally inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mments. 15. The next observation of the AO that there was no intangible asset transferred to the assessee by the seller company is also not correct because law in this regard has already been settled by the Hon ble Supreme Court in the case of CIT Vs. SIMS securities reported in 348 ITR 302, wherein the Hon ble Supreme Court has held that excess amount paid over and above to the net asset value would be treated as goodwill. Hon ble Supreme Court in this case has further held that goodwill is in the nature of any other commercial or business right under the category of intangible assets. 16. We further observe that the recipient company has offered the excess amount as short-term capital gain and the same has been accepted by the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal relied by the Ld. A.R. in the case of ACTT v. Dorma India (P.) Ltd., Chennai in [IT Appeal Nos. 1664 to 1666 (Chny) of 2019 dated 20-11-2019]. Further, we also place reliance on the judgment of Hon'ble Karnataka High Court in the case of Padinini Products (P) Ltd v. Dy. CIT [2020] 121 taxmann.com 237/[202 I] 277 Taxman 22, wherein similar circumstances Hon'ble High Court has allowed the claim of the assessee. 15. In view of the above discussion, we are of the view that the authorities below are not correct in disallowing the claim of the assessee on depreciation. We hold accordingly and direct the AO to allow appreciation on goodwill. 16. So far as ground and 3 and 4 are concerned, we restore the issue to the file of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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