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TMI Blog2023 (2) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... are by nature meant for better business purposes and are generally revenue neutral. Appeals are hereby dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of depreciation was brought w.e.f. 01.04.2021 and the assessment before us pertains to Assessment Year 2014-15 and 2015-16 which are before the amendment in the Act. Hence, it was argued that depreciation on goodwill is legally allowable expenditure. The ld. AR further argued that the judgment quoted by the Revenue of United Beverage Ltd. Vs. ACIT in ITA No. 722/Bang./2014 pertains to the case of amalgamation whereas the case of the assessee pertains to demerger after the approval of the Hon'ble High Court. 6. Rebutting the arguments of the ld. AR, the Departmental Representative taken us through the provisions to Section 32(1) of the Income Tax Act, 1961 and argued that the issue of amalgamation or demerger stands on the same principle when the issue of depreciation in the further year is concerned in the post implementation of the Court order. 7. Heard the arguments of both the parties and perused the material available on record. 8. We find from the record, during the financial year 2013-14, the appellant had acquired malt production units of Malt Company India Pvt. Ltd. (MCIPL). Malt production units at Pataudi (Haryana) and Kashipur (Uttarakhand) were a part of MCIP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), stood vested in the appellant as on 1st April 2013: S. NO. Particulars Amount in Rs. I ASSETS Land 2,76,30,716 Buildings 13,69,61,629 Plant & Machinery 71,27,75,421 Other Fixed Assets 51,72,993 Capital Work in Progress 12,17,04,012 Non Current Investments 70,000 Long Term Loans and Advances 3,94,59,698 Inventories 5,68,79,984 Trade Receivables 15,04,66,263 Other Current Assets 5,90,56,353 Total Assets 1,31,01,77,069 II LIABILITIES Long Term Borrowings 1,05,96,54,849 Deferred Tax Liability 9,36,70,517 Long term provisions 10,35,325 Trade Payables 5,79,65,825 Other Current liabilities 15,06,16,758 Short term provisions 97,708 Total Liabilities 1,36,30,40,982 III Net Assets (-) 5,28,63,913 12. In consideration of the aforesaid assets and liabilities having so vested, the appellant issued 1,13,47,350 equity shares of Rs. 10 each as fully paid-up to the shareholders of MCIPL. Accordingly, the issued, subscribed and fully paid up share capital of the appellant stood at Rs. 11,34,73,500/- as on 31.3.2014. 13. The provisions of Section 43(1) explanation 3 reads as under: "Explanation 3,- Where, before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in "[clause (xiii), clause (xiiib) and clause (xiv)] of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them.] [Explanation 1.-Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malgamating company in the year of amalgamation and depreciation to demerged company and the resulting company in the year of demerger shall be apportioned in the ratio of the number of days for which the assets were used. 22. Written Down Value ('WDV') (Sections 32 and 43(6)(c)) * WDV in the hands of amalgamated company shall be the WDV of the block of assets in the hands of the amalgamating company immediately before amalgamation. * WDV in the hands of the resulting company shall be the WDV of transferred assets of the demerged company immediately before demerger. * WDV in the hands of the demerged company shall be the WDV of the block of assets before demerger less WDV of assets transferred to the resulting company. 23. Therefore, by the virtue of proviso to Section 32(1), the depreciation in the hands of the assessee is allowable only to the extent, as if, demerger has not taken place. Therefore, the assessee being a demerger company cannot be allowed depreciation on the assets created as a consequence of the scheme which is more than the deprecation allowable earlier entity. Amalgamation and demerger are by nature meant for better business purposes and are generally re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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