9911796707
TMI Blog2025 (3) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... the year of succession.
Tribunal has failed to even notice or examine the issue from that angle. Its judgment is based solely on the applicability of the Fifth Proviso to Section 32 (1) and which we, in any case, have found was clearly not germane to AYs 2015-16 and 2016-17.
In view of the above in our considered opinion, therefore, the ends of justice would warrant the matter being remitted to the board of the Tribunal for examining the appeal afresh and bearing in mind the issue which stands flagged hereinabove.
We accordingly allow the instant appeal and set aside the Order of the Tribunal dated 03 February 2023. X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st April 2013 as per order of the Hon'ble High Court of Delhi dated 5th October 2012. In terms of such order, the difference between purchase consideration and net assets acquired (net assets = assets less liabilities) was recorded as goodwill in the books of the assessee company in F.Y. 2013-14 at value of Rs. 16,62,37 ,413/- on which it claimed depreciation @ 25% as per Section 32 of the Income Tax Act, 1961 of Rs. 4,15,59,353/- in A.Y. 2014-15. Thus, goodwill amounting to Rs. 16,62,37,413/- was recognized in the books of the appellant during FY 2013-14. It was noticed by the AO that during the year, the assessee has claimed depreciation on goodwill @ 25% of opening WDV of Rs. 12,46,78,060/- equivalent to Rs.3,11,69,515/-." 8. The Tribunal then proceeded to accept the uncontested position of goodwill constituting an intangible asset and depreciation thus being allowable thereon. It has in this respect duly taking note of the judgment of the Supreme Court in Smifs Securities. In paragraph 11, it has reproduced the details pertaining to the block of assets which changed hands pursuant to the demerger and as they stood on 01 April 2013 in the following terms: "11. In the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on not taken place. For the same reason, the case of amalgamation is not regarded as transfer for the purpose of capital gain as provided under Section 47(vi) of the Act and therefore such cases are exempted from capital gain which is otherwise chargeable to tax on transfer of assets." 10. The ultimate conclusion which came to be rendered by the Tribunal is founded solely on the Fifth Proviso to Section 32 (1) as it stood at the relevant time. That provision and the extract of which has been placed on our record by Mr. Sethi, is reproduced hereinbelow: "32. (1) [In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-] [(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed on such percentage on the written down value thereof as may be prescribed. Explanation.-For the purposes of this proviso,- (a) the expression "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not include "maxi-cab", "motor-cab", "tractor" and "road-roller"; (b) the expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road roller" shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988):] [Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991:] [Provided also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). [Explanation 5.-For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;] [(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing [[or in the business of generation, transmission or distribution] of power], a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : [Provided that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and instal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso; (2) "sold" includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is [an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act, of any asset by the banking company to the banking institution.]] (iv) [***] (v) [***] (vi) [***] (1A) [***] [(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and amalgamation of companies, the predecessor of the business and successor the amalgamating company and amalgamated company as the case may be, are entitled to depreciation allowance on same assets which in aggregate exceeds depreciation allowance for Previous year at the prescribed dates. It is proposed to restrict the aggregate deduction in a year to the deduction computed at the prescribed rates and apportion the allowance in the ratio of number of days for which the assets were used by them." 9. Thus, it is evident that 5th proviso to S. 32 of the Act restricts aggregate deduction both by the predecessor and the successor and if in a particular year there is no aggregate deduction, the 5th proviso does not apply. Thus, it is axiomatic that until and unless it is the case of aggregate deduction, the proviso has no role to play. The 5th proviso in any case will apply only in the year of succession and not in subsequent years and also in respect of overall quantum of depreciation in the year of succession. Accordingly, the third substantial question of law is answered in favour of the assessee and against the revenue." 14. A similar view is found expressed by the Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue ['WDV'] is to be computed. Learned counsel laid special stress upon Explanations 2(a) and 2(b) appended to Section 43 (6) (c) of the Act to submit that these aspects had clearly guided the Assessing Officer ['AO'] in computing the WDV of the block of assets on which depreciation could have been claimed in the two assessment years with which we are concerned.
16. We, however, note that the Tribunal has failed to even notice or examine the issue from that angle. Its judgment is based solely on the applicability of the Fifth Proviso to Section 32 (1) and which we, in any case, have found was clearly not germane to AYs 2015-16 and 2016-17.
17. In view of the above in our considered opinion, therefore, the ends of justice would warrant the matter being remitted to the board of the Tribunal for examining the appeal afresh and bearing in mind the issue which stands flagged hereinabove.
18. We accordingly allow the instant appeal and set aside the Order of the Tribunal dated 03 February 2023.
19. The appeal shall consequently stand revived on the board of the Tribunal to be examined afresh and in light of the observations appearing hereinabove. X X X X Extracts X X X X X X X X Extracts X X X X
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