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2009 (11) TMI 85 - ITAT HYDERABAD-ARevision u/s 263 - goodwill recognised in the books of account at the time of amalgamation being the excess of actual consideration paid over and above the net assets over liabilities of the erstwhile company - as per CIT AO incorrectly allowed the same goodwil - HELD THAT:- All the rights are similar to the rights mentioned in s. 32 of the IT Act is acquired by the assessee in this case. Thus goodwill is a business or commercial right of similar nature and the assessee is benefited by amalgamation by acquiring that commercial value being intangible assets which the assessee has paid on amalgamation i.e., excess consideration over and above the excess of assets over liabilities is a goodwill which is an asset entitled for depreciation u/s 32 of IT Act. As such, AO is justified in granting the depreciation on goodwill while completing the assessment under s. 143(3) of the IT Act and CIT is not justified in invoking of provisions of s. 263 on this issue. Further, the provision of s. 263 could be invoked by the CIT if the circumstances specified therein viz., (1) the order is erroneous (2) by virtue of the order being erroneous, prejudice has been caused to the interest of the Revenue, exist. For invoking the provision s. 263, both the conditions precedent. for exercising the jurisdiction are conjunctive or not disjunctive. In the instant case, the AO followed one course of action which is permitted by law and that resulted in loss to the Revenue, that cannot, be said erroneous so far as prejudicial to interest of the Revenue. We place reliance on the judgment of Hon'ble Supreme Court of India in the case of CIT vs. Green world Corporation [2009 (5) TMI 14 - SUPREME COURT]. Penalty proceedings under s. 271(1)(c) - Since CIT himself has no power to initiate the penalty proceedings. If the AO is of the opinion that penalty is to be imposed under this provision, he is at liberty to take the decision and the CIT cannot put his words in the mouth of the AO. Accordingly, we uphold the entire arguments of the learned counsel of the assessee on the first ground raised by the assessee. Allowability of fees paid to the RoC, the assessee already agreed before the disallowance of the same and assessee cannot have any grievance on this issue. Further, the assessee has not lead any evidence regarding the entitlement of deduction under s. 35D. Moreover, this was not incurred in connection with the extension of its industrial undertaking or in connection with setting up new industrial undertaking. Accordingly, this ground of the assessee is dismissed. Reworking of the book profit, after taking into account the revaluation of assets - In this case the CIT has given only direction to verity whether entries have been made to give effect to the revaluation reserve and the AO may verity this aspect and if necessary, revise the book profit to the limited extent of depreciation charged on the revaluation portion of the assets. This direction given by the CIT is in consonance with the s. 115JB and we do not find any infirmity in this direction and same is upheld.
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