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2009 (8) TMI 1157 - AT - Income TaxDepreciation on goodwill - consequential claim on WDV - exchange ratio for amalgamation - Claim denied as value of the asset is not a depreciable one - HELD THAT:- We are of the view that the assessee has not established that it has acquired any rights of either commercial or business nature while valuing the goodwill. It is a balancing figure at the time of amalgamation and the focus of the entire valuation report is on fair exchange ratio for merger and allotment of shares of the amalgamated company to the shareholders of the amalgamating companies. Since there are no business or commercial rights involved in paying the amount and the goodwill is being a balancing amount in the scheme of amalgamation after the fair value arrived at for merger of the companies, the facts of the case do fall within the propositions laid by the Hon'ble Tribunal in the case of Bharatbhai J. Vyas v. ITO [2005 (8) TMI 279 - ITAT AHMEDABAD-C]. In the present case the goodwill simpliciter is valued at ₹ 3,05,91,000 and there were no business or commercial rights involved in that goodwill accounted by the assessee. In view of this while agreeing with the principle laid down in the abovesaid case that goodwill simpliciter is not eligible for depreciation we are not in agreement with the proposition laid down by the learned counsel that the amount accounted for by the assessee can be bifurcated into goodwill simpliciter at ₹ 50 lakhs and the balance for other commercial rights. Since no commercial rights are said to have been acquired by the assessee company under the scheme of amalgamation, we are not persuaded by the submissions of the learned counsel. Moreover in the provisions of s. 32(1)(ii) while mentioning the various intangible assets specifically and also mentioning business or commercial rights of similar nature, the legislature has specifically excluded the word 'goodwill' because it cannot be considered as a commercial or business right. Moreover, as rightly considered by the AO this goodwill is not purchased from any other person but has been acquired in the course of amalgamation in assessee's own books of account as a balancing figure for the assets acquired and the price paid. In view of these provisions, it is very clear that goodwill simpliciter cannot be considered for allowance of depreciation. In view of this we are in agreement with the orders of the AO and the CIT(A) on this issue and hold that assessee's claim of depreciation on goodwill cannot be allowed on the facts of the case. Accordingly ground No. 1 in all the years is rejected. Deduction u/s 80IA - Set off of losses and unabsorbed depreciation of the units carried forward - assessee claimed deduction under s. 80-IA on profits from Unit 3 and Unit 4 without setting off unabsorbed depreciation/losses whereas the other two units were under losses - HELD THAT:- This issue is crystallised by the decision of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. [2004 (3) TMI 9 - SUPREME COURT] wherein it was held that s. 80-IB has an overriding effect on all other sections in Chapter VI-A. It is now settled law that while computing gross total income necessary set off has to be given to the unabsorbed depreciation while computing income under the head the business or profession and the brought forward losses while arriving at the gross total income. In view of this, the contentions of the assessee cannot be accepted and the orders of the AO and the CIT(A) on this issue arc upheld. Accordingly ground No. 2 in all the appeals is rejected.
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