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2020 (4) TMI 129 - AT - Income TaxDepreciation on Goodwill - inflated value of goodwill - assessee followed AS-14 for accounting of acquisition of business, while arriving at goodwill - method of valuation or computation of net-worth for different purposes - CIT (Appeals) restricting Depreciation considering the Goodwill as the net worth of the Seller instead of Assets as per valuation report as reduced by the Liabilities - Goodwill booked by the Assessee is the Net difference in Consideration paid on purchase of the Unit under Slump Sale, as reduced by the individual Assets other than Assets except Goodwill accounted for as per valuation Report - HELD THAT:- Admittedly, AS-14, nowhere prescribed for different method of computation of net worth of undertaking acquired by way of slump sale for different purposes. In this case, the assessee although, followed AS-14 for accounting of acquisition of business, while arriving at goodwill, it has revalued its assets, which is different from value of assets, as per books of accounts of erstwhile proprietorship firm. When it comes to payment of capital gain on slump sale, the proprietor of erstwhile firm has taken net worth as per books of accounts of firm as on the date of acquisition. From the above, it is very clear that the assessee has taken different values for the purpose of accounting of acquisition of business and the proprietor has followed different method for computation of net-worth for the purpose of computation of capital gain on slump sale. Since, the seller of assets i.e proprietor of erstwhile firm and the director of the present assessee are one and the same and also, fact that the director has holding more than 21% in present company, it is undoubtedly clear that the assessee has followed a different method for accounting goodwill in books of accounts, so as to claim higher depreciation, although such method has been followed in accordance with prescribed accounting standard. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were right in, coming to the conclusion that the assessee has arrived at inflated value of goodwill to claim higher depreciation on intangibles. Since, the assessee has taken different values for different purposes, we are of the considered view that the ratio laid down CHOWGULE & COMPANY PRIVATE LIMITED VERSUS ADDL. COMMISSIONER OF INCOME-TAX [2016 (2) TMI 407 - BOMBAY HIGH COURT] is not applicable to the case of the assessee and hence, the same is hereby rejected. - Decided against assessee.
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