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2021 (8) TMI 286 - AT - Income TaxDisallowance on account of depreciation on goodwill - Scheme of Amalagamation adopted - method of accounting for the amalgamation - merger method for accounting the amalgamation and net asset value method instead of discounted cash flow method to compute the goodwill by the AO - HELD THAT:- We note that in accounting for the assets of the amalgamating company in the books of the assessee the assessee followed the purchase method in pursuance of accounting standard-14 and accounted for the cost of acquisition at fair value resulting into goodwill of ₹ 251.50 Cr and then claimed depreciation thereon @25%. After taking into account the facts of the case and the provisions of section 32 of the Act , we are of the opinion that assessee has rightly claimed the depreciation on goodwill. We also find merit in the contentions of the ld AR that the scheme of amalgamation is approved by the High Court after giving notice to the stakeholders including the Revenue to state its objections, if any, to the proposed amalgamation scheme. However revenue has raised no objection to the scheme of amalgamation. Therefore the principle of estoppel prevents the revenue from challenging the validity of the scheme at the subsequent date - See ELECTROCAST SALES INDIA LTD. VERSUS DCIT, CC-XXI, KOLKATA [2018 (3) TMI 473 - ITAT KOLKATA] In view of the decision of United Breweries Ltd Vs ACIT [2016 (9) TMI 1527 - ITAT BANGALORE] is not a good law as the Hon’ble High Court has held that 5th proviso to section 32(1) is only applicable in the circumstances where the predecessor and successor both claimed depreciation in respect of the same asset. We find that the 5th proviso was inserted in order to prevent double claim of the depreciation in respect of the same asset. But these are not the facts in the present case before us as the amalgamating company did not claim any depreciation on the goodwill and therefore the same can not be disallowed. - Decided in favour of assessee. Addition u/s 56(2)(viib) - excess issue price of shares over fair market value of the shares - Appeal of the assessee was allowed by Ld. CIT(A) by holding that the assessee is a subsidiary company of holding company which is a listed company and therefore the assessee is also a company in which the public are substantially interested and as a result, the provisions of section 56(2)viib) of the Act are not applicable - HELD THAT:- The undisputed facts are that the assessee is a subsidiary company of a company SHK which is listed on the stock exchange and therefore is a company in which public are substantially interested. Since the assessee is a subsidiary company of a company which is listed and therefore assessee is also a company in which public are substantially interested and therefore provisions of section 56(2)(viib) are not applicable to the assessee company as the said section is not applicable to the company in which public are substantially interested. We have perused the order of Ld. CIT(A) and observed that while allowing the appeal of the assessee on this issue, Ld. CIT(A) has also held that provisions of section 56(2)(viib) of the Act are not applicable to the assessee for the reason that assessee company is a subsidiary company of holding company which is listed and therefore the assessee also becomes a company in which public are substantially interested. We are of the view that Ld. CIT(A) has correctly allowed the appeal of the assessee. Benefit of brought forward losses denied - CIT(A) allowed the appeal of the assessee on this issue by observing that as per provisions of section 72A of the Act, even if amalgamation was done the other way around, benefit of brought forward losses would have been available to the amalgamated entity - HELD THAT:- As perused the provisions of section 72A of the Act minutely and observe that the section allows benefit of losses incurred by amalgamating company to the amalgamated company. Therefore, there is merit in the arguments of the ld. AR that even if the amalgamation was done the other way around, benefit of brought forward losses would have been available to the amalgamated company. Under these facts and circumstances we do not find any infirmity in the appellate order so far as this issue is concerned. The ld. CIT(A) rightly reversed the order of AO denying the benefit of brought forward losses and unabsorbed depreciation to the appellant assessee - Assessee appeal allowed.
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