TMI Blog2012 (7) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in the business of providing technical consultancy services and also undertaking engineering construction and erection contracts as well as supply of material for such contracts. For assessment year 2003-04, it had filed its return of income on 1st December 2003, declaring total income of ₹ 13,86,98,640. The assessment was completed under section 143(3) of the Income Tax Act, 1961 (for short the Act ) on 30th March 2006, inter-alia, disallowing depreciation claimed on goodwill and making an adjustment under section 92CA(3) of the Act. Certain other additions were also made. 3. The assessee carried the matter before the first appellate authority wherein the Commissioner (Appeals) granted part relief. Aggrieved, the Revenue is in appeal before the Tribunal, on the following grounds:- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the AC. to grant depreciation on goodwill without appreciating that depreciation is not allowable u/s. 36(1)(ii) of the IT. Act since goodwill is not an intangible asset in the nature of know-how, a patents, copyright, trademark, licenses, franchises or any other busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Commissioner (Appeals) and submitted that it is stated that the amount in question is goodwill and under those circumstances, no depreciation can be granted. He further contended that the assessee had invested in CGEL and if at all there is a loss, it is loss of capital and can never be goodwill. 6. Learned Departmental Representative, on ground no.2, submitted that the assessee has not disclosed income during the year and, hence, cannot claim tax credit during the year. He relied on Rule 37(BA)(2)(i) of the Act, and argued that once the income relatable to TDS is not shown during the year, the question of granting TDS credit does not arise. 7. On ground no.3, the learned Departmental Representative relied on the order passed by the Assessing Officer. 8. On club expenditure also, he relied on the order passed by the Commissioner (Appeals). 9. The learned Sr. Advocate, Mr. Firoze B. Andhyarujina, representing the assessee, on the other hand, opposed the contention of the learned Departmental Representative and submitted that on the issue of goodwill, the first characteristic is brought out at Para-(iii)/Page-2 of the order passed by the Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was subsequent to the mortgage that goodwill was created. He distinguished other cases relied upon by the learned Departmental Representative. 13. On ground no.2, i.e., TDS credit, he relied on assessee s own case for the earlier assessment year reported in Toyo Engg. India Ltd. v/s JCIT, [2006] 100 TTJ 373 (Mum.) and submitted that the issue is covered. He pointed out that the income in question was embedded in the work-inprogress. 14. On ground no.3, he submitted that the Commissioner (Appeals) called for the remand report and accepted the findings of the Assessing Officer that the transactions in question were not with an Associated Enterprises. Thus, he submitted that the Revenue should not have any grievance. On the issue of club expenditure he submitted that the ground is misconceived as the Commissioner (Appeals) had decided the issue against the assessee. 15. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record, as well as the case laws cited before us, we hold as follows:- 16. The facts of the issue are brought at Para-2.2 of the order passed by the Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining 40% of the share holding and the CGEL became 100% subsidiary of the assessee company. Thus, it is clear that the assessee is having investment in the CGEL, which shares were valued above ₹ 30,000 per share. 18. Now we would consider the order dated 14th October 2003 of the Hon'ble Jurisdictional High Court which approved the scheme of amalgamation of Casablances Gannon Engineering Ltd. with the assessee company. The assessee relies on the following passage:- . DOTH FURTHER ORDER that upon the Scheme becoming effective no shares of the petitioner company shall be allotted in respect of the holding of the petitioner company in the transferor company and the share capital of the transferor company shall stand cancelled as the Transferor Company is wholly owned subsidiary of the petitioner company AND THIS COURT DOTH FURTHER ORDER that on and from the Effective Date as defined in the Scheme, the assets and liabilities appearing in the books of transferor company as on the Appointed Date shall become and be shown as assets and liabilities of the Transferee Company at the same value as they appeared in the books of the Transferor Company and that the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional payment is probable and can reasonably be estimated at the date of amalgamation, it is included in the calculation of the consideration. In all other cases, the adjustment is recognised as soon as the amount is determinable [see Accounting Standard (AS) 4, Contingencies and Events Occurring After the Balance Sheet Date]. Treatment of Goodwill Arising on Amalgamation 19. Goodwill arising on amalgamation represents a payment made in anticipation of future income and it is appropriate to treat it as an asset to be amortised to income on a systematic basis over its useful life. Due to the nature of goodwill, it is frequently difficult to estimate its useful life with reasonable certainty. Such estimation is, therefore, made on a prudent basis. Accordingly, it is considered appropriate to amortise goodwill over a period not exceeding five years unless a somewhat longer period can be justified. 20. Factors which may be considered in estimating the useful life of goodwill arising on amalgamation include: (a) the foreseeable life of the business or industry; (b) the effects of product obsolescence, changes in demand and other economic factors; (c) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... help of the assessee. 23. Coming to the decision relied upon by the assessee i.e., the judgment of Hon'ble Delhi High Court in Hindustan Coco Cola Beverages P. Ltd., decision of Hyderabad Bench of the Tribunal in The A.P. Paper Mills Ltd. (supra) and other case laws, they do not help the case of the assessee, as that was a case where there was purchase of goodwill which is in the nature of a commercial right. In the case on hand, the very purchase of goodwill is not proved by the assessee. Consequently, ground no.1 of the Revenue appeal is allowed. 24. Coming to ground no.2, the issue of grant of TDS credit is squarely covered in favour of the assessee and against the Revenue by a decision of Mumbai Bench of the Tribunal in assessee s own case reported as 100 TTJ 373. Respectfully following the same, we dismiss this ground of the Revenue. 25. Ground no.3(a) and 3(b), are misconceived. The Commissioner (Appeals) has accepted the remand report of the Assessing Officer and granted relief to the assessee. We do not understand as to how the Assessing Officer can file an appeal against his own findings. The transactions in question are not with the A.E. but with third ..... X X X X Extracts X X X X X X X X Extracts X X X X
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