TMI Blog2016 (12) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ahmedabad. 2. Assessee has raised following grounds of appeal :- 1. In law and in the facts and circumstances of the appellant's case, the impugned order passed by the learned Pr. CIT u/s. 263 of the Incometax Act, 1961 is void and deserves to be cancelled, inter alia , for the reason that it has been passed without jurisdiction as the original assessment order which it sought to revise was neither erroneous nor prejudicial to the interests of the Revenue. The learned Pr. CIT ought to have appreciated, inter alia , (a) that it being the admitted position that the appellant had neither claimed nor had it been allowed any depreciation on Goodwill in Assessment years 2007-08, 2008-09 and 2009-10, its claim for depreciation in the present assessment year on the basis of written down value arrived at after considering depreciation for A.Y. 2010-11 (which was the first year in which it had claimed depreciation on Goodwill) alone had been correctly allowed in the original assessment order considering that as per the definition of the expression written down value contained in clause (G) of Section 43 only such depreciation as had been actually allowed to an assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous and prejudicial to the interest of revenue with regard to excess depreciation claimed on goodwill. In reply to the notice assessee submitted that the issue of claiming depreciation on goodwill was well taken up by ld. Assessing Officer during assessment proceedings and all the details relating thereto were furnished and the claim by assessee was found to be correct by Assessing Officer and there was full application of mind by him as he adopted legally correct view. 4. However, ld. Principal CIT did not agree to the contentions of assessee and cancelled the order u/s 143(3) of the Act and directed to make fresh assessment by observing as follows :- 3. I have considered the facts of the case and the submissions made by the assessee. The Goodwill arose due to the demerger of city gas distribution business of Adani Energy Ltd. demerged in Adani Gas Ltd. (UP) Pvt. Ltd., and the resultant company i.e. Adani Gas Ltd. paid consideration to the demerged company and the difference (Rs.33,98,9-0,680/-) between the cost of assets and the amount paid constituted Goodwill. The High Court ordered appointed date as 1st January, 2007 which meant that scheme was effective from appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill was allowed. Head note of this judgment of Hon. Apex Court reads as under :- Section 32 of the income-tax Act, 1961 - Depredation -Allowance/Rate of- Assessment year 2003-04 - Whether 'goodwill' is an asset under Explanation 3(b) to section 32(1) - Held, yes - During relevant assessment year, one 'Y' Ltd. amalgamated with assessee-company - According to assessee, excess consideration paid by it over value of net assets acquired of Y' ltd. amounted to goodwill on which depreciation was to be allowed -Authorities below recorded a finding that assets and liabilities of T Ltd. were transferred to assessee for a consideration; that difference between cost of an asset and amount paid constituted goodwill and that assessee-company in process of amalgamation had acquired a capital right in form of goodwill because of which market worth of assessee-company stood increased - Accordingly, assessee's claim was allowed - Whether since revenue could not rebut factual findings recorded by authorities below, impugned order passed by them was to be upheld - Held, yes [Para 8] [In favour of assessee] 7. On the strength of the judgment of Hon. Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Ltd. and carrying on the business of City Gas Distribution(CGD). During the year it was decided that the CGD business carried on by M/s Adani Energy Ltd.(a wholly owned subsidiary of Adani Enterprise Ltd.) be demerged and the same be vested in the company. For this purpose a scheme of arrangement u/s 391 to 394 of the Companies Act, 1956 was prepared and submitted to Hon. Gujarat High Court. The same was approved by Hon. High Court on 19th November 2009 and the copy of the same was filed with Registrar of Companies on 10th December, 2009, the effective date. The scheme of arrangement provides for transfer with effect from January 1, 2007, being the appointed date, of all the assets and liabilities, the legal proceedings, all the deposits and balances, certain employees and related benefits, all the contracts and agreements in relation to the Gas Distribution business to a distinct identity to Adani Energy (UP) Pvt. Ltd. now known as Adani Gas Ltd. The scheme has accordingly been given effect in books of accounts. Consequently upon giving effect to the scheme an amount of ₹ 33.99 crores was paid towards goodwill which is disclosed separately but was not amortized in the cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be allowed from Asst. Year 2007-08 whereas assessee started claiming depreciation from Asst. Year 2010-11 which resulted in excess brought forward of opening wdv of goodwill in Asst. Year 2010-11 with consequent excess allowance of depreciation. 12. The main contention of the assessee through this appeal is the validity of the order u/s 263 of the Act. We find that Explanation-2 to section 263 contemplates that an order passed by Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of revenue if in the opinion of Pr.CIT/Commissioner - (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; . (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section, or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 13. We find that clause (a) of Explanation-2 to section 263 is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax, Kolkata v. Smifs Securities Ltd. [2012] 24 taxmann.com 222 (SC) it was held as under- I. Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 2003-04 - Whether 'goodwill' is an asset under Explanation 3(b) to section 32(1) - Held, yes - During relevant assessment year, one 'V Ltd. amalgamated with assesseecompany - According to assessee, excess consideration paid by it over value of net assets acquired of 'Y' ltd. amounted to goodwill on which depreciation was to be allowed -Authorities below recorded a finding that assets and liabilities of 'Y' Ltd. were transferred to assessee for a consideration; that difference between cost of an asset and amount paid constituted goodwill and that assessee-company in process of amalgamation had acquired a capital right inform of goodwill because of which -market worth of assessee-company stood increased - Accordingly, assessee's claim was allowed - Whether since revenue, could not rebut factual findings recorded by authorities below, impugned order passed by them was to be upheld - Held, yes [Para 8] [In favour of assessee] II. Section 32 of the Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gas manufacturing of Compressed Natural Gas (CNG). At CNG ^ stations built up by the assessee company, canopy is used as a roof. The assessee company has therefore considered the same as Furniture fixtures and claimed depreciation @ 10% on actual cost. (b) Your good self has sought proof of service tax reversal. In this regard, we would like to submit that the assessee company has already submitted posting entries alongwith narration vide point 5 of earlier submission dated 25th December, 2013. (c) Your good self has asked the assessee company to submit proof of asset no. 474 i.e. DRS (District Regulating Station) at Vadaj area in Ahmedabad. The said asset includes capital expenditure relating to permission and licences expenses for laying pipeline in vadaj area, DRS cost, pipeline laying and commissioning of gas connection to industrial, commercial and residential customers of Vadaj area, expenditure during construction period and interest allocation. As data runs into number of pages, we are submitting herewith the same in soft copy vide Annexure-8. 15. Your good self has sought explanation on allowability of depreciation on -goodwill alongwith reason why the entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld - Held, yes [Para 8] [In favour of assessee] In view of stated. facts and case law, claim of depreciation on goodwill should be allowed. f) Assessment order u/s 143(3) was passed on 30th March, 2014. 14. From going through the above series of events from point (a) to (f) para-13 above starting from filing of return till completion of assessment proceedings u/s 143(3) of the Act, we observe that assessee on the strength of the judgment of Hon. Apex Court in the case of CIT vs. Smifs Securities Ltd. (supra), revised its return of income by claiming depreciation on the Written Down Value (WDV) of goodwill paid towards acquiring C.G.D. business. Ld. Assessing Officer raised necessary queries for this claim as it was not made at the time of filing of original return, to which assessee gave detailed reply with necessary evidence. We also observe that the only point of litigation between the view taken by Assessing Officer and that of Pr. CIT was that ld. Assessing Officer allowed assessee s claim of depreciation on goodwill on the WDV calculated by notionally allowing depreciation for Asst. Year 2010-11 because scheme of demerger was approved by Hon. Jurisdictional High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an incorrect application of law will satisfy the requirement of the order being erroneous. 16. Further in order to appreciate the contentions of ld. AR that it is not mandatory for the assessing authority to discuss all the issues dealt during the course of assessment proceedings in his assessment order the matter was dealt by Hon. Jurisdictional High Court in the case of Pr. CIT vs. Shri Prakash Bhagchand Khatri (supra) wherein Hon. High Court upheld the decision of the Tribunal quashing the order u/s 263 of the Act by observing as follows :- 6. It can thus be seen that though final order assessment was silent on this aspect, the Assessing Office had carried out inquiries about the nature of sale of land and about the validity of the assessee's claim of deduction under section 54F of the Act. Learned counsel for the Revenue however submitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise to a long term capital gain. Looking to the tenor of queries by the Assessing Office and details ..... X X X X Extracts X X X X X X X X Extracts X X X X
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