TMI Blog2022 (11) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... bilities is recognized as Goodwill in the books of acquiring company. It works principally on one to one basis wherein factors such as synergy, weave length, future proximities, area, industry, number of years etc. are facts are considered in determining the business valuation. In this type of businesses, the valuation of business is identified generally by way of potential number of subscriber and rates of subscriber fees applicable to them. In case the subscribers decrease in subsequent to becoming the partnership firm, the depreciation is claim on that basis. These contentions of the Ld. AR are accepted. Thus, in case of Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT ] the claim of the assessee appears to be proper. The cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as grievously erred in law and on facts in not appreciating the recognition of Goodwill and thereby disallowing the claim of depreciation u/s. 32(1) of Rs. 68,75,000/-. 2.3 That in the facts and circumstances of the case the Ld. CIT(A) ought to have appreciated the recognition of Goodwill and thereby allowed the claim of depreciation u/s. 32(1) of Rs. 68,75,000/-. It is therefore prayed that disallowance u/s. 32(1) towards depreciation of Rs. 68,75,000/- confirmed by the CIT(A) deserves to be deleted. 3. The assessee partnership firm is engaged in business of cable television networking, cable distribution, Advertising, Distribution and redistribution of television and cable signals and allied Cable Network Business Vastrapur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that till the merger, proprietary concern was separate and independent entity and the assets lying in the books were exclusively of proprietary concern. It is but natural and very logical that there won't be any goodwill in the books of proprietary concern. The goodwill arose only because of the acquisition of network by the company and this will get impacted in the books of acquiring company only for the reason that the acquiring company is paying premium to that extent in order to acquire the business. On the contrary, this premium may be considered as gain in the hands of the proprietary co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of assets and liabilities is recognized as Goodwill in the books of acquiring company. It works principally on one to one basis wherein factors such as synergy, weave length, future proximities, area, industry, no of years etc. are facts are considered in determining the business valuation. In this type of businesses, the valuation of business is identified generally by way of potential no of subscriber and rates applicable to them. The Ld. AR submitted that the concerned network which was acquired during the year was valued at Rs. 2,75,00,000/- wherein approximately 5000/- potential customers in the area were identified and rate determined was 5520/- per connection. The valuation working was discussed by the Assessing Officer at page 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has rightly made this addition. 7. Heard both the parties and perused all the relevant material available on record. From the perusal of the Partnership Deed dated 10.10.2015 which is effective from 01.04.2015 clause 9 and 37 of the said Partnership Deed states as follows: 9. Both the Parties have determined and assessed the value of the said Business of CRAZY NETWORK at Rs. 2,75,00,000/- (Rupees Two Crores Seventy five lacs only). The said value includes goodwill of CRAZY NETWORK but does not includes any liabilities, debts, payables, or disputes or claims of CRAZY NETWORK. ........... 37. Second Party undertakes and declares that there is no claim, liability, loan or payable on any asset, properties, material or goodwil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which is paid over and above the book value of assets and liabilities is recognized as Goodwill in the books of acquiring company. It works principally on one to one basis wherein factors such as synergy, weave length, future proximities, area, industry, number of years etc. are facts are considered in determining the business valuation. In this type of businesses, the valuation of business is identified generally by way of potential number of subscriber and rates of subscriber fees applicable to them. In case the subscribers decrease in subsequent to becoming the partnership firm, the depreciation is claim on that basis. These contentions of the Ld. AR are accepted. Thus, in light of the decision of the Apex Court in case of Smifs Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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