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TMI Blog2019 (12) TMI 1645X X X X Extracts X X X X X X X X Extracts X X X X ..... was acquired during merger of two companies i.e. the erstwhile Shristi Infrastructure Development Corporation Limited with Peerless Abasan Finance Limited in accordance with the orders of the Delhi High Court & Calcutta High Court. Subsequently, the name of Peerless Abasan Finance Limited was changed to Shristi Infrastructure Development Corporation Limited. The difference between the cost of net assets and the amount paid by the transferee company, in terms of scheme of Amalgamation, was recorded as goodwill, i.e. for Rs. 10,00,00,000/-. 4.1. AO'S CASE: The AO has made the following comments in his assessment order:- In the submission made by the AR of the assessee company that a sum of Rs. 10 crores has been recorded as goodwill in the books of Shristi Infrastructure Development Corporation Ltd during F.Y. 2006-07. But on-going through the tax audit report and profit & loss A/c and balance sheet of the assessee company Shristi Infrastructure Development Corporation Ltd. filed for the Financial Year 2006-07 filed along with the return of income for the A.Y. 2007-08, it is revealed that there was no goodwill reflected as an asset. Therefore, the claim of the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 288 - Del HC) -Cyber India Online Ltd. vs ACIT (2014)(42 Taxmann.com 108) 1.5 In light of the above, it is apparent that the depreciation is allowable on goodwill. 1.6 The Ld. AO in its order has also not contested that the depreciation on goodwill is not allowable u/ s 32(1)(ii) of the Act. The Ld. AO has disallowed the depreciation on goodwill merely on the contention that the goodwill is not reflected in the post-merger audited financial statement and the tax audit report. 1.7 In this regard, it is humbly submitted that post approval of merger by the Hon'ble High Court of Delhi and Hon'ble Calcutta High Court, the audited financial statement for FY 2006-07 clearly reflected the amount of goodwill for a sum of Rs. I 00,000,000/ - that arose pursuant to the merger. The same was also filed with the Ld. AO vide letter dated 27 February 2015. Copy of the relevant extract of the audited financial statement for FY 2006-07 of the Appellant is enclosed and marked as Annexure 3. 1.8 The Appellant had claimed the depreciation @ 25% on the sum o/ Rs. 100,000,000/- during the A.Y. 2011-12 in accordance with the provisions of section 32(1)(i, of the Act read with sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidences filed by the Ld. A/R, it has been observed that the AO made a remark that value of goodwill is not available from the financial statements of F.Y. 2006-07, without giving due cognizance to the relevant financial statements and without considering the submission of the appellant. Furthermore, it is not the case of AO that the depreciation on goodwill is not allowable u/s 32(1)(ii) of the Act. The AO has disallowed the depreciation on goodwill merely on the contention that the goodwill is not reflected in the post-merger profit & loss account and Balance sheet for the financial year 2006-07 and the tax audit report. In this regard, the Ld. A/R filed copy of audited financial statement for FY 2006-07, wherein the amount of goodwill for Rs. 10,00,00,000/- has been clearly reflected, which was also filed with the AO during the assessment proceedings. It is also seen that there remains no ambiguity on plain reading of the provisions of section 32(1) of the Act read with Explanation 3, that depreciation is allowable on 'any other business or commercial rights of similar nature'. The Ld. A/R also contended that 'goodwill' can be considered as 'any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded as goodwill in the books of SIDCL during F. Y. 2006-07.The Hon'ble SC has, in the case of SMIFS Securities (2012)24 taxmann.com 222(SC) held that goodwill in the form of difference between the amount paid and the cost of the net asset acquired from the amalgamating company is an asset eligible for depreciation under the Act. The ruling of SMIFS securities has also been followed by the Bombay High Court in the case of Birla Global Asset Finance Co. Ltd (Income Tax Appeal No. 6835 of 20 10) and Toyo Engineering India Ltd (TS-811-HC-20 12BOM). Goodwill has arisen in the books of SIDCL in the FY 2006-07. The company has not claimed depreciation on goodwill in any Assessment Year prior to A. Y. 11-12. Section 43(6) of the Act provides as follows: "writ en down value" means a. In the case of assets acquired in the previous year, the actual cost to the assessee; b. In the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922(11 of 1922) or any Act repealed by that Act, or under any executive orders issued when the Indian Income Tax Act 1886( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. We note that by going through the provisions of section 32(1) of the Act there remains no ambiguity that depreciation is allowable on Goodwill which can be classified under the category of 'any other business or commercial rights of similar nature'. This view is supported by the decision of the Hon'ble Supreme court in the case of the CIT vs. Smits Securities Ltd. [2012] 24 taxmann.com 222 (SC). We note that the decision of Supreme Court has also been followed in the following decisions wherein it was held that depreciation is allowable on goodwill arising on merger: - DCIT vs. Worldwide Media [2014] 43 Taxmann.com 18-Mum ITAT - Triune Energy Services (P) Ltd.-vs DCIT, [2016] 65 Taxmann.com 288-Del HC) - Cyber India online ltd. vs ACIT [2014] 42 Taxmann. Com 108 We note Assessing Officer has disallowed the depreciation on goodwill merely on the ground that the goodwill is not reflected in the post-merger audited financial statement and the tax audit report of the assessee. In this regard, the assessee has submitted that post approval of merger by the Hon'ble High Court of Delhi and Hon'ble Calcutta High court, the audited financial statement for FY 2006-07 clea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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