TMI Blog2023 (9) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... of demerger scheme without examining the provisions of explanation 2 to section 43(6) r.w.s. 32 due to which the assessment order passed u/s. 143(3) of the Act has become erroneous and prejudicial to the interest of the Revenue HELD THAT:- Tribunal found that the assessee had furnished various factual and legal submissions dated 19.12.2017 where the assessee relied upon the case of Commissioner of Income Tax, Kolkata vs. Smifs Securities Ltd [ 2012 (8) TMI 713 - SUPREME COURT] - As observed by the Tribunal that the Assessing Officer had considered the action of granting approval and also the Valuation Report. Since therefore the Assessing Officer had examined the aspect of the assessee s claim during the course of acceptance, in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Deniel Merchants (P) Ltd. vs. ITO [2018] 95 taxmann.com 366 (SC) dealing with the identical situation of acceptance of explanation of the assessee without making detailed enquiries? 3. Brief facts indicate that the assessee company has filed return of income for assessment year 2015-16 declaring total loss of Rs. 1,04,49,70,098/-. The case was selected for complete scrutiny and assessment was completed u/s. 143(3) of the Act vide order dated 23-12- 2017 accepting the return of income filed by the assessee. Subsequently, the Pr. CIT noticed that pursuant to the order of Hon ble High Court of Gujarat dated 20-04-2015 sanctioning the composite scheme of arrangement in the nature of amalgamation or demerger, the Healthcare Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany) shall be the WDV of the block of assets of the demerged company immediately before the demerger. Further, the Pr. CIT observed that 6th Proviso to section 32(1) of the Act makes it clear that the depreciation in the hands of the resulting company is to be calculated at the prescribed rates on the WDV of the assets in the books of the demerged company, which in this case would be Nil as the WDV of the corresponding assets itself is Nil as discussed above. Thus, the Pr. CIT was of the view that the depreciation amounting to Rs. 68,84,94,588/- claimed on the aforesaid goodwill is not allowable under the Act to the assessee company. However, according to Ld. Pr. CIT, the ld. Assessing Officer wrongly accepted the claim of depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 5.1 Mr. Patel would submit that the Assessing Officer had failed to follow the explanation 2B to Section 43(6) of the Act where it is made clear that the WDV of the block of assets in the hands of the resulting company shall be the WDV of the block of assets of the demerged company immediately before merger. Hence the Assessing Officer wrongly allowed the depreciation on self generated goodwill. 6. We have perused the order of the Principal CIT and that of the Tribunal. The Tribunal by the order held as under: 8. We have heard the rival contentions and perused the material on record. We observe that the issue regarding the claim of depreciation in the hands of the demerged company was inquired during the course of assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved by the Tribunal that the Assessing Officer had considered the action of granting approval and also the Valuation Report. Since therefore the Assessing Officer had examined the aspect of the assessee s claim during the course of acceptance, in the opinion of the Tribunal, the Assessing Officer while passing order under Section 143(3) of the Act had taken a plausible view sustainable in the eye of law. Relying on the decision, it was held that the assessee company is entitled to claim depreciation on goodwill expended at the time of amalgamation of companies. 8. In the case of Smifs Securities Ltd. (supra), paras 4 to 7 read as under: 4. Explanation 3 states that the expression `asset' shall mean an intangible asset, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This finding has also been upheld by Income Tax Appellate Tribunal [`ITAT', for short]. We see no reason to interfere with the factual finding. 7. One more aspect which needs to be mentioned is that, against the decision of ITAT, the Revenue had preferred an appeal to the High Court in which it had raised only the question as to whether goodwill is an asset under Section 32 of the Act. In the circumstances, before the High Court, the Revenue did not file an appeal on the finding of fact referred to hereinabove. 9. The Assessing Officer had also relied on the case of Smifs Securities Ltd. (supra) and allowed the claim for depreciation. 10. For the aforesaid reasons, no substantial question of law arises for consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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