TMI Blog2024 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... additional depreciation, made otherwise than by a revised return of income by the appellate authorities. Goodwill acquired pursuant to the amalgamation - The issue of depreciation on goodwill arising on amalgamation has already been dealt with by Hon'ble Supreme Court in the case of Smifs Securities [ 2012 (8) TMI 713 - SUPREME COURT] which is later followed in various cases by the Hon ble High Courts and Co-ordinate Benches of the Tribunal. We find force in the submissions of the learned AR that Explanation 2 to Section 43(6) of the Act, does not affect the right of amalgamated company to claim depreciation as the explanation is applicable only where an existing block of asset is transferred to the amalgamated company, and that since here goodwill comes into existence only for the first time because of excess consideration paid, explanation does not apply. Explanation 5 to Section 32(1) of the Act clearly lays down that the provisions of such sub-section shall apply whether or not the assessee has claimed the deduction in respect of the depreciation in computing the total income. It, therefore, goes without saying that irrespective of the fact of assessee claimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded as goodwill in the consolidated audited financials of assessee for the financial year 2016-17, prepared under Companies Act, 2013. Pursuant to such merger, the assessee recorded the excess purchase consideration over net assets of SNL for Rs. 1,04,16,27,225/- as negative capital reserve in terms of Ind-AS accounting, which is nothing but goodwill , which again is an intangible asset from tax perspective. 3. While filing the return of income for the assessment year 2018-19, according to the assessee, the claim of the additional deduction of depreciation on goodwill amounting to Rs. 26,04,06,806/- was inadvertently not preferred. Assessee made such a claim by way of filing revised computation of income. The learned Assessing Officer in the draft assessment order passed on 24/09/2021, did not consider the additional claim made by the assessee by filing revised computation of income without providing any reasons. 4. Aggrieved, assessee preferred objections before the learned DRP. Assessee contended before the learned DRP that by mistake or inadvertence, while filing the return of income, did not claim the additional depreciation on goodwill. According to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the depreciation calculated on 'actual cost' of capital asset in the hands of amalgamating company prior to amalgamation; and that under section 49(1)(iii)(e) of the Act, cost of capital assets to be the same as in the hands of previous owner where capital assets became the assets of the successor as a result of transfer under section 47(vi) of the Act. 7. Learned DRP recorded that the decision in the case of Smifs Securities (supra) was without considering the provisions under 5th proviso to section 32(1), section 49(1)(iii)(e), Explanation 7 to section 43(1) and/or Explanation 2(b) to section 43(6)(c) and section 55(2)(a)(ii) of the Act, which were relevant to the issue in hand, given the fact that these were not argued before the court, could not be extended on the points which were not argued or evaluated at all. Further, According to the learned DRP, in the case of Smifs Securities (supra), the taxpayer acquired capital right in the form of existing clientele, i.e., 'goodwill' which was noted as a finding of fact and was not appealed by the Revenue before the Hon ble High Court and the only issue for consideration was whether goodwill is an asset within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. On the other hand, the presumption is that when the matter was heard, all the conceivable defences material for decision were raised at that time. Merely because the provisions under Explanation 2 to Section 43(6) and Explanation 7 to Section 43(1) of the Act, were not specifically mentioned in the order of the Hon ble Supreme Court, it is not open for the learned DRP to find a reason not to follow the ratio. If such a course is allowed, it will lead to anarchy, because it would be easy to find a particular aspect absent in the judgment and to avoid the following of the binding precedent. He further submitted that as a matter of fact, Explanation 2 to Section 43(6) of the Act has application in this matter, because the intangible asset in the shape of goodwill comes into existence only on the event of amalgamation in this case. So also, he submitted that 6th proviso to Section 32(1) of the Act is also not applicable because such an asset in the shape of goodwill was not available to the amalgamating company because of its coming into existence, in this case, only on the event of amalgamation. He further submitted that Explanation 7 to Section 43(1) of the Act also does not impa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, of the considered opinion that there is no bar to consider the claim of the assessee for additional depreciation, made otherwise than by a revised return of income by the appellate authorities. We shall now proceed to consider such a claim of the assessee for additional depreciation. 12. It is not in dispute that the assessee acquired the goodwill pursuant to the amalgamation with SNL India, and consequently, the assessee acquired right to take over employees, right to use financial, managerial and technical resources, personnel capabilities, skills, expertise and the right to enjoy all the advantages of established business of SNL India. The assessee paid excess consideration over net assets of amalgamating company towards goodwill. The issue of depreciation on goodwill arising on amalgamation has already been dealt with by Hon'ble Supreme Court in the case of Smifs Securities (supra), which is later followed in various cases by the Hon ble High Courts and Co-ordinate Benches of the Tribunal. 13. We find force in the submissions of the learned AR that Explanation 2 to Section 43(6) of the Act, does not affect the right of amalgamated company to claim depreciation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at goodwill is an intangible asset and eligible for depreciation. 15. Explanation 5 to Section 32(1) of the Act clearly lays down that the provisions of such sub-section shall apply whether or not the assessee has claimed the deduction in respect of the depreciation in computing the total income. It, therefore, goes without saying that irrespective of the fact of assessee claiming or not, the depreciation shall be allowed while computing the total income of the assessee. Then it becomes the obligation on the part of the Revenue to allow depreciation on goodwill even if it is not claimed by the assessee. At the same time, the CBDT Circular No.14 (XL 35) of 1955, date 11/04/1955, reinforces this obligation in unequivocal terms, stating that the department must not take advantage of ignorance of any assessee as to his rights and it is one of the duties of the department to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs, by taking initiative in guiding the taxpayer where the proceedings are before them indicate that some relief is due to the taxpayer. When we read Explanation 5 to Section 32(1) of the Act and the above circul ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
