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TMI Blog2024 (6) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... ry evidences brought on record duly considered in the light of Rule 18(6) of ITAT Rules. 4. Assessee is an Indian company engaged in the Media and Entertainment Sector. The key business activities of the assessee include broadcasting of television channels, sale of advertisement airtime and content syndication etc., 5. As per the amalgamation scheme approved by the National Company Law Tribunal vide order dated 08.06.2017 United Home Entertainment Pvt., Ltd., [hereinafter in short "UHEPL"] a group company amalgamated with the assessee company. The assets and liabilities of UHEPL were taken over at the respective fair value accordingly were reflected in the audited financial statements of the assessee company based on a determination by an independent valuer. The consideration was paid / discharged by way of issue of shares of the assessee company to the shareholders of UHEPL. As approved under the scheme of amalgamation the consideration paid in excess of the fair value of net assets taken over is recorded in the audited financial statements of the assessee company as good will. 6. Assuming the jurisdiction cast upon him by the provisions of section 263 of the Act, the Ld. Pr.CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced- (a) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and (b) by the amount of depreciation that would have been alowable to the assesses for any assessment year commencing on or after the 1st day of April, 1988 as if the asset was the only asset in the relevant block of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, 13. Then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or the amalgamated company; as the case may be, shall be the written down value of the block of assets as in the case of the transferor-company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year. 14. Thus the Act clearly lay down that the actual cost of the block of asset (intangible block in this case) in the hand of the amalgamated company (assessee) would be written down value in the immediate preceding year in the case of amalgamating companies. Since, the written down value of the intangible block of asset was zero in the books of the amalgamating compares, the actual cost would remain zero in the hand of amalgamated company (the assessee). 15. This interpretation in our understan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial question of law: "Question No.[b]: "Whether goodwil is an asset within the meaning of Section 32 of the Income Tax Act, 1961, and whether depreciation on 'goodwill' is allowable under the said Section?" 19. The Hon'ble Supreme Court answered as under: - "Answer: In the present case, the assesses rad claimed deduction of Rs. 54,85,430/- as depreciation on goodwill. In the course of hearing, the explanation regarding origin of such goodwill was given as under: "In accordance with Scheme of Amalgamation of YSN Shares & Securities (P) Ltd with Smifs Securities Ltd (duly sanctioned by Hon'ble High Courts of Bombay and Calcutta with retrospective effect from 1st April. 1998. assets and liabilities of YSN Shares & Securities (P) Ltd were transferred to and vest in the company. In the process goodwill has arisen in the books of the company." 2. It was further explained that excess consideration paid by the assessee over the value c* net assets acquired of YSN Shares and Securities Private Limited [Amalgamating Company should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards the reputation whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 herein above. 8. For the afore-stated reasons, we answer Question No. [b] also in favour of the assessee." 20. Since the claim of depreciation has the backing of the Hon'ble Supreme Court by no stretch of imagination the assessment order can be considered as "erroneous" and "prejudicial to the interest of the revenue" in so far as this issue concerned. 21. If the Ld. Pr.CIT was of the firm belief that the Assessing Officer has not conducted proper enquires, in so far as the claim of depreciation or good will is concerned. Nothing prevented the Ld. Pr.CIT to conduct enquires as held by the Hon'ble Delhi High Court in the case of DG Housing Projects [343 ITR 329], the relevant findings read as under: - "Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 22. In so far as the second issue is concerned, the assessee in its notes to the revised return of income has specifically mentioned the error as under: - "2. computation under normal provisions of the income-tax Act, 1961 (Act). In the revised return of income, an amount of Rs. 14.71 crores was added in respect of inventory amortization as the same was claimed in earlier years but debited to profit and loss account for the financial year ended 31 March 2017. DBIL has inadvertently disallowed an amount of Rs. 14.71 crores instead of Rs.. 20.88 crores (mentioned in detail in point 10 under content costs). Once the above is rectified in the computation of income and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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