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TMI Blog2024 (2) TMI 1553X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal. 2. Disallowance to the tune of Rs. 77,32,454/- under section 32 of the Income Tax Act, 1961 ('the Act') in respect of goodwill (Rs. 33,46,509/-) and other net tangible assets (Rs. 43,85,945/-) is the subject matter of this appeal. Facts giving rise to this issue are that the assessee and Allegis India are part of the Allegis Group of Companies that provides recruiting and staffing solutions in relation to a wide range of industries. Assessee specialised in information technology line of services and is engaged in providing software consultancy and support services and after acquisition by the Allegis Group, is providing such services to some unrelated parties in India. Allegis India is engaged in multiple business lines such as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the transfer of the concern and not during the financial year in which such transfer took place. Learned Assessing Officer also disallowed depreciation on other assets on the ground that such assets were not put to use, and therefore, no depreciation is allowable. 5. Assessee preferred appeal before the learned CIT(A) and contended that the business acquisition was undertaken as a part of the global reorganization exercise undertaken within the Allegis Group to rationalise the holding and operational structures for deriving more focussed and efficient business operations and since such operations are usual phenomenon and a common practice in the corporate world, there is nothing to suspect the same. It was contended that the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation is not dependent on usage of any number of days, but on the block assets concept, disregard of usage for 180 days or more or less. Learned CIT(A) observed that the BTA was executed on 27/03/2017 with the closing date and time being 31/03/2017 at 11.59 p.m. when the assessee assumed the assets and liabilities and, therefore, in the absence of transfer of any employees and usage of the machinery, the assessee is not entitled to claim depreciation under section 32 of the Act. 8. It is argument on behalf of the assessee that the requirement for claim of depreciation is the acquisition of the asset during the year under consideration is ready for use, but law does not require actual usage or usage for any number of days. Since the IT ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observed that the BTA is a colourable device, created only to reduce the taxes, because the capital gain tax paid by the seller would be very marginal when compared to claim depreciation on goodwill. Further according to the learned CIT(A), the valuation of the goodwill is based on un-audited and management certified financial statements and the consultants have not relied upon any comparative market data to arrive at the valuation of the fixed assets. 11. Learned AR brough to our notice through the statement of profit and loss that pursuant to the business acquisition, assessee earned incremental revenue of 87% from Rs. 91,53,20,147/- as on 31/03/2017 to Rs. 1,72,02,28,563/- as on 31/03/2018; w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouring under the impression that the capital gains tax paid by the transferor company would be very marginal as compared to the eligible depreciation. The impugned order, however, does not provide any basis for this observation of the learned CIT(A). 13. It remains an undisputed fact that the seller company is assessed to tax and the capital gains offered by it are accepted without any adjustment. Assessee placed reliance on the decision of the Hon'ble High Court of Delhi in the case of Triune Projects Private Limited 77 taxmann.com 40 and the view taken by the Co-ordinate Bench of the Bangalore Tribunal in the case of I&B Seeds Pvt. Limited., 142 taxmann.com 274 for the principle that once the department accepted the capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(1) of the Act. 16. 6th proviso to section 32(1) of the Act reads that in any previous year, the aggregate deduction in respect of depreciation of the tangible assets allowable to the predecessor and successor in case of succession shall not exceed the deduction calculated at the prescribed rates as if the succession had not taken place, and such deduction shall be apportioned between the predecessor and successor in the ratio of the number of days for which the assets were used by them. No record is available before us throwing light on the proportion of the depreciation claimed by the seller, but the assessee is entitled to claim such depreciation only in proportion to the number of days for which the asset held by it. We, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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