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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI SANDEEP SINGH KARHAIL, JM
ITA number 1113/M/2023 is filed by the ICICI bank Ltd (the appellant) for assessment year 2013 – 14 against the appellate order passed by the National faceless appeal Centre (Delhi) (the learned CIT – A) dated 21/3/2022 wherein the appeal filed by the assessee against the assessment order dated 29/3/2019 passed by the Asst Commissioner Of Income Tax – 2 (3) (2), Mumbai (the AO)
The assessee is aggrieved and has preferred this appeal raising following grounds.
1. Disallowance of depreciation on goodwill/ Intangible assets acquired on merger ₹ 452,46,93,899 [paras 4 to 6, Pages 4 to 22 of the NFAC order]
On the facts and circumstances of the case and in law, the NFAC erred in disallowing the amount of ₹ 452,46,93,899 being depreciation claimed on the WDV as on April 1, 2012 on the block of assets in the nature of Goodwill/intangible rights acquired by the Appellant on merger with the Bank of Rajasthan Limited and Anagram Finance Limited.
Brief facts of the case shows that assessee is aggrieved with the order of the learned CIT – A in disallowance of depreciation on goodwill/intangible assets acquired on merger amounting to ₹ 4,524,693,899 on merger with the Bank Of Rajasthan Limited and Anagram finance limited.
Assessee filed its original return of income for assessment year 2013 – 14 on 29/11/2013 declaring the total income of ₹ 85,822,314,680, which was subsequently revised on 31/3/2015 at ₹ 85,705,253,270. In the return of income filed by the assessee, it has claimed depreciation at the rate of 25% on the written down value as on April 1, 2012 on the block of the assets of Goodwill/business commercial rights.
In the assessment order dated 23/1/2017 passed under section 143 (3) read with section 144C (3) of the act the learned assessing officer has disallowed the above claim of the depreciation for the reason that a. In the books of accounts of Bank of Rajasthan there was no goodwill at the time of merger, hence the question of purchase of Goodwill did not arise.
b. For assessment year 2011 – 12 assessee has not claimed Goodwill in its return of income and audit report but after the decision of the honourable Supreme Court assessee c. Further while giving direction for amalgamation, honourable High Court was not shown to have ordered to pay any specific amount for such goodwill and therefore it could not be accepted that the assessee incurred any additional cost on account of Goodwill. d. The claim made by the assessee with regard to Goodwill which was only a fictitious assets in the hands of the assessee and also claim of depreciation were neither bona fides nor tenable.
Assessee carried the matter before the learned Commissioner of Income Tax (Appeals) – 56, Mumbai who passed an order dated 24/1/2019 wherein as per Para number 55 of that order the issue was discussed. The learned CIT – A a. Noted that claim as such is allowed up to and including assessment year 2012 – 13 in favour of the appellant. However, during the course of the assessment proceedings, the learned assessing officer has raised further issues and a detailed submission of the assessing officer was recorded at paragraph number 56. The rejoinder of the assessee was also taken on record. meanwhile on 16/11/2018 the learned assessing officer made a further submission wherein it relied on the decision of coordinate bench in the case of United breweries Ltd [TS – 553 – ITAT – 2016 (Bangalore) ] wherein the fifth proviso to section 32 (1) of the act was invoked and it was held that the assessee is not entitled
b. So, The AO was directed to examine bringing on record necessary facts and without wearing any finding for any other assessment year except as permitted by the law in respect of ICICI bank Ltd, specifically with respect to the fifth proviso to section 32 (1) relating to the claim of depreciation on amalgamated company and definition of actual cost as per section 43 (1) and then depreciation on goodwill needed to be allowed in accordance with the law.
Pursuant to the direction of the learned CIT – A, the learned assessing officer passed the order giving effect to CIT – A order on 29/3/2019 wherein following the decision of the coordinate bench in case of United breweries Ltd (supra) held that the deduction on account of depreciation claimed by the assessee is in contravention of the fifth proviso to section 32 (1), section 43 (1) of the Act. Accordingly, the disallowance was retained.
Assessee aggrieved with that order preferred an appeal before the learned CIT – A (National faceless appeal Centre) who passed an order dated 21/3/2022 wherein after taking the submission of the assessee , decided the issue as per to paragraph number 6 holding that: –
a. No goodwill exists holding as under :- b. With respect to the applicability of explanation 7 to section 43 (1) the learned CIT – A further held that that amalgamation is a tax neutral scheme for companies as well as for the shareholders and not to provide a tax planning mechanism to either of them. He further stated that depreciation is to be computed on actual cost/written down value of the block of assets in accordance with section 43 of the act. He held that in respect of a capital c. With respect to the applicability of the fifth proviso to section 32 of the act when the assessee stated that it can be looked into in the first year when the asset is purchased/created and not in the subsequent year relying upon the decision of the honourable Karnataka High Court in case of Padmini products (private limited (2020) 317 CTR 369, the learned CIT held that the operation of the judgment of the honourable Karnataka High Court has been stayed by the honourable Supreme Court in (2021) 131 taxmann.com 75 and therefore it is not right for the assessee to rely on that judgment. d. He further held that the claim of depreciation can be examined even in the assessment years subsequent to the assessment year in which the amalgamation has taken place. e. He further held that though for assessment year 2011 – 12 and 2012 – 13, despite the learned assessing officer disallowing the depreciation, the learned CIT – A the f. With respect to the claim of the assessee that the learned assessing officer is not permitted to disturb the written down value of the block of assets in subsequent year, he held that the rule of consistency is neither absolute nor infallible relying on the decision of the honourable Supreme Court in case of Distributors Baroda private limited versus Union of India and others [155 ITR 120] wherein it has been held that if any wrong has been committed, same should not be perpetuated.
Accordingly, he upheld the denial of claim of depreciation on the impugned goodwill.
Assessee is aggrieved with that and is in appeal before us. Assessee submitted a paper book containing 50 pages wherein assessee submitted the details of depreciation claimed for assessment year 2013 – 14 along with the relevant portion of tax audit report. Assessee also submitted the documents with respect to the scheme of amalgamation of the Bank of Rajasthan with the ICICI bank Ltd as approved by the reserve bank of India and letter submitted for assessment year 2011 – 12 to the assessing officer for claiming the depreciation on the goodwill. In fact, it was stated that the first year of the claim of the depreciation would be assessment year 2011 – 12 and therefore whatever is decided in that particular case will apply for determination of the opening balances of intangible asset for this assessment year. It was stated that, for assessment year 2011 – 12 the appeal is pending before the coordinate
The learned CIT DR also agreed with the above proposition that the written down value would be decided depending on the decision of the coordinate bench in assessee’s own case for assessment year 2011 – 12 and therefore the issue may be set-aside to the file of the learned assessing officer to determine the opening WDV in this case in accordance with that. However, he submitted that the reasons given by the learned CIT – A in this case are relevant for even deciding the case for assessment year 2011 – 12.
We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, in this case first claim of depreciation on goodwill was made by the assessee for assessment year 2011 – 12. The learned assessing officer disallowed such claim in that year. However on the appeal before the learned CIT – A the claim of the assessee was allowed. The learned AO is in appeal before the coordinate bench in ITA number 7292/M/2016. Therefore unless it is decided whether assessee has acquired any intangible asset on merger or not, in the year in which it is claimed to have acquired, claim of allowability of depreciation in subsequent year cannot be decided. Therefore, whatever would be decided in that appeal would have a direct bearing on the claim of depreciation of the assessee for this year. As both the parties do not have any objection if the issue is restored
In the result, ITA number 1113/M/2022 filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 27.09. 2023.