THERMO FISHER SCIENTIFIC INDIA PVT LTD. ,MUMBAI vs. DCIT-15(3)(1), MUMBAI

This appeal by the assessee is directed against order dated 13.12.2022 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, raising following grounds:

1. Ground 1 - General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel - 2 ('Hon'ble DRP and the final assessment order passed by the Thermo Fisher Scientific India Pvt. Ltd. 2 Thermo Fisher Scientific India Pvt. Ltd.

learned Deputy Commissioner of Income learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai 15(3)(1), Mumbai (learned DCIT°) (learned DCIT°) are bad in law and merit to be set aside. are bad in law and merit to be set aside. It is prayed that the directions of DRP and the final assessment It is prayed that the directions of DRP and the final assessment It is prayed that the directions of DRP and the final assessment order passed by the learned DCIT be set aside. order passed by the learned DCIT be set aside.

2. Ground 2 2. Ground 2 - Depreciation on goodwill 2.1 On the facts and in the circumstances of the case and in On the facts and in the circumstances of the case and in On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DR have erred in aw, the learned DCIT and the Hon'ble DR have erred in aw, the learned DCIT and the Hon'ble DR have erred in disallowing the Appellant's claim for depreciation of Rs. disallowing the Appellant's claim for depreciation of Rs. disallowing the Appellant's claim for depreciation of Rs. 21,28,26,691 on goodwill arising on acquisition of business 21,28,26,691 on goodwill arising on acquisition of business 21,28,26,691 on goodwill arising on acquisition of business from GlaxoSmithkline Pharmaceuticals Limited ('GSK) and from GlaxoSmithkline Pharmaceuticals Limited ('GSK) and from GlaxoSmithkline Pharmaceuticals Limited ('GSK) and Chemito Technologies Private Chemito Technologies Private Limited ('CTPL'). It is prayed that the learned DCIT be directed to allow It is prayed that the learned DCIT be directed to allow It is prayed that the learned DCIT be directed to allow depreciation of Rs. 21,28,26,691 on goodwill acquired by the depreciation of Rs. 21,28,26,691 on goodwill acquired by the depreciation of Rs. 21,28,26,691 on goodwill acquired by the Appellant as part of the business acquisition from GSK and Appellant as part of the business acquisition from GSK and Appellant as part of the business acquisition from GSK and CTPL. 2.2 On the facts and circumstances of the case and in On the facts and circumstances of the case and in On the facts and circumstances of the case and in law, the learned DCIT and Hon'ble DR erred in relying on Explanation 7 learned DCIT and Hon'ble DR erred in relying on Explanation 7 learned DCIT and Hon'ble DR erred in relying on Explanation 7 to section 43(1) of the Income to section 43(1) of the Income-tax Act, 1961 (IT Act) and holding tax Act, 1961 (IT Act) and holding that the value of goodwill in the books of the Appellant should that the value of goodwill in the books of the Appellant should that the value of goodwill in the books of the Appellant should be nil without appreciating that the said Explanation 7 be nil without appreciating that the said Explanation 7 be nil without appreciating that the said Explanation 7 is applicable only in case of transfer of capital asset under a applicable only in case of transfer of capital asset under a applicable only in case of transfer of capital asset under a scheme of amalgamation, whereas in the instant case, there is scheme of amalgamation, whereas in the instant case, there is scheme of amalgamation, whereas in the instant case, there is no amalgamation, but the Appellant had acquired goodwill on no amalgamation, but the Appellant had acquired goodwill on no amalgamation, but the Appellant had acquired goodwill on slump sale as part of business acquisition from GSK and CTPL. slump sale as part of business acquisition from GSK and CTPL. slump sale as part of business acquisition from GSK and CTPL. It is prayed that learned DCIT be directed to hold that the rayed that learned DCIT be directed to hold that the rayed that learned DCIT be directed to hold that the above referred provision has no applicability to the Appellant's above referred provision has no applicability to the Appellant's above referred provision has no applicability to the Appellant's case. On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the learned DCIT and Hon'ble DR erred in relying on the erstwhile learned DCIT and Hon'ble DR erred in relying on the erstwhile learned DCIT and Hon'ble DR erred in relying on the erstwhile fifth proviso to section 32(1) (ii) [now sixth proviso to section so to section 32(1) (ii) [now sixth proviso to section so to section 32(1) (ii) [now sixth proviso to section 32(1) (ii)I read with Explanation 1 to section 43(6) of the IT Act 32(1) (ii)I read with Explanation 1 to section 43(6) of the IT Act 32(1) (ii)I read with Explanation 1 to section 43(6) of the IT Act of the Act and holding that the cost of goodwill in the hands of of the Act and holding that the cost of goodwill in the hands of of the Act and holding that the cost of goodwill in the hands of Appellant should be nil, without appreciating that the said Appellant should be nil, without appreciating that the said Appellant should be nil, without appreciating that the said proviso applies to depreciation to be allowed in case of transfer pplies to depreciation to be allowed in case of transfer pplies to depreciation to be allowed in case of transfer of depreciable assets in case of amalgamation/ demerger/ of depreciable assets in case of amalgamation/ demerger/ of depreciable assets in case of amalgamation/ demerger/ succession of business under section 170 of the IT Act, succession of business under section 170 of the IT Act, succession of business under section 170 of the IT Act, whereas, in the instant case, there is no amalgamation/ whereas, in the instant case, there is no amalgamation/ whereas, in the instant case, there is no amalgamation/

Thermo Fisher Scientific India Pvt. Ltd. 3 Thermo Fisher Scientific India Pvt. Ltd. demerger / succession of the b demerger / succession of the business, but the Appellant had usiness, but the Appellant had acquired goodwill on slump sale through payment of monetary acquired goodwill on slump sale through payment of monetary acquired goodwill on slump sale through payment of monetary consideration as part of business acquisition from GSK and consideration as part of business acquisition from GSK and consideration as part of business acquisition from GSK and CTPL It is prayed that learned DCIT be directed to hold that the It is prayed that learned DCIT be directed to hold that the It is prayed that learned DCIT be directed to hold that the above referred provision has no applicabi above referred provision has no applicability to the Appellant's lity to the Appellant's case. 2.3 On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the learned DCIT and Hon'ble DR erred in holding that the learned DCIT and Hon'ble DR erred in holding that the learned DCIT and Hon'ble DR erred in holding that the valuation of intangible assets, its inter se proportions and valuation of intangible assets, its inter se proportions and valuation of intangible assets, its inter se proportions and valuation report obtained by the Appellant are u valuation report obtained by the Appellant are u valuation report obtained by the Appellant are unrealistic without appreciating that the fair value of the assets of without appreciating that the fair value of the assets of without appreciating that the fair value of the assets of business, including goodwill acquired from GSK and CTPL was business, including goodwill acquired from GSK and CTPL was business, including goodwill acquired from GSK and CTPL was determined by an independent valuer in the valuation report determined by an independent valuer in the valuation report determined by an independent valuer in the valuation report based on the purchase price allocation after duly considering based on the purchase price allocation after duly considering based on the purchase price allocation after duly considering the methodology prescribed under the Accounting Standards ethodology prescribed under the Accounting Standards ethodology prescribed under the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI). issued by the Institute of Chartered Accountants of India (ICAI). issued by the Institute of Chartered Accountants of India (ICAI). It is prayed that learned DCIT be directed to consider the fair It is prayed that learned DCIT be directed to consider the fair It is prayed that learned DCIT be directed to consider the fair value of the assets including goodwill of business acquired value of the assets including goodwill of business acquired value of the assets including goodwill of business acquired from GSK and from GSK and CTPL based on the valuation report of an CTPL based on the valuation report of an independent valuer, the same being in accordance with the independent valuer, the same being in accordance with the independent valuer, the same being in accordance with the Accounting Standards issued by the ICAI. Accounting Standards issued by the ICAI. 2.4 On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not applying th learned DCIT and Hon'ble DRP erred in not applying th learned DCIT and Hon'ble DRP erred in not applying the ratio of the judgment of the Hon'ble Supreme Court in Smifs Securities the judgment of the Hon'ble Supreme Court in Smifs Securities the judgment of the Hon'ble Supreme Court in Smifs Securities Ltd. [2012) 348 IT 302 (SC) to the Appellant's case wherein the 348 IT 302 (SC) to the Appellant's case wherein the 348 IT 302 (SC) to the Appellant's case wherein the Hon'ble Supreme Court had held that goodwil is an intangible Hon'ble Supreme Court had held that goodwil is an intangible Hon'ble Supreme Court had held that goodwil is an intangible asset eligible for depreciation under section 32 of the IT asset eligible for depreciation under section 32 of the IT asset eligible for depreciation under section 32 of the IT Act.

3. Ground No. 3 3. Ground No. 3 – Depreciation on purchase of software Depreciation on purchase of software 3.1 On the facts and circumstances of the case and in law, the 3.1 On the facts and circumstances of the case and in law, the 3.1 On the facts and circumstances of the case and in law, the Ld. DCIT has erred in not granting depreciation on purchase of Ld. DCIT has erred in not granting depreciation on purchase of Ld. DCIT has erred in not granting depreciation on purchase of software based on the directions of DRP for AY 2007 software based on the directions of DRP for AY 2007 software based on the directions of DRP for AY 2007-08. 3.2 It is prayed that the Ld. DCIT be directed to grant rayed that the Ld. DCIT be directed to grant rayed that the Ld. DCIT be directed to grant depreciation amounting to Rs.1,04,938/ depreciation amounting to Rs.1,04,938/- purchase of software. purchase of software.

4. Ground 4 Ground 4 - Deletion of erroneous demand of Rs. Deletion of erroneous demand of Rs. 80,79,043

Thermo Fisher Scientific India Pvt. Ltd. 4 Thermo Fisher Scientific India Pvt. Ltd.

4.1 On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the learned DCIT (irit final learned DCIT (irit final assessment order) has erred in assessment order) has erred in determining a demand of Rs. 80,79,043 as payable by the determining a demand of Rs. 80,79,043 as payable by the determining a demand of Rs. 80,79,043 as payable by the Appellant (in its final assessment order) as a difference Appellant (in its final assessment order) as a difference Appellant (in its final assessment order) as a difference between refund of Rs. 4,48,30,280 issued to the Appellant and between refund of Rs. 4,48,30,280 issued to the Appellant and between refund of Rs. 4,48,30,280 issued to the Appellant and refund of Rs. 3,67,51,237 determined as payable refund of Rs. 3,67,51,237 determined as payable refund of Rs. 3,67,51,237 determined as payable to the Appellant. 4.2 The learned DCIT has failed to consider that the Appellant The learned DCIT has failed to consider that the Appellant The learned DCIT has failed to consider that the Appellant has received interest of Rs. 80,79,043 has received interest of Rs. 80,79,043 under Section 244A of under Section 244A of the IT Act on the refund of Rs. 3,67,51,237 and accordingly, the IT Act on the refund of Rs. 3,67,51,237 and accordingly, the IT Act on the refund of Rs. 3,67,51,237 and accordingly, has received a total refund of Rs. 4,48,30,280 (Rs. 3 has received a total refund of Rs. 4,48,30,280 (Rs. 3 has received a total refund of Rs. 4,48,30,280 (Rs. 3,67,51,237 plus Rs. 80,79,043) including interest under section 244A of the plus Rs. 80,79,043) including interest under section 244A of the plus Rs. 80,79,043) including interest under section 244A of the IT Act and the erroneous demand of Rs. 80,79,043 determined IT Act and the erroneous demand of Rs. 80,79,043 determined IT Act and the erroneous demand of Rs. 80,79,043 determined is on account of non is on account of non-grant of interest under section 244A of the grant of interest under section 244A of the IT Act in the computation sheet of the final assessment IT Act in the computation sheet of the final assessment IT Act in the computation sheet of the final assessment order. 4.3 It is prayed that the learned DCIT be directed to consider It is prayed that the learned DCIT be directed to consider It is prayed that the learned DCIT be directed to consider interest under section 244A of the IT Act in the computation interest under section 244A of the IT Act in the computation interest under section 244A of the IT Act in the computation sheet and delete the erroneous demand of Rs. 80,79,043. sheet and delete the erroneous demand of Rs. 80,79,043. sheet and delete the erroneous demand of Rs. 80,79,043. Ground 5 - Penalty proceeding Penalty proceeding 5.1 On the facts and in the circumstan On the facts and in the circumstances of the case and in ces of the case and in law, the learned DCIT erred in initiating penalty proceedings law, the learned DCIT erred in initiating penalty proceedings law, the learned DCIT erred in initiating penalty proceedings under section 274 r.w.s. 271(1)(c) of the IT Act stating that the under section 274 r.w.s. 271(1)(c) of the IT Act stating that the under section 274 r.w.s. 271(1)(c) of the IT Act stating that the Appellant has furnished inaccurate particulars of income. Appellant has furnished inaccurate particulars of income. Appellant has furnished inaccurate particulars of income. 5.2 It is prayed that the learned DCIT be direc It is prayed that the learned DCIT be directed not to initiate ted not to initiate penalty proceedings under section penalty proceedings under section 271(1)(c) of the IT Act. 271(1)(c) of the IT Act.

Thermo Fisher Scientific India Pvt. Ltd. 5 Thermo Fisher Scientific India Pvt. Ltd. by the assessee was selected for scrutiny assessment and statutory by the assessee was selected for scrutiny assessment by the assessee was selected for scrutiny assessment notices under the Income notices under the Income-tax Act, 1961( In short ‘ The Act’) were tax Act, 1961( In short ‘ The Act’) were issued and complied with issued and complied with. In view of the international transactions . In view of the international transactions carried out by the assessee with its Associated E assessee with its Associated Enterprises nterprises (AEs), the Assessing Officer referred the matter of determination of arm’s the Assessing Officer referred the matter of determination of the Assessing Officer referred the matter of determination of length price of those international transactions to the learned price of those international transactions to the learned price of those international transactions to the learned transfer pricing officer (TPO). The learned TPO proposed an transfer pricing officer (TPO). The learned TPO proposed an transfer pricing officer (TPO). The learned TPO proposed an adjustment of ₹2,90,14, ,90,14,438/- to the value of the international to the value of the international transactions. The learned Assessing Officer after taking into transactions. The learned Assessing Officer after taking into transactions. The learned Assessing Officer after taking into account adjustment to the value of the international transactions , account adjustment to the value of the international transactions , account adjustment to the value of the international transactions , proposed a draft order on 06/03/2013 incorporating other proposed a draft order on 06/03/2013 incorporating other proposed a draft order on 06/03/2013 incorporating other additions and assessin assessing the total loss to Rs.(-)13,57,75,279/ 13,57,75,279/-. On further objections raised by the assessee, the learned dispute further objections raised by the assessee, the learned dispute further objections raised by the assessee, the learned dispute resolution panel (DRP) issued certain direc resolution panel (DRP) issued certain directions to the Assessing tions to the Assessing Officer vide order dated 26/12/2013. The Assessing Officer passed ide order dated 26/12/2013. The Assessing Officer passed ide order dated 26/12/2013. The Assessing Officer passed the consequent final assessment order on 04/02/2014 assessing inal assessment order on 04/02/2014 assessing inal assessment order on 04/02/2014 assessing loss at Rs. (-)13,74,77,247/ 13,74,77,247/-. Aggrieved, the assessee preferred assessee preferred appeal before the Income ppeal before the Income-Tax Appellate Tribunal (ITAT TAT). The ITAT in allowed the appeal of the assessee partly /Mum/2014 allowed the appeal of the assessee partly /Mum/2014 allowed the appeal of the assessee partly and restored the issue of taxability of goodwill to the file of the the issue of taxability of goodwill to the file of the the issue of taxability of goodwill to the file of the Assessing Officer. The Assessing Officer following the due procedure Assessing Officer. The Assessing Officer following the due procedure Assessing Officer. The Assessing Officer following the due procedure of law passed this impugned impugned final assessment order final assessment order, against which assessee is on appeal before the ITAT in second round. assessee is on appeal before the ITAT in second round. assessee is on appeal before the ITAT in second round.

Thermo Fisher Scientific India Pvt. Ltd. 6 Thermo Fisher Scientific India Pvt. Ltd.

3. The ground No. 1 of the appeal, being general in nature und No. 1 of the appeal, being general in nature, we und No. 1 of the appeal, being general in nature are not required to adjudicate upon specifically and therefore same are not required to adjudicate upon specifically and therefore same are not required to adjudicate upon specifically and therefore same is dismissed as infructuous. is dismissed as infructuous. Ground 2: Depreciation on Goodwill Ground 2: Depreciation on Goodwill - Rs. 21,28,26,691 Rs. 21,28,26,691

4. The facts qua the ground No. 2 of the appeal are that The facts qua the ground No. 2 of the appeal are that The facts qua the ground No. 2 of the appeal are that the assessee acquired two units and recognised goodwill in those assessee acquired two units and recognised goodwill in those assessee acquired two units and recognised goodwill in those transactions. Firstly Firstly, during the previous year relevant to the uring the previous year relevant to the Assessment Year ("AY") 2008 Assessment Year ("AY") 2008-09, the assessee acquired by way of a acquired by way of a ale on a going concern basis the Qualigens Fine Chemicals Qualigens Fine Chemicals slump sale on a going concern basis the Division from Glaxo Smith Kline Pharmaceuticals Limited ("GSK" from Glaxo Smith Kline Pharmaceuticals Limited ("GSK")( from Glaxo Smith Kline Pharmaceuticals Limited ("GSK" i.e. an independent third an independent third-party seller) for a consideration of Rs. party seller) for a consideration of Rs. 234.20 crores vide a Business Transfer Agreement ("BTA") dated 26 234.20 crores vide a Business Transfer Agreement ("BTA") dated 26 234.20 crores vide a Business Transfer Agreement ("BTA") dated 26 July 2007 (pages 1-100 of the paper book). The consideration paid 100 of the paper book). The consideration paid 100 of the paper book). The consideration paid was allocated over various tangible and intangible assets based on a was allocated over various tangible and intangible assets based on a was allocated over various tangible and intangible assets based on a valuation report dated 31 December 2008 issued by M/s Bansi S. valuation report dated 31 December 2008 issued by M/s Bansi S. valuation report dated 31 December 2008 issued by M/s Bansi S. Mehta and Co., Chartered Accountants (p Mehta and Co., Chartered Accountants (pages 101-137 of the 137 of the paper book) and balance amount was treated as Goodwill of business. book) and balance amount was treated as Goodwill of business. book) and balance amount was treated as Goodwill of business. 4.1 Secondly, during the previous year relevant to the uring the previous year relevant to the current uring the previous year relevant to the Assessment Year ("AY") 2009 Assessment Year ("AY") 2009-10, the assessee acquired by way of a acquired by way of a slump sale on a going concern basis the slump sale on a going concern basis the Analytical Techno Analytical Technologies and Environmental Instrumentation Division and Environmental Instrumentation Division from Chemito Technologies Private Limited ("CTPL*) for a consideration of Technologies Private Limited ("CTPL*) for a consideration of Technologies Private Limited ("CTPL*) for a consideration of Rs.67.18 crores vide a BTA dated 27 May 2008 (pages 138-287 of Rs.67.18 crores vide a BTA dated 27 May 2008 (pages 138 Rs.67.18 crores vide a BTA dated 27 May 2008 (pages 138

Thermo Fisher Scientific India Pvt. Ltd. 7 Thermo Fisher Scientific India Pvt. Ltd. the paper book). The consideration paid was allocated over various the paper book). The consideration paid was allocated over various the paper book). The consideration paid was allocated over various tangible and intangible assets based on a valuation report dated 29 ngible and intangible assets based on a valuation report dated 29 ngible and intangible assets based on a valuation report dated 29 September 2009 issued by M/s Bansi S. Mehta and Co., Chartered September 2009 issued by M/s Bansi S. Mehta and Co., Chartered September 2009 issued by M/s Bansi S. Mehta and Co., Chartered Accountants (pages 288 ages 288-342 of the paper book) and balance 342 of the paper book) and balance amount was treated as Goodwill of business. amount was treated as Goodwill of business.

4.2 In both acquisitions In both acquisitions, the excess of consideration paid over the , the excess of consideration paid over the fair values of the assets and liabilities was attributed to Goodwill. In fair values of the assets and liabilities was attributed to Goodwill. In fair values of the assets and liabilities was attributed to Goodwill. In the return of income for AY 2008 the return of income for AY 2008-09 and 2009-10, depreciation was 10, depreciation was not claimed on goodwill. The assessment for AY 2008-09 was not not claimed on goodwill. The assessment for AY 2008 not claimed on goodwill. The assessment for AY 2008 picked up for scrutiny. During the course of the assessment for scrutiny. During the course of the assessment for scrutiny. During the course of the assessment proceedings for the assessment year 2009 proceedings for the assessment year 2009-10, the assessee assessee claimed depreciation on Goodwill in view of the decision of the Hon'ble depreciation on Goodwill in view of the decision of the Hon'ble depreciation on Goodwill in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. (348 CIT v. Smifs Securities Ltd. (348 Supreme Court in the case of ITR 302).

4.3 The details of the claim made by the The details of the claim made by the assessee assessee before the Assessing Officer ("AO") during the sing Officer ("AO") during the assessment proceedings for AY assessment proceedings for AY 2009-10 are as follows: 10 are as follows: Particulars Amount (Rs.) Value of Goodwill acquired from GSK in AY 2008-09 Value of Goodwill acquired from GSK in AY 2008 74.94.11.161 Less: Depreciation @ 25% for AY 2008-00 Less: Depreciation @ (18,73.52,790) Written Down Value ('WDV) as on 1 April 2008 Written Down Value ('WDV) as on 1 April 2008 56.20,58,371 Add: Value of Goodwill acquired from CTPL in AY 2009- Add: Value of Goodwill acquired from CTPL in AY 2009 - 28,92,48.395 10 Total value of Goodwill eligible for depreciation for AY 85,13,06,766 Total value of Goodwill eligible for depreciation for AY Total value of Goodwill eligible for depreciation for AY 2009-10 Less: Depreciation @ 25% for the AY under (21,28,26,691) Less: Depreciation @ 25% for the AY under Less: Depreciation @ 25% for the AY under consideration

Thermo Fisher Scientific India Pvt. Ltd. 8 Thermo Fisher Scientific India Pvt. Ltd.

63.84,80,075 WDV as on 31 March 2009 WDV as on 31 March 2009 4.4 The AO did not accept the The AO did not accept the assessee's claim for depreciation on 's claim for depreciation on goodwill on the ground that the same was not made by filing revised goodwill on the ground that the same was not made by filing revised goodwill on the ground that the same was not made by filing revised return of income, which was upheld by the Hon'ble Dispute return of income, which was upheld by the Hon'ble Dispute return of income, which was upheld by the Hon'ble Dispute Resolution Panel ("DRP") vide directions dated 26 December 2013. Resolution Panel ("DRP") vide directions dated 26 December 2013. Resolution Panel ("DRP") vide directions dated 26 December 2013. Accordingly, the final assessment order dated 6 February 2014 was Accordingly, the final assessment order dated 6 February 2014 was Accordingly, the final assessment order dated 6 February 2014 was passed denying the claim. passed denying the claim.

28 June 2019 was 4.5 On appeal, the ITAT vide order dated On appeal, the ITAT vide order dated 28 June 2019 was pleased to remand the matter to the AO for adjudicating the issue of pleased to remand the matter to the AO for adjudicating the issue of pleased to remand the matter to the AO for adjudicating the issue of depreciation on goodwill on merits. depreciation on goodwill on merits.

4.6 In the second round, the AO passed a draft assessment order In the second round, the AO passed a draft assessment order In the second round, the AO passed a draft assessment order dated 31 March 2022 under section 143(3) read with section 254 of dated 31 March 2022 under section 143(3) read with section 254 of dated 31 March 2022 under section 143(3) read with section 254 of the Income-tax Act, 1961 ("the Act") denying the claim for tax Act, 1961 ("the Act") denying the claim for tax Act, 1961 ("the Act") denying the claim for depreciation on goodwill. The AO accepted in view of the decision of depreciation on goodwill. The AO accepted in view of the decision of depreciation on goodwill. The AO accepted in view of the decision of the Hon'ble Supreme Court in Smifs Securities' case (supra) e Hon'ble Supreme Court in Smifs Securities' case (supra) e Hon'ble Supreme Court in Smifs Securities' case (supra) that Goodwill was a depreciable Goodwill was a depreciable asset. However, he held that the . However, he held that the decision in Smifs Securities' case was confined to the issue as to decision in Smifs Securities' case was confined to the issue as to decision in Smifs Securities' case was confined to the issue as to whether Goodwill was a depreciable asset and the other issues such whether Goodwill was a depreciable asset and the other issues such whether Goodwill was a depreciable asset and the other issues such as valuation thereof were required to be gone into. He heavily relied as valuation thereof were required to be gone into. He heavily relied as valuation thereof were required to be gone into. He heavily relied upon the decision of upon the decision of the ITAT in the case of United Breweries Ltd. United Breweries Ltd. (2016) 76 taxmann.com 103 (Bangalore (2016) 76 taxmann.com 103 (Bangalore - Trib.) Trib.) and also distinguished the other decisions relied upon by the assessee. distinguished the other decisions relied upon by the distinguished the other decisions relied upon by the Thermo Fisher Scientific India Pvt. Ltd. 9 Thermo Fisher Scientific India Pvt. Ltd.

4.7 In the final analysis at page 17, in para 12, the AO observed In the final analysis at page 17, in para 12, the AO observed In the final analysis at page 17, in para 12, the AO observed as under:

"12. To sum up, the claim for depreciation on goodwill recorded in the "12. To sum up, the claim for depreciation on goodwill recorded in the "12. To sum up, the claim for depreciation on goodwill recorded in the books of the assessee arising out of slump purchase into the assessee books of the assessee arising out of slump purchase into the assessee- books of the assessee arising out of slump purchase into the assessee company cannot be allowed for the following reasons: company cannot be allowed for the foll 1. The assessee has not followed the proper system of accounting The assessee has not followed the proper system of accounting The assessee has not followed the proper system of accounting as mandated by the Accounting Standard-14. As the amalgamation as mandated by the Accounting Standard 14. As the amalgamation was of the nature of 'purchase', the assessee was required to adjust was of the nature of 'purchase', the assessee was required to adjust was of the nature of 'purchase', the assessee was required to adjust the difference between the amount recorded as share capital issued the difference between the amount recorded as s hare capital issued and the amount of share capital of the transferor company in and the amount of share capital of the transferor company in and the amount of share capital of the transferor company in appropriate reserves, following the 'Pooling of Interest method. The appropriate reserves, following the 'Pooling of Interest method. The appropriate reserves, following the 'Pooling of Interest method. The recording of the excess consideration over the net assets as Goodwill is recording of the excess consideration over the net assets as Goodwill is recording of the excess consideration over the net assets as Goodwill is not a proper accounting. not a proper accounting. 2.

2. The 'actual cost of the intangible asset, Goodwill, of the actual cost of the intangible asset, Goodwill, of the actual cost of the intangible asset, Goodwill, of the amalgamating company was not properly recorded in the books of the amalgamating company was not properly recorded in the books of the amalgamating company was not properly recorded in the books of the amalgamated company. In the books of Chemito Technologies and amalgamated company. In the books of Chemito Technologies and amalgamated company. In the books of Chemito Technologies and Glaxosmithkline Pharmaceuticals Ltd., the value of Goodwill was Nil. Glaxosmithkline Pharmaceuticals Ltd., the value of Goodwill was Nil. Glaxosmithkline Pharmaceuticals Ltd., the value of Goodwill was Nil. As per the provisions of Explanation 7 to section 43(1), the value of er the provisions of Explanation 7 to section 43(1), the value of er the provisions of Explanation 7 to section 43(1), the value of Goodwill in the books of Thermo Fisher should also have been Nil. Goodwill in the books of Thermo Fisher should also have been Nil. Goodwill in the books of Thermo Fisher should also have been Nil. 3.

5. A homogeneous reading of the provisions of sections 2(1B). 32 A homogeneous reading of the provisions of sections 2(1B). 32 A homogeneous reading of the provisions of sections 2(1B). 32 and 43 of the Act make it evident that in an amalgamation of the and 43 of the Act make it evident that in an amalgamation of the nature of 'merger', which is case of the Appellant, the goodwill so nature of 'merger', which is case of the Appellant, the goodwill so nature of 'merger', which is case of the Appellant, the goodwill so recorded should be of the nature of 'reserves and no depreciation recorded should be of the nature of 'reserves and no depreciation recorded should be of the nature of 'reserves and no depreciation would be allowable on it. allowable on it.

7. The decision of the Hon'ble ITAT Bangalore in case of United The decision of the Hon'ble ITAT Bangalore in case of United The decision of the Hon'ble ITAT Bangalore in case of United Breweries is applicable in the facts or the case. Breweries is applicable in the Thermo Fisher Scientific India Pvt. Ltd. 10 Thermo Fisher Scientific India Pvt. Ltd.

4.8 Based on above ove reasoning, depreciation on goodwill was reasoning, depreciation on goodwill was disallowed in the draft assessment order. disallowed in the draft assessment order. Against the draft Against the draft assessment order, the assessment order, the assessee filed objections before DRP. DR filed objections before DRP. DRP also rejected the Appellant's claim vide directions dated 13th also rejected the Appellant's claim vide directions dated also rejected the Appellant's claim vide directions dated December 2022. The Ld. The Ld. DRP held that the present was a case of DRP held that the present was a case of succession and therefore the AO was justified in invoking sixth succession and therefore the AO was justified in invoking sixth succession and therefore the AO was justified in invoking sixth proviso to section 32 of the Act. proviso to section 32 of the Act. The Ld. DRP also stated that DRP also stated that valuation reports were unrealistic since they were primarily based valuation reports were unrealistic since they were primarily based valuation reports were unrealistic since they were primarily based on the projection of r on the projection of revenues for subsequent 5 years, which were evenues for subsequent 5 years, which were provided by management, without sharing any transparent, provided by management, without sharing any transparent, provided by management, without sharing any transparent, discernible and acceptable methodology based on authenticated discernible and acceptable methodology based on authenticated discernible and acceptable methodology based on authenticated market size / market share of the businesses market size / market share of the businesses acquired acquired market research / studies, other relevan research / studies, other relevant factors, etc. The AO passed the The AO passed the final assessment order dated 31 final assessment order dated 31st January 2023 under section January 2023 under section 143(3) read with 144C(13) read with section 254 of the Act denying 144C(13) read with section 254 of the Act denying 144C(13) read with section 254 of the Act denying the claim of depreciation on goodwill. the claim of depreciation on goodwill.

Transactions in question are in the nature of slump sale, not Transactions in question are in the nature of slump sale, not Transactions in question are in the nature of slump sale, not amalgamation

Thermo Fisher Scientific India Pvt. Ltd. 11 Thermo Fisher Scientific India Pvt. Ltd.

The acquisition of the business undertakings by the Appellant from The acquisition of the business undertakings by the Appellant from The acquisition of the business undertakings by the Appellant from GSK and CTPL were by way of a slump sale. A review of the respective GSK and CTPL were by way of a slump sale. A review of the respective BTAs clearly show that the business undertakings were taken over as BTAs clearly show that the business undertakings were taken over as BTAs clearly show that the business undertakings were taken over as a whole for a lump sum consideration. For instance, a reference may a whole for a lump sum consideration. For instance, a reference may a whole for a lump sum consideration. For instance, a reference may be made to the following: be made to the following: a. Page 4 of the paper book (Recitals): GSK is desirous of selling and a. Page 4 of the paper book (Recitals): GSK is desirous of selling and a. Page 4 of the paper book (Recitals): GSK is desirous of selling and Purchaser (i.e., the Appellant) is desirous of purchasing the QFC aser (i.e., the Appellant) is desirous of purchasing the QFC aser (i.e., the Appellant) is desirous of purchasing the QFC undertaking as a going concern comprised of its assets, liabilities, undertaking as a going concern comprised of its assets, liabilities, undertaking as a going concern comprised of its assets, liabilities, rights and obligations as provided for in the agreement at or for a lump rights and obligations as provided for in the agreement at or for a lump rights and obligations as provided for in the agreement at or for a lump sum consideration b. Page 4 of the paper book (para 3): Lump sum consideration of Rs. b. Page 4 of the paper book (para 3 ): Lump sum consideration of Rs. 240 crores c. Page 5 of the paper book (para 3.2): The parties acknowledge and Page 5 of the paper book (para 3.2): The parties acknowledge and Page 5 of the paper book (para 3.2): The parties acknowledge and agree that the acquisition will constitute an outright slump sale of the agree that the acquisition will constitute an outright slump sale of the agree that the acquisition will constitute an outright slump sale of the entire QFC undertaking as a going concern for a lump sum entire QFC undertaking as a going concern for a lump sum entire QFC undertaking as a going concern for a lump sum consideration. d. Page 17 of the paper book (para 6.14): Take over of employees, d. Page 17 of the paper book (para 6.14): Take over of employees, d. Page 17 of the paper book (para 6.14): Take over of employees, which shows that the takeover was on a going concern basis. Also to which shows that the takeover was on a going concern basis. Also to which shows that the takeover was on a going concern basis. Also to the same effect is para 7.4, 8.2, 8.3, etc. the same effect is para 7.4, 8.2, 8.3, etc. e. Page 23 of the paper book (para 9.2): GSK to continue operation of e. Page 23 of the paper book (para 9.2): GSK to continue operation of e. Page 23 of the paper book (para 9.2): GSK to continue operation of the undertaking till its takeover by the Appellant. dertaking till its takeover by the Appellant. f. Page 30 of the paper book (para 12): GSK gave a non f. Page 30 of the paper book (para 12): GSK gave a non-compete f. Page 30 of the paper book (para 12): GSK gave a non undertaking for a period of 3 years undertaking for a period of 3 years g. Page 45 of the paper book: Details of registered trademarks taken g. Page 45 of the paper book: Details of registered trademarks taken g. Page 45 of the paper book: Details of registered trademarks taken over by the Appellant over by the Appellant h. Pages 46-55 of th 55 of the paper book: Details of fixed assets taken over by e paper book: Details of fixed assets taken over by the Appellant. i. Page 62-64 of the paper book: Details of material contracts 64 of the paper book: Details of material contracts 64 of the paper book: Details of material contracts j. Page 67-70 of the paper book: Statement of assets and liabilities and 70 of the paper book: Statement of assets and liabilities and 70 of the paper book: Statement of assets and liabilities and accounting policies k. Pages 73-83 of the paper book: 83 of the paper book: Details of material agreements Details of material agreements Similar is the case of acquisition from CTPL. The following clauses of the Similar is the case of acquisition from CTPL. The following clauses of the Similar is the case of acquisition from CTPL. The following clauses of the BTA with CTPL may be noted: BTA with CTPL may be noted:

Thermo Fisher Scientific India Pvt. Ltd. 12 Thermo Fisher Scientific India Pvt. Ltd. a. Page 139 of the paper book (Recitals): Seller (CTPL) is desirous of a. Page 139 of the paper book (Recitals): Seller (CTPL) is desirous of a. Page 139 of the paper book (Recitals): Seller (CTPL) is desirous of selling and Purchaser (Appellant) is desirous of purchasing the selling and Purchaser (Appellant) is desirous of purchasing the Undertaking comprised of its assets, liabilities, rights and obligations Undertaking comprised of its assets, liabilities, rights and obligations Undertaking comprised of its assets, liabilities, rights and obligations (the "Acquired Business") as provided for in this Agreement. (the "Acquired Business") as provided for in this Agreement. (the "Acquired Business") as provided for in this Agreement. b. Page 140 of the paper book (para 3): Lump sum consideration of Rs. Page 140 of the paper book (para 3): Lump sum consideration of Rs. Page 140 of the paper book (para 3): Lump sum consideration of Rs. 58 crores plus earnout amount, which would be paid by the purchaser 58 crores plus earnout amount, which would be paid by the purchaser to the seller in respect of the profits made by the undertaking over and to the seller in respect of the profits made by the undertaking over and to the seller in respect of the profits made by the undertaking over and above an agreed threshold amount between the date of contract and above an agreed threshold amount between the date of contract and above an agreed threshold amount between the date of contract and the date of actual acquisition. the date of actual acquisition. c. Page 143 of the paper book (para 3.2): The parties acknowledge and c. Page 143 of the paper book (para 3.2): The parties acknowledge and agree that the transaction will constitute an outright slump sale of the agree that the transaction will constitute an outright slump sale of the agree that the transaction will constitute an outright slump sale of the entire Acquired Business as an inseparable whole as a going concern entire Acquired Business as an inseparable whole as a going concern entire Acquired Business as an inseparable whole as a going concern for a lump sum consideration. for a lump sum consideration. d. Page 149-150 of the paper book (para 5.3.3): The consideration to 150 of the paper book (para 5.3.3): The consideration to 150 of the paper book (para 5.3.3): The consideration to be paid by wire transfer. paid by wire transfer. e. Page 181 of the paper book: Statement of assets and liabilities e. Page 181 of the paper book: Statement of assets and liabilities e. Page 181 of the paper book: Statement of assets and liabilities f. Page 186 of the paper book: Schedule of fixed assets, which shows Page 186 of the paper book: Schedule of fixed assets, which shows Page 186 of the paper book: Schedule of fixed assets, which shows there was no goodwill in CTPL. g. there was no goodwill in CTPL. g. g. Page 191 of the paper book: List of assets (no goodwill) Page 191 of the paper book: List of assets (no goodwill) Page 191 of the paper book: List of assets (no goodwill) h. Pages 208-222: List of material contracts 222: List of material contracts i. Page 223: List of distributors . Page 223: List of distributors 5.1 The assessee further further submitted that the above is only an that the above is only an illustrative list of the relevant clauses of the two BTAs, which show illustrative list of the relevant clauses of the two BTAs, which show illustrative list of the relevant clauses of the two BTAs, which show that:

(i) The undertakings were acquired by the assesee from GSK and (i) The undertakings were acquired by th from GSK and CTPL by way of a slump sale and on a going concern basis CTPL by way of a slump sale and on a going concern basis CTPL by way of a slump sale and on a going concern basis (ii) The consideration for such acquisition was paid by wire transfer ) The consideration for such acquisition was paid by wire transfer ) The consideration for such acquisition was paid by wire transfer (i.e., in monetary terms) and not by issuance of shares (i.e., in monetary terms) and (iii) There was no goodwill in seller's books and no claim of (iii) There was no goodwill in seller's books and no claim of depreciation by the sellers on goodwill depreciation by the sellers on goodwill

Thermo Fisher Scientific India Pvt. Ltd. 13 Thermo Fisher Scientific India Pvt. Ltd.

(iv) Lumpsum consideration paid by the assessee for acquiring the (iv) Lumpsum consideration paid by the for acquiring the undertakings was allocated over various assets and liabilities and undertakings was allocated over various assets and liabilities and undertakings was allocated over various assets and liabilities and recognised in the books of the Appellant at their respective fair valu recognised in the books of the Appellant at their respective fair values recognised in the books of the Appellant at their respective fair valu based on valuation report as per the requirement of Accounting based on valuation report as per the requirement of Accounting based on valuation report as per the requirement of Accounting Standard 10. (v) Accordingly, the transactions in question were in the nature of (v) Accordingly, the transactions in question were in the nature of (v) Accordingly, the transactions in question were in the nature of slump sale. This has been acknowledged by the AO and DR as well slump sale. This has been acknowledged by the AO and DR as well slump sale. This has been acknowledged by the AO and DR as well in their orders. 5.3 The Ld. Counsel Counsel further submitted the AO has applied various AO has applied various provisions relating to amalgamation to the facts of the assessee. provisions relating to amalgamation to the facts of the provisions relating to amalgamation to the facts of the The AO stated that the The AO stated that the assessee has not followed proper system of has not followed proper system of accounting as mandated by accounting as mandated by AS 14. The AO has further stated that a AS 14. The AO has further stated that a homogeneous reading homogeneous reading of the provisions of sections 2(1B), 32 and 43 of the provisions of sections 2(1B), 32 and 43 of the Act make it evident that in an amalgamation of the nature of of the Act make it evident that in an amalgamation of the nature of of the Act make it evident that in an amalgamation of the nature of merger, which is case of the merger, which is case of the assessee, the goodwill so recorded , the goodwill so recorded should be of the nature of reserves and no depreciation should be should be of the nature of reserves and no depreciation should be should be of the nature of reserves and no depreciation should be allowed on it. Since the acquisition of businesses was by way of it. Since the acquisition of businesses was by way of it. Since the acquisition of businesses was by way of slump sale, the fair value of assets is required to be determined by slump sale, the fair value of assets is required to be determined by slump sale, the fair value of assets is required to be determined by a valuer and the consideration paid to the seller is required to be a valuer and the consideration paid to the seller is required to be a valuer and the consideration paid to the seller is required to be allocated amongst the different assets identified by the valuer allocated amongst the different assets identified by the valuer allocated amongst the different assets identified by the valuer through purchase price allocation in accordance with para 15.3 of hrough purchase price allocation in accordance with para 15.3 of hrough purchase price allocation in accordance with para 15.3 of AS 10, which provides that "where several assets are purchased for AS 10, which provides that "where several assets are purchased for AS 10, which provides that "where several assets are purchased for a consolidated price, the consideration is apportioned to the various a consolidated price, the consideration is apportioned to the various a consolidated price, the consideration is apportioned to the various assets on a fair basis as determined by competent valuers". assets on a fair basis as determined by competent valu assets on a fair basis as determined by competent valu Similarly, para 16.1 of the said AS provides: "16.1 Goodwill, in Similarly, para 16.1 of the said AS provides: "16.1 Goodwill, in Similarly, para 16.1 of the said AS provides: "16.1 Goodwill, in general, is recorded in the books only when some consideration in general, is recorded in the books only when some consideration in general, is recorded in the books only when some consideration in money or money's worth has been paid for it. Whenever a business money or money's worth has been paid for it. Whenever a business money or money's worth has been paid for it. Whenever a business

Thermo Fisher Scientific India Pvt. Ltd. 14 Thermo Fisher Scientific India Pvt. Ltd. is acquired for a price (payable either in cash or in shares or is acquired for a price (payable either in cash or in is acquired for a price (payable either in cash or in otherwise) which is in excess of the value of the net assets of the otherwise) which is in excess of the value of the net assets of the otherwise) which is in excess of the value of the net assets of the business taken over, the excess is termed as 'goodwill'. Goodwill business taken over, the excess is termed as 'goodwill'. Goodwill business taken over, the excess is termed as 'goodwill'. Goodwill arises from business connections, trade name or reputation of an arises from business connections, trade name or reputation of an arises from business connections, trade name or reputation of an enterprise or from other intangible benefits enjoyed by an enterprise or from other intangible benefits en enterprise or from other intangible benefits en enterprise." Therefore, the AO is not justified in relying on the enterprise." Therefore, the AO is not justified in relying on the enterprise." Therefore, the AO is not justified in relying on the provisions of AS 14, sections 2(1B), 32 and 43 of the Act, which provisions of AS 14, sections 2(1B), 32 and 43 of the Act, which provisions of AS 14, sections 2(1B), 32 and 43 of the Act, which apply to cases of amalgamation and other transactions, where apply to cases of amalgamation and other transactions, where apply to cases of amalgamation and other transactions, where transferor of the business is exempted from paying tax on transfer transferor of the business is exempted from paying t transferor of the business is exempted from paying t of the assets and, therefore, the transferee does not get a higher of the assets and, therefore, the transferee does not get a higher of the assets and, therefore, the transferee does not get a higher cost of assets acquired but the cost in its hands continues to be cost of assets acquired but the cost in its hands continues to be cost of assets acquired but the cost in its hands continues to be what was the cost in the transferor's hands. what was the cost in the transferor's hands. Non-applicability of Explanation 7 to section 43() and applicability of applicability of Explanation 7 to Explanation 7 to section 43() and section 43() and Explanation 2 to section 43(6) of the Act ion 2 to section 43(6) of the Act 5.4 The ld counsel further submitted that t 5.4 The ld counsel further submitted that the AO has held that he AO has held that value of goodwill in the books of GSK and CTPL is Nil and as per the value of goodwill in the books of GSK and CTPL is Nil and as per the value of goodwill in the books of GSK and CTPL is Nil and as per the provisions of Explanation 7 to section 43(1) of the Act, the value of provisions of Explanation 7 to section 43(1) of the Act, the value of provisions of Explanation 7 to section 43(1) of the Act, the value of Goodwill in the book Goodwill in the books of the assessee should also have been Nil. should also have been Nil. Further, it is stated that WDV of the block of assets of intangible Further, it is stated that WDV of the block of assets of intangible Further, it is stated that WDV of the block of assets of intangible assets in the books of the assets in the books of the assessee should have been recorded as should have been recorded as Nil value against the goodwill as per the provisions of Explanation 2 Nil value against the goodwill as per the provisions of Explanation 2 Nil value against the goodwill as per the provisions of Explanation 2 to section 43(6) of the Act. on 43(6) of the Act.

Thermo Fisher Scientific India Pvt. Ltd. 15 Thermo Fisher Scientific India Pvt. Ltd.

5.5 It is submitted by the assessee by the assessee that Explanation 7 to section that Explanation 7 to section 43(1) and Explanation 2 to section 43(6) of the Act are applicable to 43(1) and Explanation 2 to section 43(6) of the Act are applicable to 43(1) and Explanation 2 to section 43(6) of the Act are applicable to transactions in the scheme of an amalgamation and, therefore, not transactions in the scheme of an amalgamation and, therefore, not transactions in the scheme of an amalgamation and, therefore, not applicable in the case of the applicable in the case of the assessee, since transactions of the , since transactions of the assessee are in the nature of slump sale. are in the nature of slump sale. Non-applicability of fifth proviso (now si applicability of fifth proviso (now sixth proviso) to section xth proviso) to section 32(1)(ii) of the Act 5.6 The ld counsel further submitted that t 5.6 The ld counsel further submitted that the AO in the assessment he AO in the assessment order has stated that without prejudice, the depreciation allowable order has stated that without prejudice, the depreciation allowable order has stated that without prejudice, the depreciation allowable to the assessee on Goodwill post on Goodwill post-purchase should have been at the purchase should have been at the same rate as allowable to seller prior to amalgamation as per the same rate as allowable to seller prior to amalgamation as per the same rate as allowable to seller prior to amalgamation as per the fifth proviso (now sixth proviso fifth proviso (now sixth proviso) to section 32(1)(ii) of the Act and ) to section 32(1)(ii) of the Act and accordingly, the depreciation allowable to the accordingly, the depreciation allowable to the assessee assessee on Goodwill should have been zero. should have been zero. submitted that the said proviso applies 5.7 Regarding above , it Regarding above , it was submitted that the said proviso applies in cases of tax neutral transactions, such as amalgamation, in cases of tax neutral transactions, such as amalgamation in cases of tax neutral transactions, such as amalgamation demerger, demerger, demerger, succession, succession, succession, etc. etc. etc. where where where the the the transferor transferor transferor (i.e., (i.e., (i.e., the the the amalgamating amalgamating company amalgamating company or company or or the the demerged company or the the demerged company or the demerged company or the predecessor, as the case may be) is not taxed on the transfer of the predecessor, as the case may be) is not taxed on the transfer of the predecessor, as the case may be) is not taxed on the transfer of the assets and, therefore, the scheme of the Act is that the transferee assets and, therefore, the scheme of the Act is that the transferee assets and, therefore, the scheme of the Act is that the transferee does not get the benefit of the fair value of the assets even if the ot get the benefit of the fair value of the assets even if the ot get the benefit of the fair value of the assets even if the said value is higher for the purposes of claiming depreciation said value is higher for the purposes of claiming depreciation said value is higher for the purposes of claiming depreciation thereon. However, the said principle cannot apply in the case of However, the said principle cannot apply in the case of However, the said principle cannot apply in the case of Thermo Fisher Scientific India Pvt. Ltd. 16 Thermo Fisher Scientific India Pvt. Ltd. transactions by way of slump sale, where the sellers viz. GSK and transactions by way of slump sale, where the sellers viz. GSK and transactions by way of slump sale, where the sellers viz. GSK and CTPL were assessable to capital gains tax as per the provisions of CTPL were assessable to capital gains tax as per the provisions of CTPL were assessable to capital gains tax as per the provisions of section 50B of the Act. Therefore, in the present case, the assessee section 50B of the Act. Therefore, in the present case, the section 50B of the Act. Therefore, in the present case, the cannot be denied the benefit of higher cost by relying on the sixth cannot be denied the benefit of higher cost by relying on the sixth cannot be denied the benefit of higher cost by relying on the sixth proviso to section 32. proviso to section 32.

5.8 It was further submitted It was further submitted that in any event, sixth proviso applies n any event, sixth proviso applies in cases where goodwill appears in the books of the seller / in cases where goodwill appears in the books of the seller / in cases where goodwill appears in the books of the seller / predecessor and who has claimed depreciation thereon. In a case predecessor and who has claimed depreciation thereon. In a case predecessor and who has claimed depreciation thereon. In a case such as the present one, where the goodwill neither appears in the such as the present one, where the goodwill neither appears in the such as the present one, where the goodwill neither appears in the books of the seller no books of the seller nor is any depreciation claimed thereon by the r is any depreciation claimed thereon by the sellers, the question of aggregation of depreciation claimed by both sellers, the question of aggregation of depreciation claimed by both sellers, the question of aggregation of depreciation claimed by both and thereafter apportionment of such aggregate to the seller and and thereafter apportionment of such aggregate to the seller and and thereafter apportionment of such aggregate to the seller and buyer in the ratio of number of days for which the same was used buyer in the ratio of number of days for which the same was used buyer in the ratio of number of days for which the same was used by them does not arise. For this reason also, sixth proviso is not not arise. For this reason also, sixth proviso is not not arise. For this reason also, sixth proviso is not applicable. Non-applicability of decision of Hon applicability of decision of Hon’ble Bangalore ITAT in case ble Bangalore ITAT in case of United Breweries (supra) of United Breweries (supra)

5.9 The ld counsel submitted that t ld counsel submitted that the AO has a he AO has alleged that the decision of Hon’ble Bangalore ITAT ble Bangalore ITAT in case of United Breweries in case of United Breweries (supra) is squarely applicable in the facts of the Appellant's case. (supra) is squarely applicable in the facts of the Appellant's case. (supra) is squarely applicable in the facts of the Appellant's case.

5.10 In this regard the Ld the Ld counsel submitted that the facts of the that the facts of the said case are completely distinguishable from the facts in the said case are completely distinguishable from the facts in the said case are completely distinguishable from the facts in the present case. In case of Unit present case. In case of United Breweries (UB):

Thermo Fisher Scientific India Pvt. Ltd. 17 Thermo Fisher Scientific India Pvt. Ltd.

(i) There was an amalgamation of three wholly owned subsidiaries with UB (i) There was an amalgamation of three wholly owned subsidiaries with UB (i) There was an amalgamation of three wholly owned subsidiaries with UB (ii) Goodwill existed in the books of one of the subsidiaries at Rs. 7.45 crores (ii) Goodwill existed in the books of one of the subsidiaries at Rs. 7.45 crores (ii) Goodwill existed in the books of one of the subsidiaries at Rs. 7.45 crores which was enhanced to Rs. 62.30 crores in the books of UB based on which was enhanced to Rs. 62.30 crores in the books of UB based on which was enhanced to Rs. 62.30 crores in the books of UB based on revaluation before amalgamation revaluation before amalgamation (iii) The AO in that case had doubted the deflated value of tangible assets (iii) The AO in that case had doubted the deflated value of tangible assets (iii) The AO in that case had doubted the deflated value of tangible assets and observed that in case replacement cost of building, plant and and observed that in case replacement cost of building, plant and and observed that in case replacement cost of building, plant and machinery and higher value of land was taken into account, there would not machinery and higher value of land was taken into account, there would not machinery and higher value of land was taken into account, there would not be any goodwill. Accordingly, resort was taken to Explanation 3 to section be any goodwill. Accordingly, resort was taken to Explanation 3 to section be any goodwill. Accordingly, resort was taken to Explanation 3 to section 43(1) of the Act. It is submitted that Explanation 3 to section 43(1) can have 43(1) of the Act. It is submitted that Explanation 3 to section 43(1) can have no application in the present case since goodwill did not exist in the books of no application in the present case since goodwill did not exist in the books of no application in the present case since goodwill did not exist in the books of GSK or CTPL and, hence, there was no question of them using the assets GSK or CTPL and, hence, there was no question of them using the assets GSK or CTPL and, hence, there was no question of them using the assets before acquisition of the undertakings by the Appellant. Moreover before acquisition of the undertakings by the Appellant. Moreover, there is before acquisition of the undertakings by the Appellant. Moreover no finding by the AO that the transfer was done for the purposes of claiming no finding by the AO that the transfer was done for the purposes of claiming no finding by the AO that the transfer was done for the purposes of claiming enhanced depreciation. enhanced depreciation. 5.11 But in the case of But in the case of assessee, however:

(i) The divisions were acquired by way of a slump sale as a going (i) The divisions were acquired by way of a slump sale as a going (i) The divisions were acquired by way of a slump sale as a going concern from GSK and CTPL, which are concern from GSK and CTPL, which are unrelated entities whereas unrelated entities whereas in United Breweries parties were related. in United Breweries parties were related.

(ii) The sellers continue to exist after their respective businesses (ii) The sellers continue to exist after their respective businesses (ii) The sellers continue to exist after their respective businesses were sold to the Appellant were sold to the Appellant (iii) Goodwill did not exist in the books of the sellers. The goodwill (iii) Goodwill did not exist in the books of the sellers. The goodwill (iii) Goodwill did not exist in the books of the sellers. The goodwill was determined based on the purchase price allocation made by an ed on the purchase price allocation made by an ed on the purchase price allocation made by an independent valuer by assigning fair values to the assets in independent valuer by assigning fair values to the assets in independent valuer by assigning fair values to the assets in accordance accordance accordance with with with the the the relevant relevant relevant accounting accounting accounting standard. standard. standard. Excess Excess Excess consideration paid to the sellers over the net assets acquired was consideration paid to the sellers over the net assets acquired was consideration paid to the sellers over the net assets acquired was considered as goodwill considered as goodwill

Thermo Fisher Scientific India Pvt. Ltd. 18 Thermo Fisher Scientific India Pvt. Ltd.

(iv)The valuation of other assets except for goodwill was not The valuation of other assets except for goodwill was not The valuation of other assets except for goodwill was not challenged by the Ld. AO in case of challenged by the Ld. AO in case of the Appellant (v) The DRP has not found any ) The DRP has not found any discrepancy in the value assigned to in the value assigned to any particular asset but has generally stated that the valuation any particular asset but has generally stated that the valuation any particular asset but has generally stated that the valuation reports became "unrealistic" because the underlying information e "unrealistic" because the underlying information e "unrealistic" because the underlying information and assumptions were not shared. It is submitted that the and assumptions were not shared. It is submitted that the and assumptions were not shared. It is submitted that the valuation reports firstly identify various intangible assets and valuation reports firstly identify various intangible assets and valuation reports firstly identify various intangible assets and thereafter adopt accepted methods for valuing the same. Therefore, thereafter adopt accepted methods for valuing the same. thereafter adopt accepted methods for valuing the same. without any specific material, the same cannot be disregarded or cific material, the same cannot be disregarded or cific material, the same cannot be disregarded or held to be unrealistic. In any event, it is submitted that even if the held to be unrealistic. In any event, it is submitted that even if the held to be unrealistic. In any event, it is submitted that even if the valuation of the asset undergoes a change, it will merely result in valuation of the asset undergoes a change, it will merely result in valuation of the asset undergoes a change, it will merely result in reallocation of the total cost over assets, which therefore cannot reallocation of the total cost over assets, which therefore cannot reallocation of the total cost over assets, which therefore cannot result in denial of depreciation. result in denial of depreciation.

5.12 Accordingly, it was submitted it was submitted that the facts of the case of facts of the case of United Breweries are clearly distinct and not applicable to the facts United Breweries are clearly distinct and not applicable to the facts United Breweries are clearly distinct and not applicable to the facts of the case of the Appellant. of the case of the Appellant. Observations of DRP with respect to the valuation of intangible Observations of DRP with respect to the valuation of inta Observations of DRP with respect to the valuation of inta assets 5.13 The ld counsel submitted that t The ld counsel submitted that the DRP has remarked that the he DRP has remarked that the valuation reports are primarily based on the projection of revenues valuation reports are primarily based on the projection of revenues valuation reports are primarily based on the projection of revenues for subsequent 5 years, which is provided by the management, for subsequent 5 years, which is provided by the management, for subsequent 5 years, which is provided by the management, reflects increase/ variations, without sharing any transparent, reflects increase/ variations, without sharing any transparent, reflects increase/ variations, without sharing any transparent, discernible and acceptable methodo discernible and acceptable methodology based on authenticated logy based on authenticated

Thermo Fisher Scientific India Pvt. Ltd. 19 Thermo Fisher Scientific India Pvt. Ltd. market size/ market share of the businesses acquired, market market size/ market share of the businesses acquired, market market size/ market share of the businesses acquired, market research/ studies, other relevant factors etc. research/ studies, other relevant factors etc. the ld DRP further the ld DRP further observed that in their their considered opinion, for the reasons of the considered opinion, for the reasons of the above referred deficiencies, the va above referred deficiencies, the valuation of intangible assets and its luation of intangible assets and its inter se proportions, the valuation reports beca ions, the valuation reports became unrealistic. me unrealistic.

5.14 The counsel in this regard, n this regard, submitted that it has only acquired it has only acquired depreciable assets as a part of the business acquisition. In this depreciable assets as a part of the business acquisition. In this depreciable assets as a part of the business acquisition. In this regard, without prejudice to what has been submitted above, even if udice to what has been submitted above, even if udice to what has been submitted above, even if it is considered that valuation of intangible assets viz. trademarks, it is considered that valuation of intangible assets viz. trademarks, it is considered that valuation of intangible assets viz. trademarks, technical know-how, how, how, copyrights, copyrights, copyrights, quality quality quality control control control know know-how, know software, commercial rights in the form of supply/ vendor/ software, commercial rights in the form of supply/ vendor/ software, commercial rights in the form of supply/ vendor/ manufacturing contrac manufacturing contracts etc. are lower, and in case a higher value ts etc. are lower, and in case a higher value is to be assigned to such intangible assets, the lowering of the value is to be assigned to such intangible assets, the lowering of the value is to be assigned to such intangible assets, the lowering of the value of goodwill would be offset by the higher allocation of the of goodwill would be offset by the higher allocation of the of goodwill would be offset by the higher allocation of the consideration paid by the consideration paid by the assessee to the sellers and resultantly to the sellers and resultantly there would effectively not be denial of depreciation. Therefore, on ffectively not be denial of depreciation. Therefore, on ffectively not be denial of depreciation. Therefore, on this count also, there is no justification of denying depreciation. this count also, there is no justification of denying depreciation. this count also, there is no justification of denying depreciation.

5.15 Reliance is placed on the following decisions, wherein it has Reliance is placed on the following decisions, wherein it has Reliance is placed on the following decisions, wherein it has been categorically held that depreciation is allowable on goodwill in been categorically held that depreciation is allowable on goodwil been categorically held that depreciation is allowable on goodwil a slump sale, after taking into account all relevant provisions of the a slump sale, after taking into account all relevant provisions of the a slump sale, after taking into account all relevant provisions of the Act, including fifth proviso (now sixth proviso) to section 32 of the Act, including fifth proviso (now sixth proviso) to section 32 of the Act, including fifth proviso (now sixth proviso) to section 32 of the Act.

Thermo Fisher Scientific India Pvt. Ltd. 20 Thermo Fisher Scientific India Pvt. Ltd.

(i) Triune Energy Services (P.) Ltd. v. DCIT [2016] 65 (i) Triune Energy Services (P.) Ltd. v. DCIT [2016] 65 (i) Triune Energy Services (P.) Ltd. v. DCIT [2016] 65 taxmann.com 288 (Delhi) taxmann.com 288 (Delhi)

In this decision, the Hon' In this decision, the Hon'ble Delhi High Court while dealing with ble Delhi High Court while dealing with depreciation on goodwill arising on account of slump sale has held depreciation on goodwill arising on account of slump sale has held depreciation on goodwill arising on account of slump sale has held in favour of the assessee stating as under: in favour of the assessee stating as under:

"As indicated hereinbefore Goodwill includes a host of intangible "As indicated hereinbefore Goodwill includes a host of intangible

As indicated hereinbefore Goodwill includes a host of intangible assets, which a person acquires, on acq assets, which a person acquires, on acquiring a business as a going uiring a business as a going concern and valuing the same at the excess consideration paid over concern and valuing the same at the excess consideration paid over concern and valuing the same at the excess consideration paid over and above the value of net tangible assets is an acceptable and above the value of net tangible assets is an acceptable and above the value of net tangible assets is an acceptable accounting practice. Thus, a further exercise to value the goodwill is accounting practice. Thus, a further exercise to value the goodwill is accounting practice. Thus, a further exercise to value the goodwill is not warranted.

(ii) Triune Energy Services (P.) Ltd. v. DCIT [2018] 96 nergy Services (P.) Ltd. v. DCIT [2018] 96 nergy Services (P.) Ltd. v. DCIT [2018] 96 taxmann.com 580 (Delhi taxmann.com 580 (Delhi -Trib.)

The Hon'ble Delhi Tribunal in this case placed reliance on the The Hon'ble Delhi Tribunal in this case placed reliance on the The Hon'ble Delhi Tribunal in this case placed reliance on the decision of Hon ble High Court in case of the same assessee and decision of Hon ble High Court in case of the same assessee and decision of Hon ble High Court in case of the same assessee and directed the Id. A to delete the disallowance on account of directed the Id. A to delete the disallowance on directed the Id. A to delete the disallowance on depreciation on intangibles/ goodwill. depreciation on intangibles/ goodwill. (iii) M/s. Pitney Bowes India v. DCIT (ITA Nos. 289 to (iii) M/s. Pitney Bowes India v. DCIT (ITA Nos. 289 to (iii) M/s. Pitney Bowes India v. DCIT (ITA Nos. 289 to 293/Del/2013)

The Hon'ble Delhi ITAT in this case has held as under: The Hon'ble Delhi ITAT in this case has held as under: The Hon'ble Delhi ITAT in this case has held as under:

Thermo Fisher Scientific India Pvt. Ltd. 21 Thermo Fisher Scientific India Pvt. Ltd.

"We are of the view that list of transferred asset included business "We are of the view that list of transferred asset included business "We are of the view that list of transferred asset included business know-how, customer and vendor list etc which are business or tomer and vendor list etc which are business or tomer and vendor list etc which are business or commercial rights of similar nature as specified in 32(1)(i) of the commercial rights of similar nature as specified in 32(1)(i) of the commercial rights of similar nature as specified in 32(1)(i) of the Act, which constitute part of the "goodwill" of the business, Act, which constitute part of the "goodwill" of the business, Act, which constitute part of the "goodwill" of the business, transferred as going concern to the assessee. Since in the case transferred as going concern to the assessee. Since in the case transferred as going concern to the assessee. Since in the case tangible assets alongwith other business/commercial rights, have s alongwith other business/commercial rights, have s alongwith other business/commercial rights, have been transferred to the assessee, the value of "Goodwill" should be been transferred to the assessee, the value of "Goodwill" should be been transferred to the assessee, the value of "Goodwill" should be computed by reducing the value of all liabilities, the tangible assets, computed by reducing the value of all liabilities, the tangible assets, computed by reducing the value of all liabilities, the tangible assets, Government Authorizations valued by the valuer and non-compete Government Authorizations valued by the valuer and non Government Authorizations valued by the valuer and non fee valued by the valuer, out of the slump sale consideration and e valued by the valuer, out of the slump sale consideration and e valued by the valuer, out of the slump sale consideration and then depreciation should be allowed at the rate prescribed for the then depreciation should be allowed at the rate prescribed for the then depreciation should be allowed at the rate prescribed for the intangible assets under section32(1) (it) of the Act." intangible assets under section32(1) (it) of the Act." (iv) Grindwell Norton Ltd. v. ACIT (ITA Nos.528/Mum/2012 and (iv) Grindwell Norton Ltd. v. ACIT (ITA Nos.528/Mum/2012 and (iv) Grindwell Norton Ltd. v. ACIT (ITA Nos.528/Mum/2012 and 5800/Mum/2013)

In this case, the Hon'ble ITAT while dealing with the facts similar to In this case, the Hon'ble ITAT while dealing with the facts similar to In this case, the Hon'ble ITAT while dealing with the facts similar to that of the Appellant has held as under: that of the Appellant has held as under:

"we can say that since the assessee had purchased the Grinding "we can say that since the assessee had purchased the Grinding "we can say that since the assessee had purchased the Grinding Wheel Business from OAL as a going concern, therefore, amount of Wheel Business from OAL as a going concern, therefore, amount of Wheel Business from OAL as a going concern, therefore, amount of consideration paid in excess of value of tangible assets would be ion paid in excess of value of tangible assets would be ion paid in excess of value of tangible assets would be accounted for in its books of accounts as 'Goodwill'. Under these accounted for in its books of accounts as 'Goodwill'. Under these accounted for in its books of accounts as 'Goodwill'. Under these circumstances, no further exercise would be required to make circumstances, no further exercise would be required to make circumstances, no further exercise would be required to make precise valuation of the amount of 'Goodwill'. precise valuation of the amount of 'Goodwill'.

Thermo Fisher Scientific India Pvt. Ltd. 22 Thermo Fisher Scientific India Pvt. Ltd.

…Thus, viewed from any ang …Thus, viewed from any angle, the assessee is eligible for the claim le, the assessee is eligible for the claim of depreciation us 32(1)(ii) on the amount of intangible assets of depreciation us 32(1)(ii) on the amount of intangible assets of depreciation us 32(1)(ii) on the amount of intangible assets acquired by it as per Business Transfer Agreement, and thus action acquired by it as per Business Transfer Agreement, and thus action acquired by it as per Business Transfer Agreement, and thus action of lower authorities was not factually or legally justified while of lower authorities was not factually or legally justified while of lower authorities was not factually or legally justified while making disallowance of the depreciation on the intangible assets. nce of the depreciation on the intangible assets. nce of the depreciation on the intangible assets. The AD is directed to grant the benefit of depreciation in terms of The AD is directed to grant the benefit of depreciation in terms of The AD is directed to grant the benefit of depreciation in terms of section 32(1)(i) upon the intangible assets acquired by the assessee. section 32(1)(i) upon the intangible assets acquired by section 32(1)(i) upon the intangible assets acquired by Thus, these grounds are al Thus, these grounds are allowed in favour of the assessee” lowed in favour of the assessee” (v) I & B Seeds (P.) Ltd. v. DCIT [20221 142 taxmann.com 274 Seeds (P.) Ltd. v. DCIT [20221 142 taxmann.com 274 Seeds (P.) Ltd. v. DCIT [20221 142 taxmann.com 274 (Bangalore - Trib.)

In this case, the Hon'ble ITAT had allowed depreciation on goodwill In this case, the Hon'ble ITAT had allowed depreciation on goodwill In this case, the Hon'ble ITAT had allowed depreciation on goodwill which arose pursuant to slump sale. Further, with respect to the which arose pursuant to slump sale. Further, with respect to the which arose pursuant to slump sale. Further, with respect to the amendment in section 32(1) by Finance Act, 2021, the Hon'ble ITAT amendment in section 32(1) by Finance Act, 2021, th amendment in section 32(1) by Finance Act, 2021, th has held as under:

13.13 The Finance Act, 2021, inserted a series of amendments in 13.13 The Finance Act, 2021, inserted a series of amendments in 13.13 The Finance Act, 2021, inserted a series of amendments in relation to the allowance of depreciation on Goodwill. Post such relation to the allowance of depreciation on Goodwill. Post such relation to the allowance of depreciation on Goodwill. Post such amendments, no depreciation is allowable to an Assessee on amendments, no depreciation is allowable to an Assessee on amendments, no depreciation is allowable to an Assessee on goodwill. However, it has been spe goodwill. However, it has been specifically provided that the cifically provided that the aforementioned amendments will take effect from April 01, 2021 aforementioned amendments will take effect from April 01, 2021 aforementioned amendments will take effect from April 01, 2021 and will, accordingly, apply in relation to AY 2021-22 and and will, accordingly, apply in relation to AY 2021 and will, accordingly, apply in relation to AY 2021 subsequent AYS..

...13.15 Therefore, the intention of the legislature is that ...13.15 Therefore, the intention of the legislature is that ...13.15 Therefore, the intention of the legislature is that depreciation on goodwill is depreciation on goodwill is allowable prior to the said Amendments, allowable prior to the said Amendments,

Thermo Fisher Scientific India Pvt. Ltd. 23 Thermo Fisher Scientific India Pvt. Ltd. is manifest from the adjustment mechanism. If the legislative is manifest from the adjustment mechanism. If the legislative is manifest from the adjustment mechanism. If the legislative intention was to deny depreciation for the past years as well, then intention was to deny depreciation for the past years as well, then intention was to deny depreciation for the past years as well, then there was no need for any adjustment to the cost of acquisition of there was no need for any adjustment to the cost of acquisition of there was no need for any adjustment to the cost of acquisition of the goodwill. Such an interpretation would lead to a provision of the an interpretation would lead to a provision of the an interpretation would lead to a provision of the law being redundant or otiose and such interpretation should be law being redundant or otiose and such interpretation should be law being redundant or otiose and such interpretation should be rejected.

5.16 The ld counsel further submitted ld counsel further submitted that since assessment for AY that since assessment for AY 2008-09 was not picked up for scrutiny, it did not have an occa 09 was not picked up for scrutiny, it did not have an occasion 09 was not picked up for scrutiny, it did not have an occa to claim depreciation on goodwill in AY 2008 to claim depreciation on goodwill in AY 2008-09 in respect of 09 in respect of goodwill arising out of slump purchase of undertaking from GSK. goodwill arising out of slump purchase of undertaking from GSK. goodwill arising out of slump purchase of undertaking from GSK. Therefore, certain claims were raised before the Hon'ble ITAT in the Therefore, certain claims were raised before the Hon'ble ITAT in the Therefore, certain claims were raised before the Hon'ble ITAT in the appeal for AY 2009- -10. The Hon'ble ITAT by its order dat 10. The Hon'ble ITAT by its order dated 24 August 2022 was pleased to restore these claims to the file of the August 2022 was pleased to restore these claims to the file of the August 2022 was pleased to restore these claims to the file of the AO by observing as under: AO by observing as under:

"5. Admittedly, the contentions raised by the assessee in Ground No. 10 "5. Admittedly, the contentions raised by the assessee in Ground No. 10 "5. Admittedly, the contentions raised by the assessee in Ground No. 10 and 11 are claims related to the main ground regarding allowing and 11 are claims related to the main ground regarding allowing and 11 are claims related to the main ground regarding allowing depreciation on goodwill. The contention raised in ground no. 12 is a new depreciation on goodw ill. The contention raised in ground no. 12 is a new claim. We noticed that the main issue relating to depreciation on goodwill claim. We noticed that the main issue relating to depreciation on goodwill claim. We noticed that the main issue relating to depreciation on goodwill has been restored to the file of the AO by the Tribunal in its order dated 28 has been restored to the file of the A by the Tribunal in its order dated 28- 06-2019. The new claim raised in Ground no.12 also requires examination 2019. The new claim raised in Ground no.12 also requires examination 2019. The new claim raised in Ground no.12 also requires examination at the end of the AO. at the end of the AO.

6. Accordingly, we deem it proper to restore all these additional grounds 6. Accordingly, we deem it proper to restore all these additional grounds 6. Accordingly, we deem it proper to restore all these additional grounds also to the file of AO for examining them in accordance with law, after also to the file of AO for examining them in acco rdance with law, after affording adequate opportunity of being heard to the assessee. affording adequate opportunity of being heard to the assessee. affording adequate opportunity of being heard to the assessee.

Thermo Fisher Scientific India Pvt. Ltd. 24 Thermo Fisher Scientific India Pvt. Ltd.

5.17 The ld counsel submitted that ld counsel submitted that keeping in mind the keeping in mind the above directions of the ITAT in its order dated directions of the ITAT in its order dated 24 August 2022, the ITAT 24 August 2022, the ITAT in deciding the present appeal may be pleased to issue necessary in deciding the present appeal may be pleased to issue necessary in deciding the present appeal may be pleased to issue necessary directions / clarifications, if deemed necessary, to the AO so that directions / clarifications, if deemed necessary, to the AO so that directions / clarifications, if deemed necessary, to the AO so that the assessee is not precluded from pursuing the is not precluded from pursuing the claims restored to claims restored to the AO by the order dated 24 August 2022. the AO by the order dated 24 August 2022.

5.18 We have heard rival submission of parties. The issue in We have heard rival submission of parties. The issue in We have heard rival submission of parties. The issue in dispute is claim of depreciation on Goodwill recognised by the dispute is claim of depreciation on Goodwill recognised by the dispute is claim of depreciation on Goodwill recognised by the assessee in two transaction of acquisition of two units. The assessee assessee in two transaction of acquisition of two units. The assessee in two transaction of acquisition of two units. The claimed that those acquisitions are that those acquisitions are for purchase of unit for for purchase of unit for lumpsum consideration, as going concerns lumpsum consideration, as going concerns in the nature of slump in the nature of slump sale, which is subject to capital gain tax u/s 50B in the hand of ale, which is subject to capital gain tax u/s 50B in the hand of ale, which is subject to capital gain tax u/s 50B in the hand of seller. Whereas the according the Assessing officer the acquisitions seller. Whereas the according the Assessing officer the acquisiti seller. Whereas the according the Assessing officer the acquisiti are in the nature of amalgamation. Before us in the nature of amalgamation. Before us, the learned counsel , the learned counsel has referred to various clauses of business transfer agreement has referred to various clauses of business transfer agreement has referred to various clauses of business transfer agreement (BTA) in respect of units acquired from GSK and CTPL respectively. (BTA) in respect of units acquired from GSK and CTPL respectively. (BTA) in respect of units acquired from GSK and CTPL respectively. On perusal of relevant clauses referred, we find that transaction in On perusal of relevant clauses referred, we find that tr On perusal of relevant clauses referred, we find that tr both the cases are of slump sale and not, amalgamation as stated both the cases are of slump sale and not, amalgamation as stated both the cases are of slump sale and not, amalgamation as stated by the Assessing Officer. by the Assessing Officer.

5.19 The learned Assessing Officer has further relied on the The learned Assessing Officer has further relied on the The learned Assessing Officer has further relied on the Explanation 7 to section 43(1) of the Act, to hold that assessee is Explanation 7 to section 43(1) of the Act to hold that assessee is not entitled for depreciation on the Goodwill recognised. For ready not entitled for depreciation on the Goodwill recognised. For ready not entitled for depreciation on the Goodwill recognised. For ready reference, the relevant explanation is reproduced as under: reference, the relevant explanation is reproduced as under: reference, the relevant explanation is reproduced as under:

Thermo Fisher Scientific India Pvt. Ltd. 25 Thermo Fisher Scientific India Pvt. Ltd.

“Explanation 7.—Where, in a scheme of amalgamation, any capital asset Where, in a scheme of amalgamation, any capital asset Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamati is transferred by the amalgamating company to the amalgamated ng company to the amalgamated company and the amalgamated company is an Indian company, the company and the amalgamated company is an Indian company, the company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company actual cost of the transferred capital asset to the amalgamated company actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating shall be taken to be the same as it would have been if the amalgamating shall be taken to be the same as it would have been if the amalgamating company had continue company had continued to hold the capital asset for the purposes of its d to hold the capital asset for the purposes of its own business. Explanation 7A.— —Where, in a demerger, any capital asset is transferred Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting by the demerged company to the resulting company and the resulting by the demerged company to the resulting company and the resulting company is an Indian company, the actual cost of the company is an Indian company, the actual cost of the transferred capital asset to the resulting company shall be taken to be the same as it would asset to the resulting company shall be taken to be the same as it would asset to the resulting company shall be taken to be the same as it would have been if the demerged company had continued to hold the capital have been if the demerged company had continued to hold the capital have been if the demerged company had continued to hold the capital asset for the purpose of its own business : asset for the purpose of its own business : Provided that such actual cost shall not exceed th that such actual cost shall not exceed the written down value e written down value of such capital asset in the hands of the demerged company. of such capital asset in the hands of the demerged company. of such capital asset in the hands of the demerged company.” 5.20 On perusal of the above E perusal of the above Explanation, we find that same is in xplanation, we find that same is in relation to transactions of amalgamation and not related to slump relation to transactions of amalgamation and not related to slump relation to transactions of amalgamation and not related to slump sale transactions, which is the case of th which is the case of the assessee.

5.21 The The The learned learned learned Assessing Assessing Assessing Officer Officer Officer has has has further further further relied relied relied on on on Explanation-2 to section 43(6) of the Act, which reads as under: 2 to section 43(6) of the Act, which reads as under: 2 to section 43(6) of the Act, which reads as under:

“Explanation 2.— —Where in any previous year, any block of assets is Where in any previous year, any block of assets is transferred,— (a) by a holding company to its by a holding company to its subsidiary company or by a subsidiary subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the company to its holding company and the conditions of clause (iv) or, as the company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of case may be, of clause (v) of section 47 are satisfied; or satisfied; or (b) by the amalgamating company to the amalgamated company in a by the amalgamating company to the amalgamated company in a by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian scheme of amalgamation, and the amalgamated company is an Indian scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost of then, notwithstanding anything contained in clause (1), the actual cost of then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the c the block of assets in the case of the transferee ase of the transferee-company or the amalgamated company, as the case may be, shall be the written down amalgamated company, as the case may be, shall be the written down 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 value of the block of assets as in the case of the transferor 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 amalgamating company for the immediately preceding previous year as amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the by the amount of depreciation actually allowed in relation to the by the amount of depreciation actually allowed in relation to the said preceding previous year. said preceding previous year.

Thermo Fisher Scientific India Pvt. Ltd. 26 Thermo Fisher Scientific India Pvt. Ltd.

5.22 On perusal of above E On perusal of above Explanation, we find that it is in relation xplanation, we find that it is in relation to acquisition of a subsidiary company by its holding company or to acquisition of a subsidiary company by its holding company or to acquisition of a subsidiary company by its holding company or vice versa and in relatio vice versa and in relation to transactions of amalgamation and not n to transactions of amalgamation and not in respect of slump sale. in respect of slump sale.

5.23 The learned Assessing Officer The learned Assessing Officer has further relied on fifth further relied on fifth proviso ( now sixth proviso) to section 32(1)(ii) of the Act, which is proviso ( now sixth proviso) to section 32(1)(ii) of the Act, which is proviso ( now sixth proviso) to section 32(1)(ii) of the Act, which is reproduced for ready reference: reproduced for ready reference:

“Provided also “Provided also that the aggregate deduction, in respect of he aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being depreciation of buildings, machinery, plant or furniture, being depreciation of buildings, machinery, plant or furniture, being tangible tangible assets assets or or know-how, know how, patents, patents, copyrights, copyrights, trademarks, licences, franchises or any other business or trademarks, licences, franchises or any other business or trademarks, licences, franchises or any other business or commercial rights of similar nature, being int commercial rights of similar nature, being intangible assets angible assets allowable to the predecessor and the successor in the case of allowable to the predecessor and the successor in the case of allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause succession referred to in clause (xiii), clause (xiiib) and clause succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 section 47 or section 170 or to the amalgamating or to the amalgamating company and the amalgamated company in the case of company and the amalgamated company in the case of company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting amalgamation, or to the demerged company and the resulting amalgamation, or to the demerged company and the resulting company in the case company in the case of demerger, as the case may be, shall of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at not exceed in any previous year the deduction calculated at not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation the prescribed rates as if the succession or the amalgamation the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and or the demerger, as the case may be, had not taken place, and or the demerger, as the case may be, had not taken place, and such deduction shall be apportion such deduction shall be apportioned between the predecessor ed between the predecessor and the successor, or the amalgamating company and the and the successor, or the amalgamating company and the and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the amalgamated company, or the demerged company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the resulting company, as the case may be, in the ratio of the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. number of days for which the assets were used by them. number of days for which the assets were used by them.” 5.24 On plain reading of the above proviso, it is clear that same is n plain reading of the above proviso, it is clear that same is n plain reading of the above proviso, it is clear that same is in relation to allocation of the depreciation on the asset between in relation to allocation of the depreciation on the asset between in relation to allocation of the depreciation on the asset between predecessor and successor entities, whereas in the instant case predecessor and successor entities, whereas in the instant case predecessor and successor entities, whereas in the instant case goodwill was not in existence as intangible asset in the case of goodwill was not in existence as intangible asset in the case goodwill was not in existence as intangible asset in the case predecessor companies from whom the assessee has acquired predecessor companies from whom the assessee has acquired predecessor companies from whom the assessee has acquired

Thermo Fisher Scientific India Pvt. Ltd. 27 Thermo Fisher Scientific India Pvt. Ltd. corresponding units under slump sale. Therefore, the said provision corresponding units under slump sale. Therefore, the said provision corresponding units under slump sale. Therefore, the said provision is also not applicable of the facts of the instant case. is also not applicable of the facts of the instant case. is also not applicable of the facts of the instant case.

5.25 The ratio is in the case of United Breweries (supra) The ratio is in the case of United Breweries (supra) The ratio is in the case of United Breweries (supra) is also not applicable over the facts of the facts of case as in the said case there was as in the said case there was amalgamation of the three wholly owned subsidiaries whereas in amalgamation of the three wholly owned subsidiaries whereas in amalgamation of the three wholly owned subsidiaries whereas in the instant case there is a acquisition of units of third parties by the instant case there is a acquisition of units of third parties by the instant case there is a acquisition of units of third parties by way of slump sale.

5.26 The learned DR before The learned DR before us submitted that allocation of values that allocation of values to the fixed asset acquired has been on lower side for creating to the fixed asset acquired has been on lower side for creating to the fixed asset acquired has been on lower side for creating goodwill as intangible asset. But in our opinion, if the quantum of goodwill as intangible asset. But in our opinion, if the quantum of goodwill as intangible asset. But in our opinion, if the quantum of goodwill is reduced, the valuation of the fixed asset will increase, goodwill is reduced, the valuation of the fixed asset will increase, goodwill is reduced, the valuation of the fixed asset will increase, which are also eligible for which are also eligible for depreciation and thus in the exercise of depreciation and thus in the exercise of reallocation of values among the goodwill and other fixed asset ,will reallocation of values among the goodwill and other fixed asset reallocation of values among the goodwill and other fixed asset be a revenue neutral exercise. revenue neutral exercise.

In view of the above discussion, we concur with the arguments 5.27 In view of the above discussion, we concur with the arguments In view of the above discussion, we concur with the arguments of the learned counsel of the assessee that of the learned counsel of the assessee that goodwill arising from goodwill arising from transactions of acquisition of units of GSK and CTPL, is eligible for transactions of acquisition of units of GSK and CTPL, is eligible for transactions of acquisition of units of GSK and CTPL, is eligible for depreciation under the provisions of the Act. As far as claim of the depreciation under the provisions of the Act. As far as claim of the depreciation under the provisions of the Act. As far as claim of the assessee for allowing depreciation on said goodwill corresponding to assessee for allowing depreciation on said goodwill corresponding to assessee for allowing depreciation on said goodwill corresponding to assessment year 2008 assessment year 2008-09, we are of the opinion that claim with we are of the opinion that claim with respect to depreciation for assessment years 2008-09, cannot be respect to depreciation for assessment years 2008 respect to depreciation for assessment years 2008 allowed in the appeal for assessment year 2009 allowed in the appeal for assessment year 2009-10. It is for the 10. It is for the assessee to explore necessary remedy under the provisions of the assessee to explore necessary remedy under the provisions of the assessee to explore necessary remedy under the provisions of the Thermo Fisher Scientific India Pvt. Ltd. 28 Thermo Fisher Scientific India Pvt. Ltd.

Act or any other legal r or any other legal remedy as advised. The ground No.2 (two) of . The ground No.2 (two) of the appeal of the assessee is accordingly allowed. the appeal of the assessee is accordingly allowed.

Ground 3 - Depreciation on purchase of software Depreciation on purchase of software

6. The ground No. 3 relates to The ground No. 3 relates to depreciation amounting to Rs. amounting to Rs. 1,04,938 on purchase of software based on the direct on purchase of software based on the directions of DRP for on purchase of software based on the direct AY 2007-08.

6.1 The ld counsel of the assessee submitted that i 6.1 The ld counsel of the assessee submitted that in the assessment n the assessment proceedings of AY 2007 proceedings of AY 2007-08, software expenses amounting to tware expenses amounting to Rs.10,93,104 that were claimed by the 10,93,104 that were claimed by the assessee assessee as a revenue IT(A) as capital expenditure, which have been held , which have been held by the CIT(A) as capital expenditure and depreciation thereon was allowed at the rate of expenditure and depreciation thereon was allowed at the rate of expenditure and depreciation thereon was allowed at the rate of 60% while computing taxable income of that year. Due to the 60% while computing taxable income of that year. Due to the 60% while computing taxable income of that year. Due to the accepted the said decision of smallness of the amount, the smallness of the amount, the assessee accepted the said decision of the CIT(A) and did not file further appeal to t the CIT(A) and did not file further appeal to the ITAT against the he ITAT against the same. Accordingly, the same. Accordingly, the assessee ought to have ought to have been allowed consequential depreciation for AY 2008 consequential depreciation for AY 2008-09 and AY 2009 09 and AY 2009-10. However, since the assessment for AY 2008 However, since the assessment for AY 2008-09 was not picked up 09 was not picked up for scrutiny, consequential depreciation was not allowed for AY for scrutiny, consequential depreciation was not allowed for scrutiny, consequential depreciation was not allowed 2008-09. This was the subject matter of additional ground before 09. This was the subject matter of additional ground before 09. This was the subject matter of additional ground before ITAT, which have been restored to the AO by order dated 24 August ITAT, which have been restored to the AO by order dated 24 August ITAT, which have been restored to the AO by order dated 24 August 2022 as above.

6.2 In so far as claim for depreciation for AY 2009 as claim for depreciation for AY 2009 as claim for depreciation for AY 2009-10 (subject matter of the present appeal) is conce matter of the present appeal) is concerned, DRP directed as under: DRP directed as under:

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...We also note that the matter pertains to verification and We also note that the matter pertains to verification and We also note that the matter pertains to verification and admissibility of certain facts pertaining to AY 2007-08. admissibility of certain facts pertaining to AY 2007 admissibility of certain facts pertaining to AY 2007 Therefore, considering the above facts, we are unable to Therefore, considering the above facts, we are unable to Therefore, considering the above facts, we are unable to adjudicate this particular objection as it is to be adjudicate this particular objection as it is to be decided by decided by the assessing officer. We request the assessing officer to do the assessing officer. We request the assessing officer to do the assessing officer. We request the assessing officer to do the needful and pass an appropriate order in this regard. the needful and pass an appropriate order in this regard. the needful and pass an appropriate order in this regard. The ground of objection no. 2 is dismissed. The ground of objection no. 2 is dismissed. 6.3 The ld counsel submitted that The ld counsel submitted that the AO however however, has not followed the above directions in the final assessment order and not followed the above directions in the final assessment order and not followed the above directions in the final assessment order and not given any relief.

6.4 The computation of depreciation at the rate of 60% on the The computation of depreciation at the rate of 60% on the The computation of depreciation at the rate of 60% on the opening written down value for the year under consideration is as opening written down value for the year under consideration is as opening written down value for the year under consideration is as under:

Particulars Amount (Rs.) Amount (Rs.) Software expenses disallowed as per the assessment Software expenses disallowed as per the assessment 10,93,104 10,93,104 order of 2007-08 Less: Depreciation allowed in assessment order of AY Less: Depreciation allowed in assessment order of AY 6,55,862 6,55,862 2007-08 Written down value as on 1 April 2007 Written down value as on 1 April 2007 4,37,242 4,37,242 Less: Depreciation @ 60% for AY 2008 Less: Depreciation @ 60% for AY 2008-09 (FY 2007- 2,62,345 2,62, 08) Written down value as on 1 April 2008 Written down value as on 1 April 2008 1,74,897 1,74,897 Depreciation @ 60% for the current year AY 2009 Depreciation @ 60% for the current year AY 2009-10 1,04,938 1,04,938 (FY 2008-09) 6.5 The ld counsel submitted that c The ld counsel submitted that considering the above onsidering the above submission, the AO may be directed to grant consequential submission, the AO may be directed to grant consequential submission, the AO may be directed to grant consequential depreciation of Rs.1,04,938 on purchase of software. Rs.1,04,938 on purchase of software. Rs.1,04,938 on purchase of software.

6.6 We have heard rival submission on the issue in dispute. The 6.6 We have heard rival submission on the issue in dispute. The 6.6 We have heard rival submission on the issue in dispute. The only request made in this ground is for allowing depreciation in only request made in this ground is for allowing depreciation in only request made in this ground is for allowing depreciation in respect of expenditure on computer software, which was claimed as respect of expenditure on computer software, which was claimed as respect of expenditure on computer software, which was claimed as Thermo Fisher Scientific India Pvt. Ltd. 30 Thermo Fisher Scientific India Pvt. Ltd. revenue expenditure in revenue expenditure in earlier by the assessee but rejected by the ld earlier by the assessee but rejected by the ld CIT(A) and held as capital expenditure. Since the said decision has CIT(A) and held as capital expenditure. Since the said decision has CIT(A) and held as capital expenditure. Since the said decision has been claimed as finally accepted by the assessee, the assessee been claimed as finally accepted by the assessee, the assessee been claimed as finally accepted by the assessee, the assessee deserve depreciation in subsequent years including in year under deserve depreciation in subsequent years including in year under deserve depreciation in subsequent years including in year under consideration. In principle, we agree with the claim of the assessee, . In principle, we agree with the claim of the assessee, . In principle, we agree with the claim of the assessee, however, we restore the matter for verifying that decision of ld we restore the matter for verifying that decision of ld we restore the matter for verifying that decision of ld CIT(A) in earlier AY 2007 CIT(A) in earlier AY 2007-08 has not been reversed by higher 08 has not been reversed by higher appellate authorities, and then after verification appellate authorities, and then after verification, allow the claim as allow the claim as directed above. The ground is allowed for statistical irected above. The ground is allowed for statistical purpose purpose.

Ground 4 - Deletion of erroneous demand of Rs. 80,79,043 Deletion of erroneous demand of Rs. 80,79,043 Deletion of erroneous demand of Rs. 80,79,043

7. In ground No. 4 , the assessee is aggrieved In ground No. 4 , the assessee is aggrieved by way of by way of determining demand of Rs. 80,79,043 as payable by the demand of Rs. 80,79,043 as payable by the assessing Officer assessing Officer (in its final assessment order) as a d final assessment order) as a difference between refund of ifference between refund of Rs.4,48,30,280 issued to the 4,48,30,280 issued to the assessee and refund of Rs.3,67,51,237 and refund of Rs.3,67,51,237 determined as payable to the determined as payable to the assessee.

7.1 The ld counsel submitted that t 7.1 The ld counsel submitted that the learned DCIT has failed to he learned DCIT has failed to consider that the assessee assessee has received interest of Rs.80,79,043 has received interest of Rs.80,79,043 under Section 244A of under Section 244A of the IT Act on the refund of Rs. the IT Act on the refund of Rs.3,67,51,237 and accordingly, has and accordingly, has received a total refund of Rs. received a total refund of Rs.4,48,30,280 (Rs.3,67,51,237 plus Rs. (Rs.3,67,51,237 plus Rs.80,79,043) including interest under section ing interest under section 244A of the IT Act and the erroneous demand of Rs. 80,79,043 T Act and the erroneous demand of Rs. 80,79,043 T Act and the erroneous demand of Rs. 80,79,043 determined is on account of non determined is on account of non-grant of interest under section t of interest under section Thermo Fisher Scientific India Pvt. Ltd. 31 Thermo Fisher Scientific India Pvt. Ltd.

244A of the IT Act in the computation sheet of the final assessment of the IT Act in the computation sheet of the final assessment of the IT Act in the computation sheet of the final assessment order.

7.3 The ld counsel submitted that ld counsel submitted that that the AO be directed to that the AO be directed to consider interest under section 244A of the Act in the computation interest under section 244A of the Act in the computation interest under section 244A of the Act in the computation sheet and delete the erroneous demand of Rs. 80,79,043. sheet and delete the erroneous demand of Rs. 80,79,043. sheet and delete the erroneous demand of Rs. 80,79,043.

7.4 We have heard rival submission on the issue in dispute. This 7.4 We have heard rival submission on the issue in dispute. This 7.4 We have heard rival submission on the issue in dispute. This issue is consequential to the computation of tax liability while issue is consequential to the computation of tax liability while issue is consequential to the computation of tax liability while giving effect of this order. We direct the Assessing Officer to verify ct of this order. We direct the Assessing Officer to verify ct of this order. We direct the Assessing Officer to verify the claim while giving effect of this order of Tribunal. The ground of the claim while giving effect of this order of Tribunal. The ground of the claim while giving effect of this order of Tribunal. The ground of the appeal is accordingly allowed for statistical purpose. the appeal is accordingly allowed for statistical purpose. the appeal is accordingly allowed for statistical purpose. Ground 5 - Penalty proceeding Penalty proceeding 8. The ground no. 5 he ground no. 5 relates to initiating penalty proceedings under initiating penalty proceedings under section 274 r. w.s. 271(1)(c) of the IT Act stating that the Appellant section 274 r. w.s. 271(1)(c) of the IT Act stating that the Appellant section 274 r. w.s. 271(1)(c) of the IT Act stating that the Appellant has furnished inaccurate particulars of income. has furnished inaccurate particulars of income. 8.1 The ground raised being premature at this stage, as no penalty 8.1 The ground raised being premature at this stage, as no penalty 8.1 The ground raised being premature at this stage, as no penalty has been levied by the impugned a has been levied by the impugned assessment order, therefore the ssessment order, therefore the ground raised is dismissed as infructuous. ground raised is dismissed as infructuous.

9. In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on ed in the open Court on 31/07/2023. /07/2023. Sd/ Sd/- Sd/ Sd/- (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER

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