DCIT, CIRCLE-1(1), KOLKATA vs. INDIAN CABLE NETCO LTD, KOLKATA

Per Rajesh Kumar, AM:

The appeal of Revenue and CO by the Assessee filed against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 18.07.2025 for the AY 2016-17.

ITA No. 1951/KOL/2025 2. The only issue raised by the Revenue is against the order of ld. CIT (A) allowing the depreciation of ₹7,89,99,274/- u/s 132(1) of the Act, which has been disallowed by the ld. AO on the basis of 5th Proviso to Section 32 of the Act as amalgamating company was not claiming depreciation on goodwill before amalgamation.

2.1. The facts in brief are that the assessee filed the return of income on 20.11.2016, declaring total income of ₹3,16,80,608/-. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were issued and served upon the assessee. During the course of assessment proceedings, the AO observed that the assessee has claimed depreciation on goodwill and accordingly, the assessee was given show cause notice as to why the said depreciation should be disallowed. The ld. AO also noted that the goodwill was shown in the books of the assessee as a result of merger/ amalgamation of M/s Pearltree Tradelink Pvt. ltd. The amalgamation of the said company with the assessee was done pursuant to amalgamation u/s 391 to 394 of the Companies Act, 1956, with effect from 31.03.2014 and approved vide order of Hon'ble Kolkata High Court dated 08.05.2014. The assessee submitted before the ld. AO that goodwill on intangible asset created pursuant to the order of the Hon'ble Kolkata High Court and therefore, the assessee is entitled to depreciation thereon. However, according to the ld. AO the depreciation cannot be allowed as per explanation 3 to

2.2. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after taking into consideration of contentions raised by the assessee by observing and holding as under:-

“Ground 2 is regarding disallowance of depreciation on an intangible asset i.e. goodwill which has come into existence after amalgamation with M/S PearltreeTradelinkPvt. Ltd.,(amalgamating company) with the company u/s 391 to 394 of the Companies Act,1956 w.e.f . 31.03.2014. It has been noted that this asset “goodwill” was not in existence prior to amalgamation in the books of amalgamating company, it has been created due to amalgamation itself being the difference between the amount of payment to the shareholders of the amalgamating company and value of the assets transferred from amalgamating company to the amalgamated company. In this circumstances 5th Proviso to Section 32(1) of the Income Tax Act, 1961 will not be applicable. Further, it is a fact that the scheme of merger stands approved by Hon’ble High Court of Calcutta. As per the Preamble of the Scheme of Amalgamation filed before the Hon’ble Calcutta High Court and forming part of the Order dated 08.05.2014 of the Hon’ble High Court, the amalgamation was done with the objective of: a. Consolidation of operations b. Reduction in administrative cost and overheads c. Incremental business synergies in business operations and cost savings d. Maximizing overall stakeholder value

CO No. 86/KOL/2025 3. The only issue raised by the assessee is against the confirmation of disallowance of ₹4,20,350/- by the ld. CIT (A) as made by the ld. AO u/s 14A read with section 8D of the it Rules.

3.1. After hearing the rival contentions and perusing the materials available on record, we find that during the year the assessee has not earned any income by way of exempt income. Therefore, being a settled position of law that no disallowance is called for when there is no exempt income earned during the year. Accordingly we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition.

“3. For that the ld. CIT (A) should have also held that the opening Written- down value of asset brought forward from earlier year cannot be distributed and as such depreciation on goodwill was also allowable on that score.” 4.1. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised the above additional ground of appeal challenging brought forward of Written-down value from earlier cannot be disturbed . In our opinion the issued raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts are required from any quarter whatsoever. In our considered view the assessee is at

4.2. We have heard the rival contentions and perused the material on record. We note from the goodwill has been allowed by department in the preceding assessment year and there is no pending proceedings. Therefore we are in agreement with the contention of the counsel that unless the Written-down value of preceding assessment year is changed or disturbed , the depreciation claimed on the brought forward Written-down value cannot be disallowed, The additional ground raised by the assessee is allowed.

Order pronounced on 28.04.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.04.2026 Sudip Sarkar, Sr.PS

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata