PRINCIPAL COMMISSIONER OF INCOME TAX-4 vs. ZYDUS WELLNESS LTD

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TAXAP/346/2018HC GujaratGJHC24017081201816 April 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Revenue's appeal. The Tribunal had relied on its earlier decision concerning the same assessee for a prior assessment year. The High Court, in a previous appeal (Tax Appeal No. 779 of 2017), had considered a similar issue. In that prior case, the High Court noted that the Supreme Court's decision in Commissioner of Income Tax vs. Smifs Securities Ltd. would squarely apply. The High Court observed that the Assessing Officer had not provided material to hold the depreciation claim as fictitious. If the Assessing Officer's view was that intangible assets do not qualify for depreciation, it was contrary to the Supreme Court's ruling in Smifs Securities Ltd. If the claim was baseless, there was no discussion or reference to material to support that conclusion. Therefore, the High Court found no error in the Tribunal's deletion of the disallowance.

What were the facts?

The Revenue, Principal Commissioner of Income Tax-4, filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) dated October 10, 2017. The appeal concerned the assessment year(s) not explicitly stated but implied to be prior to the current appeal. The ITAT had deleted a disallowance of depreciation amounting to Rs. 5,39,26,104 on goodwill valued at Rs. 21,57,04,417. The ITAT's decision was based on its own prior ruling for the same assessee in an earlier assessment year. The Revenue had previously appealed that earlier decision to the High Court.

What were the issues?

1. Whether the Appellate Tribunal is correct in law and on facts in deleting the disallowance of depreciation of Rs. 5,39,26,104 on Goodwill of Rs. 21,57,04,417? (Question of law and fact, concerning depreciation on intangible assets). Assessee's Contention: The judgment does not record any specific contentions made by the assessee in this appeal. However, the ITAT's decision, which is under challenge, relied on its previous ruling for the same assessee. The High Court's prior decision in Tax Appeal No. 779 of 2017, which dealt with a similar issue for an earlier assessment year, is referenced. Revenue's Contention: The Revenue is challenging the ITAT's deletion of the depreciation disallowance. The Assessing Officer's view, as discussed by the High Court in the prior appeal, was that the acquisition of an intangible asset like goodwill would not qualify for depreciation. Alternatively, if the claim was baseless, there was no material to support such a conclusion.

AI-generated summary — verify with the full judgment below

C/TAXAP/346/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 346 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX-4 Versus ZYDUS WELLNESS LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 MR.DARSHAN R. PATEL, ADVOCATE AS CAVEATOR FOR THE RESPONDENT(S) NO. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 16/04/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 10.10.2017 raising following question for our consideration: “Whether, the Appellate Tribunal is correct in law and on facts in deleting the disallowance of depreciation of Rs.5,39,26,104/ on Goodwill of Rs.21,57,04,417/ ?”

In the impugned judgment, the Tribunal has relied on its decision in case of this very assessee for the earlier assessment year. Revenue had carried such appeal before the High Court in Tax Appeal No.779 of 2017. This issue was considered by High Court in following terms: Page 1 of 2

C/TAXAP/346/2018 ORDER “6. With respect to the claim of depreciation, the decision of Supreme Court in case of Smifs Securities Ltd. (supra) would squarely apply. There is no material referred to by the Assessing Officer to hold that the claim of depreciation was fictitious. If we read his entire expression in this respect, he seems to be suggesting that being an intangible asset acquisition thereof would not qualify for depreciation. If that be so, the view of the Assessing Officer was opposed to the decision of the Supreme Court in case of Smifs Securities Ltd. (supra). On the other hand, if the observations of the Assessing Officer can be seen as his findings that the claim itself was baseless, there was no discussion or reference to any material to enable him to come to such a conclusion.” 3. In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 2 of 2

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