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Facts
The assessee company filed a return of income for AY 2015-2016 declaring 'Nil' income. The Assessing Officer (AO) passed a Draft Assessment Order proposing disallowance of current year depreciation, brought forward unabsorbed depreciation, and rejection of TDS credit. The Dispute Resolution Panel (DRP) did not grant any relief, and the AO completed the assessment.
Held
The Tribunal held that depreciation on goodwill arising from slump sale acquisitions of business/commercial rights is eligible for depreciation. The Tribunal followed its own previous decision for AY 2010-2011 and directed the AO to allow depreciation on goodwill and business/commercial rights. The appeal for brought forward unabsorbed depreciation was directed to be considered by the AO based on previous Tribunal orders. The TDS credit issue was remanded to the AO for verification.
Key Issues
The primary issue was the allowability of depreciation on business/commercial rights acquired through slump sale, treated as goodwill. Other issues included the allowance of brought forward unabsorbed depreciation and the grant of TDS credit.
Sections Cited
143(3), 144C, 32(1), 2(11), 271(1)(c), 43(1), 43(6), 50B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Appearance For the Appellant/Assessee : Ms. Chandni Shah & Ms. Hinal Shah For the Respondent/Department : Shri Pravin Salunkhe Date Conclusion of hearing : 29.07.2025 Pronouncement of order : 31.07.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal is directed against the Final Assessment Order, dated 30/09/2019, passed under Section 143(3) read with Section 144C(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], as per directions, dated 26/08/2019, issued by the Dispute Resolution Panel-2, Mumbai-1 (hereinafter referred to as ‘the DRP’) under Section 144C(5) of the Act for the Assessment Year 2015-2016.
The Assessee has raised following grounds of appeal : ―1. Ground 1-General Assessment Year 2015-2016 On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel-
2. (DRP) and the final assessment order passed by the learned Deputy Commissioner of Income-tax-15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside.
2. Ground 2 Depreciation on contracts Acquisition from Glaxosmithkline Pharmaceuticals Ltd (GSK) in AY 2008-09 2.1. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 2,38,71,679 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2014 under section 32(1) r.w.s. 2(11) of the IT Act. 2.2. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 57,58,217 on the written down value of business or commercial rights being the supply contracts as on 1 April 2014 under section 32(1) r.w.s. 2(11) of the IT Act. 2.3. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts: Manufacturing and supply contracts are not self- generated by GSK and have not been transferred to the Appellant Manufacturing and supply contracts are not an intangible asset as per Accounting Standard (AS)-26 issued by the Institute of Chartered Accountants of India 2.4. Without prejudice to para 2.1 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of manufacturing contracts as Goodwill acquired from GSK, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. 2.5. Without prejudice to para 2.2 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of supply contracts as Goodwill acquired from GSK, which is an intangible asset eligible for depreciation under section 32(1) r.w.s. 2(11) of the IT Act.
3. Ground 3 Depreciation on contracts - Acquisition from Chemito Technologies Private Limited (CTPL) in AY 2009-10 3.1. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting Assessment Year 2015-2016 depreciation of Rs. 11,58,638 on the written down value of business or commercial rights being the maintenance contracts as on 1 April 2014 under section 32(1) r.w.s 2(11) of the IT Act. 3.2. On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of maintenance contracts based on the following observations which are incorrect on facts: Maintenance contracts are not self-generated by CTPL and have not been transferred to the Appellant Maintenance contracts are not an intangible asset as per AS-26 issued by the Institute of Chartered Accountants of India 3.3. Without prejudice to the above, the learned DCIT and Hon'ble DRP erred in not considering the value of maintenance contracts as Goodwill acquired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act.
4. Ground 4 - Allowance of brought forward unabsorbed depreciation of AY 2008-09 4.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,60,932 as per return of income. 4.2. On the facts and in the circumstances of the case and in law, the learned DCTT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 18,73,52,790 on Goodwill purchased from GSK. 4.3. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 262,345 relating to software expenses treated as capital expenditure in AY 2007-08.
5. Ground 5 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2009-10 5.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 17,82,24,085 as per the original return of income. 5.2. On the facts and in the circumstances of the case and in law, Assessment Year 2015-2016 the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009- 10 of Rs. 14,05,14,593 on the written down value of Goodwill purchased from GSK as on 1 April 2008. 5.3. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009- 10 of Rs. 7,23,12,099 on Goodwill purchased from CTPL 5.4. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 104,938 relating to software expenses treated as capital expenditure in AY 2007-08.
6. Ground 6- Allowance of brought forward unabsorbed depreciation pertaining to AY 2010-11 6.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 20,63,13,710 as per return of income. 6.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010- 11 of Rs. 10,53,85,945 on the written down value of Goodwill purchased from GSK as on 1 April 2009. 6.3. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 5,42,34,074 on Goodwill purchased from CTPL as on 1 April 2009. 6.4. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 41,975 relating to software expenses treated as capital expenditure in AY 2007-08.
7. Ground-Allowance of brought forward unabsorbed depreciation pertaining to AY 2011-12 7.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2011-12 of Rs. 32,60,75,657 as per return of income. 7.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 16,790 relating to software expenses treated as capital expenditure in AY 2007-08 8. Ground 8 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2012-13 8.1 On the facts and in the circumstances of the case and in law, the learned DCTT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2012-13 of Rs. 26,32,11,490 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs.6,716 relating to software expenses treated as capital expenditure in AY 2007-08 9. Ground 9 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2013-14 9.1. On the facts and in the circumstances of the case and in law, the learned DCTT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2013-14 of Rs. 16,66,17,345 as per return of income. 9.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs.2,686 relating to software expenses treated as capital expenditure in AY 2007-08.
10. Ground 10-Allowance of brought forward unabsorbed depreciation pertaining to AY 2014-15 10.1. The Learned AO has erred in not allowing correct amount of brought forward unabsorbed depreciation of AY 2014-15 aggregating of Rs. 16,31,40,005 which was claimed by the Assessee Company in the return of income for AY 2014-15 11. Ground 11-Failure to grant partial credit of Tax Deducted at Source (TDS) of Rs. 10,75,900 11.1. On the facts and in the circumstances of the case and in law, the learned AO has erred in not granting partial TDS credit claimed in the return of income amounting to Rs. 10,75,900.
12. Ground 12-Penalty proceeding 12.1. On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act.‖ 3. The relevant facts in brief are that the Assessee is a company engaged in the manufacturing, installation and sale (including trading) of scientific/medical laboratory equipment and chemicals at Assessment Year 2015-2016 the relevant time. For the Assessment Year 2015-2016, the Assessee filed return of income on 28/11/2015 declaring ‘Nil’ income. The case of the Assessee was selected for regular scrutiny. The Assessing Officer passed the Draft Assessment Order, dated 30/11/2018 proposing, inter alia, (a) disallowance of current year depreciation (INR.3,07,88,534/-), (b) disallowance of brought forward unabsorbed depreciation pertaining to preceding assessment years and (c) rejecting claim of TDS Credit (INR.10,73,734/-). The Assessee filed Objections before the DRP which were disposed off vide Order, dated 26/08/2019, passed by the DRP. The DRP declined to grant any relief in relation to the aforesaid issues and therefore, the Assessing Officer completed assessment under Section 143(3) read with Section 144C(3) of the Act vide Assessment Order, dated 30/09/2019. Being aggrieved, the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced at Paragraph 2 above.
We have heard both the sides and have perused the material on record including the orders passed by the authorities below and the decisions of the Tribunal in the case of the Assessee cited during the course of hearing.
Ground No. 2 & 3
When Ground No. 2 & 3 were taken up, the Learned Authorized Representative for the Assessee, at the outset, submitted that issues raised in Ground No.2 and Ground No.3 raised by the Assessee in the present appeal are covered by the decision of the Mumbai Bench of the Tribunal in the case of the Assessee for the Assessment Year 2010-2011 [ITA No.2458/Mum/2015, dated 16/07/2025] and placed on record a copy of the aforesaid decision. On perusal of the said decision we find that Ground No.2 and Ground No.3 raised in the present appeal are identical to Ground No.2 and Ground No.3 raised Assessment Year 2015-2016 in appeal for the Assessment Year 2010-2011 and the same were directed against the denial of depreciation claimed by the Assessee on manufacturing, supply and maintenance contracts.
5.1. During the previous year relevant to the Assessment Year 2008-09, the Assessee had the Qualigens Fine Chemicals Division from GSK Pharma Ltd. Thereafter, during previous year relevant to the Assessment Year 2009-10, the Assessee had acquired Analytical Technologies and Environmental Instrumentation Division from Chemito Technologies Pvt. Ltd. Thus, the Assessee acquired, as part of the aforesaid acquisitions, certain business/commercial rights in the form of certain manufacturing contracts, supply contracts and maintenance contracts. The aforesaid business/commercial rights were recognised by the Assessee as intangible assets in the financial statements of the relevant previous years in accordance with the asset recognition criteria as stipulated under ‗Accounting Standard- 26: Intangible Assets‘. The Assessee also treated the difference between the purchase consideration paid and the value of all assets (tangible and intangible assets) acquired in the slump sale as goodwill in its financial statements. The Assessee has been claiming depreciation on the goodwill and business/commercial rights. However, the Assessing Officer denied depreciation claimed by the Assessee in respect of business/commercial rights for the Assessment Year 2015-2016. The DRP agreed with the Assessing Officer and declined to grant any directions giving relief to the Assessee by placing reliance on the assessment order passed in the preceding assessment years whereby similar depreciation claim was denied.
5.2. We note that the claim for depreciation in relation to the business/commercial rights acquired by the Assessee was first denied during the assessment proceedings for the Assessment Year 2010-2011. The issue travelled to the Tribunal and vide order, dated Assessment Year 2015-2016 16/07/2025, Mumbai Bench of the Tribunal in the appeal preferred by the Assessee for the Assessment Year 2010-2011 [ITA No.2458/Mum/2015] decided the issue in favour of the Assessee and directed the Assessing Officer to grant depreciation as claimed by the Assessee in respect of business/commercial rights arising from the manufacturing contracts, supply contracts and maintenance contracts holding as under:
―6. Grounds no.2-5, raised in assessee‘s appeal, pertain to the claim of depreciation on manufacturing, supply and maintenance contracts and goodwill pursuant to the acquisition of two undertakings in a slump sale arrangement in earlier years.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the manufacturing, installation and sale (including trading) of scientific/medical laboratory equipment and chemicals. For the year under consideration, the assessee filed its return of income on 30/03/2011, declaring a total loss of INR 21,55,61,952. During the assessment proceedings, upon perusal of the details of depreciation claimed by the assessee, it was observed that the assessee has claimed depreciation on manufacturing contracts and supply/maintenance contracts based on acquisition of undertakings from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. Accordingly, the assessee was asked to justify the allowability of claim of depreciation on manufacturing contracts and supply/maintenance contracts. In its response, the assessee placed reliance upon the Business Transfer Agreements, Valuation Report, and some judicial rulings. The Assessing Officer (―AO‖), vide draft assessment order dated 24/03/2014 passed under section 143(3) read with section 144C of the Act, disagreed with the submissions of the assessee on the following basis: – (a) No such intangible assets, such as manufacturing contracts, and supply/maintenance contracts have been transferred to the assessee company in a slump sale. (b) No evidence of these intangible assets being self- generated, and the same were transferred to the assessee in a slump sale.
Assessment Year 2015-2016 (c) Manufacturing contract, and supply/maintenance contracts are not akin to the assets identified under the provision of section 32(1)(ii) of the Act. (d) From the valuation report, ―future economic benefits‖ and ―cost measurement‖ cannot be measured reliably. (e) Regarding the supply contracts purchased from GSK Pharma Ltd, it is seen from the valuation report that the agreements are valid only for one year; thus, such contracts cannot be said to be enforceable in a court of law. Hence, these contracts are not going to create defined future economic benefits, and thus, fail to qualify the definition of intangible assets as per Accounting Standard-26. (f) Regarding the maintenance contracts purchased from Chemito Technologies Pvt. Ltd., from the valuation report, it is evident that the ―future economic benefits‖ cannot be measured reliably. Thus, the ―maintenance contracts‖ do not satisfy the definition of an asset to be recognised as an intangible asset as per Accounting Standard-26.
Accordingly, the AO, vide draft assessment order, disallowed the claim of depreciation made by the assessee in respect of manufacturing contracts and supply/maintenance contracts and added the same to the total income of the assessee.
The learned DRP, vide its directions issued under section 144C(5) of the Act, rejected the objections filed by the assessee on this issue on the basis that the assessee has not explained why such a claim was not made by filing a revised return. Accordingly, the action of the AO in not entertaining the claim of the assessee was upheld. In conformity, the AO passed the impugned final assessment order on this issue. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. During the assessment year 2008-09, the assessee acquired by way of slump sale on a going concern basis the Qualigens Fine Chemicals Division from GSK Pharma Ltd. Further, during the assessment year 2009- 10, the assessee acquired on a slump sale basis the Analytical Technologies and Environmental Instrumentation Division from Chemito Technologies Pvt. Ltd. As per the assessee, amongst various other assets acquired as part of the above-mentioned Assessment Year 2015-2016 slump sale acquisitions, the assessee, inter-alia, acquired certain business/commercial rights in the form of certain manufacturing contracts, supply contracts and maintenance contracts, which were recognised by the assessee as intangible assets in the financial statements of the concerned year in accordance with the asset recognition criteria as stipulated under Accounting Standard-26. Further, the assessee treated the difference between the purchase consideration paid and the value of all assets (tangible and intangible assets) acquired in the slump sale as goodwill in its financial statements. In support of the submission that the impugned contracts qualify as intangible assets as per the Accounting Standard-26 and were accordingly recorded in the assessee‘s books of accounts as separate intangible assets, the assessee placed reliance upon the valuation reports from Bansi S. Mehta and Company, Chartered Accountants for acquisition of undertakings from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. During the hearing, reliance was also placed on the response to comments of the AO by Bansi S. Mehta and Company and additional opinion on the valuation report from M/s Anmol Sekhri Consultants Private Limited. Without prejudice to the aforesaid submission, the learned AR, inter-alia, submitted that even assuming without accepting that the consideration paid for these contracts does not constitute a separate intangible asset, the same would be liable to be considered as goodwill, i.e. the difference between the purchase consideration and the net assets value, and the depreciation is allowable on goodwill being an intangible asset.
On the contrary, the learned Departmental Representative (―learned DR‖) submitted that as per the provisions of the Accounting Standard-26, manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee pursuant to the above-mentioned slump sale acquisitions cannot be recognised as intangible assets. The learned DR further submitted that the Accounting Standard-26 specifically requires the capacity of an enterprise to control future economic benefits from an intangible asset. However, in the present case, the assessee has not been able to demonstrate its capacity to control future economic benefits from the contracts, which are only for the duration of 1 year, 2 years or 5 years. It was further submitted that the cost of these contracts cannot be measured reliably. Thus, the learned DR submitted that these contracts cannot be recognised as intangible assets in view of the provisions of the Accounting Standard-26.
In his rebuttal, the learned Authorised Representative (―learned AR‖) submitted that the manufacturing contracts related to toll manufacturing sites are engaged in exclusive manufacturing of Qualigens chemicals based on specifications provided by the assessee and the said toll manufacturers were identified in 1997 by GSK Pharma Ltd and have been associated with them for the past 10 years and have developed significant manufacturing efficiencies and better capacity utilisation leading to considerable cost advantages. Thus, the learned AR submitted that the same is likely to continue in the future. As regards the supply contracts, the learned AR submitted that the Qualigens business enjoys a leadership position with about 30% market share in the specialty chemicals market, and thus, even though supply contracts entered into on an annual basis, majority of these relationships with customers/distributors date back to 30 to 40 years and thus expected to be renewed and continued on year-on-year basis. Further, as regards the maintenance contracts, the learned AR submitted that these contracts were entered into with customers for annual maintenance of the products sold by Chemito Technologies Pvt. Ltd. business and were entered on the expiry of the warranty period of the products, normally for a period of 5 years. Thus, it was submitted that the maintenance contracts that were unexpired on the date of transfer of business were transferred to the assessee and have been valued on the basis of the discounted net contribution arising from the maintenance contracts. Further, the learned AR by referring to the sample copy of these contracts submitted that these contracts continued between the parties and the assessee beyond the period mentioned in the Business Transfer Agreements, which clearly demonstrates that the future economic benefits have flowed to the assessee from the impugned contracts.
From the perusal of the details of manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee pursuant to the above-mentioned slump sale acquisitions, forming part of the paper book from pages 73-83 and pages 214-220, we find that only few of these contracts continued in the year under consideration. Further, the maintenance contracts were all entered into on a yearly basis. However, as noted above, as per the assessee, the relationship with the manufacturer/customers/distributors has continued for many years, and these contracts are likely to continue in future. Further, as noted above, it is the plea of the assessee Assessment Year 2015-2016 that these are specialty chemicals that enjoy a leadership position and due to continuing long-standing relationships, the assessee continued to enjoy future economic benefits.
In any case, it is pertinent to note that in the present case, the total consideration paid by the assessee for the afore- mentioned slump sale acquisitions from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. includes consideration paid for manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee. Thus, even if it is assumed that these contracts are not separate intangible assets under section 32(1)(ii) of the Act, it cannot be disputed that the consideration paid also covered the consideration for these contracts, and the said consideration was over and above the net asset value of other recognised tangible and intangible assets. We find that the coordinate bench of the Tribunal in assessee‘s own case in Thermo Fisher Scientific India Pvt. Ltd. v/s DCIT, in for the assessment year 2009-10, vide order dated 31/07/2023 held that the consideration paid over and above the fair value of the assets and liabilities acquired by way of slump sale from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. is attributable to goodwill. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: - ―5.18 We have heard rival submission of parties. The issue in dispute is claim of depreciation on Goodwill recognised by the assessee in two transaction of acquisition of two units. The assessee claimed that those acquisitions are for purchase of unit for lumpsum consideration, as going concerns in the nature of slump sale, which is subject to capital gain tax us 50B in the hand of seller. Whereas the according the Assessing officer the acquisitions are in the nature of amalgamation. Before us, the learned counsel has referred to various clauses of business transfer agreement (BTA) in respect of units acquired from GSK and CTPL respectively.On perusal of relevant clauses referred, we find that transaction in both the cases are of slump sale and not, amalgamation as stated by the Assessing Officer. 5.19 The learned Assessing Officer has further relied on the Explanation 7 to section 43(1) of the Act, to hold that assessee is not entitled for depreciation on the Goodwill recognised. For ready reference, the relevant explanation is reproduced as under:
Explanation 7.—Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the 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 company had continued to hold the capital asset for the purposes of its own business. Explanation 7A.—Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting 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 have been if the demerged company had continued to hold the capital asset for the purpose of its own business : Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company.
5.20 On perusal of the above Explanation, we find that same is in relation to transactions of amalgamation and not related to slump sale transactions, which is the case of the assessee.
5.21 The learned Assessing Officer has further relied Explanation-2 to section 43(6) of the Act, which reads as under:
"Explanation 2.—Where in any previous year, any block of assets is transferred,— (a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost Assessment Year 2015-2016 of the block of assets in the case of the transferee-company or 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-company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year. 5.22 On perusal of above Explanation, we find that it is in relation to acquisition of a subsidiary company by its holding company or vice versa and in relation to transactions of amalgamation and not in respect of slump sale. 5.23 The learned Assessing Officer has further relied on fifth proviso (now sixth proviso) to section 32(1)(ii) of the Act, which is reproduced for ready reference:
Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know- how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them.
Assessment Year 2015-2016 5.24 On plain reading of the above proviso, it is clear that same is in relation to allocation of the depreciation on the asset between predecessor and successor entities, whereas in the instant case goodwill was not in existence as intangible asset in the case of predecessor companies from whom the assessee has acquired corresponding units under slump sale. Therefore, the said provision is also not applicable of the facts of the instant case.
5.25 The ratio is in the case of United Breweries (supra) is also not applicable over the facts of case as in the said case there was amalgamation of the three wholly owned subsidiaries whereas in the instant case there is a acquisition of units of third parties by way of slump sale.
5.26 The learned DR before us submitted that allocation of values 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 is reduced, the valuation of the fixed asset will increase, which are also eligible for depreciation and thus in the exercise of reallocation of values among the goodwill and other fixed asset, will be a revenue neutral exercise.
5.27 In view of the above discussion, we concur with the arguments of the learned counsel of the assessee that goodwill arising from 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 assessee for allowing depreciation on said goodwill corresponding to assessment year 2008-09, we are of the opinion that claim with respect to depreciation for assessment years 2008-09, cannot be allowed in the appeal for assessment year 2009-10. It is for the assessee to explore necessary remedy under the provisions of the Act or any other legal remedy as advised. The ground No.2 (two) of the appeal of the assessee is accordingly allowed.‖
Therefore, we are of the considered view that the entire exercise of determining the nature of manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee from the afore-mentioned slump sale acquisitions is merely academic, as even if these contracts are not considered as separate intangible assets as per the provisions of Accounting Standard-26, even then the excess consideration Assessment Year 2015-2016 paid over and above the fair value of the recognised assets and liabilities acquired by way of slump sale transactions has been held to be goodwill in nature and the assessee was allowed depreciation on the same under the provisions of the Act by the coordinate bench of the Tribunal. Accordingly, accepting the alternative plea of the assessee and respectfully following the decision of the coordinate bench of the Tribunal rendered in assessee‘s own case, we direct the AO to treat the excess of consideration paid over and above the fair value of the assets and liabilities as goodwill and allow the depreciation on same to the assessee under the provisions of the Act. On similar lines, the depreciation on goodwill amounting to INR 15,96,20,019 claimed by the assessee in the year under consideration is also allowed. As a result, grounds no.2-5, raised in assessee‘s appeal, are allowed.‖ 5.3. It is admitted position that the depreciation claimed by the Assessee for the Assessment Year 2015-2016 pertains to the same business/commercial rights in respect of which depreciation claim of the Assessee has already been allowed in the appeal preferred by the Assessee for the Assessment Year 2010-2011. The Revenue has failed to bring on record any material to differentiate the above decision of the Tribunal either on facts or in law. Therefore, respectfully following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2010-2011 [ITA No.2458/Mum/2015, 16/07/2025], we direct the Assessing Officer to allow deprecation of INR.3,07,88,534/- claimed by the Assessee in respect of business/commercial rights arising from the manufacturing contracts, supply contracts and maintenance contracts. Thus, Ground No. 2 & 3 raised by the Assessee are allowed.
Ground No.4 to 10 6. Next we will take up Ground No.4 to 10 raised by the Assessee pertaining to the claim for brought forward unabsorbed depreciation for Assessment Years 2008-2009 to Assessment Years 2014-2015.
6.1. The Learned Authorized Representative for the Assessee, placing Assessment Year 2015-2016 reliance on the chart of issues filed during the course of hearing, submitted that the Assessing Officer has erred in not allowing brought forward unabsorbed depreciation on account of disallowance of depreciation on intangible assets in several preceding years. However, the Assessee is in dispute for the same. Therefore, the Assessing Officer be directed to consider the revised amounts as per the order giving effect passed by the Assessing Officer as per the orders passed by the Tribunal in the appeals preferred by the Assessee. The Learned Departmental Representative also submitted that the relief claimed by the Assessee was consequential in nature.
6.2. On perusal of record we find that the Assessing Officer did not allow Assessee’s claim of brought forward unabsorbed depreciation on account of disallowances made in the preceding years. Since the allowance of unabsorbed depreciation is linked to the outcome of the appeals for the Assessment Years 2008-2009 to 2014-2015, we deem it appropriate to direct the Assessing Officer to consider the claim of the Assessee in respect of unabsorbed depreciation as per the orders passed by the Tribunal in the appeals for each of the preceding assessment years (i.e. Assessment Years 2008-2009 to 2014-2015). In terms of the aforesaid directions Ground No.4 to 10 raised by the Assessee are treated as allowed for statistical purposes.
Ground No.11 7. Ground No.11 raised by the Assessee pertains to the short grant of credit of Tax Deducted at Source (TDS). The Assessee had claimed TDS Credit of INR.2,10,45,439/- which was reflected in Form 26AS of the Assessee-Company and the merged entities for the year Assessment Year 2015-2015. It has been contended on behalf of the Assessee that the income corresponding to the TDS Credit claimed by the Assessee was offered to tax during the relevant previous year and therefore, the Assessee was entitled to claim TDS Credit of Assessment Year 2015-2016 INR.2,10,45,439/- and that the Assessing Officer has erred in non- grant of TDS Credit amounting to INR.10,75,900/-. In order to redress the grievance of the Assessee, we deem it appropriate to direct the Assessing Officer to verify the records. In case on verification it is found that the income corresponding to the differential TDS Credit of INR.10,75,900/- claimed by the Assessee has been offered to tax, and the said TDS Credit is reflected in Form 26AS for the Assessment Year 2015-2016 of the Assessee Company and/or the merged entities, the Assessing Officer is directed to allow Credit for the TDS Credit. In terms of the aforesaid, Ground No.11 raised by the Assessee is allowed for statistical purposes.
Ground No.1 & 12 8. Ground No. 1 raised by the Assessee is dismissed as being general in nature, while Ground No.12 raised by the Assessee, pertaining to initiation of penalty proceedings under Section 271(1)(c) of the Act is dismissed as premature in nature.
9. In result, in terms of Paragraph 5.3, 6.2, 7 and 8 above, the appeal preferred by the Assessee is allowed.
Order pronounced on 31.07.2025.