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Facts
The appellant claimed depreciation on goodwill arising from a scheme of amalgamation approved by the High Court. The Assessing Officer (AO) and Commissioner of Income Tax (Appeals) (CIT(A)) disallowed the depreciation claim. The appellant argued that the CIT(A) failed to adjudicate the issue properly.
Held
The Tribunal observed that the CIT(A)'s order was a non-speaking order and did not properly adjudicate the grounds raised by the appellant or address the case laws relied upon. Therefore, the appeals were remitted back to the CIT(A) for fresh adjudication.
Key Issues
Whether goodwill arising from a scheme of amalgamation is eligible for depreciation, and whether the CIT(A) properly adjudicated the grounds of appeal.
Sections Cited
32(1), 43(1)
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Income Tax Appellate Tribunal, Mumbai “E” Bench, Mumbai.
Before: Smt. Kavitha Rajagopal (JM) & Shri Omkareshwar Chidara (AM)
Per Bench :- The only issue to be adjudicated in both the A.Ys. 2015-16 and 2016- 17, is whether the appellant is entitled for depreciation on goodwill which is arising out of scheme of amalgamation approved by Hon'ble High Court. The following grounds of appeal are raised by the appellant in both the years, as issue involved is the same and hence the appeals are clubbed and decided in this order.
1. “Disallowance of Depreciation on Goodwill of Rs. 94,39,324/- On the facts and circumstances of the'case, the Ld. Commissioner of Income Tax (Appeals) ('CIT(A)') erred in affirming the action of the Ld. Assessing Officer (hereinafter referred as 'AO') in disallowing depreciation of Rs. 94,39,324/- claimed on goodwill, arising on account of a scheme of amalgamation approved by the High Court, for reasons which are wrong, contrary to facts and provisions in law; 2. On the facts and circumstances of the case, the Ld. C1T(A) failed to appreciate that the consideration paid in excess of the net assets taken over in the scheme of amalgamation is classifiable as goodwill which constitutes to be an intangible asset therefore eligible for depreciation
2 under section 32(1) read with section 43(1) of the Income-tax Act, 1961 [hereinafter referred to as "the Act"]; 3. On facts and circumstances of the case, the Ld. CIT(A) erred in not granting Tax Deducted at Source credit ('TDS') of Rs. 4,71,52,080/-. 4. The above grounds of appeal are without prejudice to each other.”
The Ld. AR of the appellant has argued before the ITAT that the Ld. AO has not allowed the depreciation on goodwill in both the assessment years under consideration. But both the authorities below i.e., the Ld. AO and Ld. CIT(A) have not adjudicated the issues raised by the company – consideration paid in excess of net assets taken over in the scheme of amalgamation is classifiable as “goodwill” which constitutes to be an intangible asset and therefore eligible for depreciation under section 32(1) r.w.s. 43(1) of the I.T. Act. It was further argued that the appellant company has raised a ground before Ld. CIT(A) that the “goodwill” claimed by the appellant company has arisen due to the scheme of amalgamation approved by Hon'ble High Court and hence the appellant company is eligible for depreciation. The Ld. AR of the appellant has brought to the notice of the ITAT that the Ld. CIT(A) has not adjudicated the issues and simply reproduced the assessment order and held the issue against the company. The grounds relating not granting TDS also were not properly adjudicated by Ld. CIT(A). Even though, several cases-law were filed before Ld. CIT(A) for the proposition that the appellant company is entitled for depreciation when the scheme of amalgamation was approved by Hon'ble High Court and there was no adjudication as to why the same were not applicable to appellant’s case.
The Ld. DR relied on the orders of Ld. AO/Ld. CIT(A).
After perusing the order of Ld. CIT(A), it is observed that the Ld. CIT(A) has not passed the appeal order without adjudicating the grounds raised by appellant nor adjudicated why the cases-law relied on by appellant are not relevant/applicable. Since the order of Ld. CIT(A) is a non-speaking order and did not adjudicate the issues raised before him while passing the appellate order, it is decided by the Bench that the issues are remitted to the 3 file of Ld. CIT(A) with a direction that all the grounds raised by appellant should be properly addressed and a speaking order should be passed after giving opportunity to the appellant.
The appeals of appellant are allowed for statistical purposes.
Order pronounced in the open Court on 17/04/2025.