DCIT 1(1)(2), MUMBAI vs. GILBARCO VEEDER INDIA PVT. LTD., MUMBAI

3. We have carefully heard the rival submissions and perused relevant material on record including documents submitted through electronic mode. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. The sole issue involved in the appeal is assessee’s claim of depreciation on goodwill. 4.1 Facts from case records of AY 2010-11 would reveal that the assessee being resident corporate assessee is stated to be engaged in development, manufacturing and marketing of engineering products and fuel dispensers, submersible tank pumps, outdoor payment terminals. It Assessment Years :2010-11, 2013-14 & 2014-15 M/s Gilbarco Veeder Root India Private Ltd. was assessed for year under consideration in scrutiny assessment u/s 143(3) on 22/03/2013 wherein the loss of the assessee was determined at Rs.1497.30 Lacs after sole disallowance of depreciation on capitalized interest for Rs.4.55 Lacs which was suo-moto offered by the assessee during the course of assessment proceedings. 4.2 The original return of income was e-filed on 15/10/2010 at loss of Rs.1501.86 Lacs. However, during assessment proceedings, the assessee filed a revised computation of income wherein it reduced claim of depreciation on fixed assets by Rs.4.55 Lacs on account of capitalized interest, which was accepted by Ld. AO. At the same time, it claimed certain depreciation on goodwill in terms of the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. (24 taxmann.com 222) However, relying upon the decision of Hon’ble Supreme Court in Goetz India Ltd. V/s CIT (284 ITR 323), Ld. AO refused to admit the same since the claim was made after expiry of time allowed for filing of revised return of income u/s 139(5) of the Act and the assessee had not claimed the same by way of filing revised return of income. 4.3 The learned CIT(A) opined that the claim not made in the return of income could be made before appellate authorities and therefore, the claim was to be admitted. It was noted that the assessee acquired PDP division of an entity namely L&T Ltd. on slump sale basis vide busines transfer agreement dated 17/11/2009 and the goodwill arose on account of excess consideration being paid over net assets taken over. The assessee recorded the goodwill at Rs.8766.84 Lacs which was reported in Tax Audit Report. However, upon subsequent review by management, the goodwill was recognized at Rs.9191.74 Lacs. Accordingly, the Assessment Years :2010-11, 2013-14 & 2014-15 M/s Gilbarco Veeder Root India Private Ltd. assessee claimed depreciation on the same @12.5%, being half of 25% since the acquisition was in later half of the year. The Ld. CIT(A) rejected the enhancement made by the management but accepted the goodwill at Rs.8766.84 Lacs and directed Ld. AO to allow depreciation on the same @12.5%. Prima facie, the assessee has accepted the verdict of learned CIT(A) and has not contested the same any further. However, the revenue is under further appeal before us with following grounds of appeal: - i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting the claim of depreciation on goodwill by relying upon the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. (284 ITR 323) wherein it was held that the appellate authorities have powers to admit claim; without appreciating the fact the ‘appellate authority’ as mentioned in the order cited above is the ITAT and its powers vested under Sec. 254 of the Act and not the Commissioner of Income Tax (Appeals). ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of depreciation on goodwill by relying on ITAT decision in assessee’s own case for AY 2011-12 and the Apex Court decision in the case of Smifs Securities Ltd. (384 ITR 302), which amounts to admitting of additional evidences.; without appreciating the fact that the CIT(A) is governed by the provisions of Sec. 251 r.w.r. 46Aof the IT Rules and hence, should have remanded the issue to the file of AO for verification. iii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in in allowing the claim of depreciation on goodwill by relying on the decision of ITAT in assessee’s own case for AY 2011-12; without verifying the valuation of goodwill; the method of accounting employed for valuation; the applicability of ratio of decision of the Hon’ble Supreme Court in the case of Smifs Securities Ltd. (384 ITR 302) in assessee’s case, as it is distinguishable on facts, as such, the issue may be set aside back to the file of A.O. for fresh adjudication of the merit.

4.4 The main contention of the revenue is that Ld. CIT(A) could not admit the claim and further, if the claim was to be admitted, the matter should have been remanded back to the file of Ld. AO for verification of valuation of goodwill and computations thereof. The Ld. AR would submit that similar claim has been allowed by the Tribunal in AY 2011-12 which Assessment Years :2010-11, 2013-14 & 2014-15 M/s Gilbarco Veeder Root India Private Ltd. has been followed by Ld. CIT(A) and therefore, the appellate order would require no interference.