APTARA TECHNOLOGIES PRIVATE LIMITED,PUNE vs. DCIT, CIRCLE1(1), PUNE

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ITA 63/PUN/2020Status: DisposedITAT Pune17 February 2026AY 2015-16Bench: DR.MANISH BORAD (Accountant Member), SHRI VINAY BHAMORE (Judicial Member)67 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the appeal. Regarding the disallowance of depreciation on Goodwill (Issue 1), the Tribunal held that the creation of Goodwill was an artificial creation and a colourable device to evade tax by claiming depreciation. The AO's observation that the amalgamation was between two 100% subsidiaries and that the shareholders of the amalgamating company received more shares in the swap ratio indicated a valuation made to suit the needs of amalgamation, not a genuine creation of goodwill. The Tribunal agreed with the AO that the Goodwill and depreciation claimed thereon were not sustainable. Consequently, the disallowance of depreciation on Goodwill was upheld. On the issue of Buy Back Tax (Issue 2), the Tribunal found no justification in the assessee's working of distributable income. It reiterated its finding that the Goodwill was artificially created and a colourable device to evade tax. Therefore, the net assets of MLPL should be considered without the artificially created Goodwill. The AO's calculation of distributable income and the levy of tax under Section 115QA were upheld, confirming the CIT(A)'s finding that the arrangement was a colourable transaction to buy back shares instead of paying dividend and evade taxes. Ground No. 2 was dismissed. Regarding the deduction for Education Cess (Issue 3), the assessee did not press this ground, and it was dismissed as 'Not Pressed'.

What were the facts?

The assessee, Aptara Technologies Private Limited (ATPL), an Indian subsidiary of Aptara Inc. USA, filed its return of income for Assessment Year 2015-16. The case was selected for scrutiny. The Assessing Officer (AO) noted an amalgamation where Maximise Learning Pvt. Ltd. (MLPL), another subsidiary, merged with ATPL, effective from April 1, 2014. As per the scheme, MLPL shareholders received ATPL shares in exchange for MLPL shares. A consideration of Rs. 6,07,20,000/- was shown due to MLPL shareholders, with Rs. 5,97,20,000/- attributed to Goodwill, which ATPL treated as an intangible asset and claimed depreciation on. The AO disallowed depreciation on Goodwill, viewing it as an artificial creation to evade tax, and also levied Buy Back Tax under Section 115QA on a share buyback transaction. The Commissioner of Income-tax (Appeals) confirmed these actions.

What were the issues?

1. Whether depreciation is allowable on 'Goodwill' amounting to Rs. 5,97,20,000/- under Section 32 of the Income-tax Act, 1961, when it arose from an amalgamation scheme. - Assessee's contention: Depreciation is allowable on goodwill, citing the judgment in CIT v. Smifs Securities Ltd. and the High Court's approval of the scheme referencing the Regional Director's affidavit. - Revenue's contention: Goodwill is an artificial creation, not a sustainable asset, and its creation violates Explanation 7 to Section 43(1) of the Act. The amalgamation was a colourable device to increase share value for buyback. 2. Whether Buy Back Tax under Section 115QA of the Income-tax Act, 1961, is leviable on the share buyback transaction. - Assessee's contention: The buyback tax is not leviable as the calculation of distributable income results in a negative figure when considering the net assets of MLPL taken over and the issue price of shares. - Revenue's contention: The entire arrangement, including the creation of goodwill, was a colourable transaction to buy back shares instead of paying dividends and evade taxes. The distributable income was correctly calculated by the AO. 3. Whether deduction for 'Education Cess on income-tax' and 'secondary and higher education cess on income-tax' is allowable while computing total income. - Assessee's contention: Although not claimed in the return, the deduction ought to have been allowed by the AO. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 32,Section 143(3),Section 115QA,Section 139(1),Section 143(1)(a),Section 142(1),Section 43(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE

Before: DR.MANISH BORAD & SHRI VINAY BHAMORE

For Appellant: Shri Percy Pardiwalla
For Respondent: Shri Amol Khairnar

Appellant by : Shri Percy Pardiwalla Respondent by : Shri Amol Khairnar Date of hearing : 03.12.2025 Date of pronouncement : 17.02.2026 आदेश / ORDER

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

1.

The captioned appeal at the instance of assessee pertaining to A.Y. 2015-16 is directed against the order dated 20.12.2019 framed by CIT(A), Pune-1 arising out of Assessment Order dated 26.12.2017 passed u/s.143(3) of the Income Tax Act, 1961.

2.

Assessee has raised following grounds of appeal :

“The grounds hereinafter taken by the Appellant are without prejudice to one another 1:0 Re.: Disallowance of depreciation on 'Goodwill' u/s. 32 of the Income-tax Act, 1961: 1:1 The Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of depreciation of Rs.1,49,30,000/- on 'Goodwill' of Rs.5,97,20,000/- u/s. 32 of the Income-tax Act, 1961. 2 Aptara Technologies Private Limited 1:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, depreciation is allowable on goodwill and the stand taken by the Assessing Officer is illegal, incorrect, erroneous and misconceived and not in accordance with law and the Commissioner of Income-tax (Appeals) ought to have held as such. 1:3 The Appellant submits that the Assessing Officer be directed to delete the disallowance made by him and to re-compute its total income accordingly. 2:0 Re.: Levying of Buy Back Tax u/s. 1150A of the Income-tax Act, 1961: 2:1 The Commissioner of Income-tax (Appeals) has erred confirming the levy of Buy Back Tax u/s.115QA of the Income-tax Act, 1961 of Rs.99,57,776/-. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, tax u/s. 115QA of the Income-tax Act, 1961 is not leviable in the instant case, and the action of the Assessing Officer is illegal, incorrect, erroneous and misconceived and the Commissioner of Income-tax (Appeals) ought to have held as such. 2:3 The Appellant submits that the Assessing Officer be directed to delete the erroneous levy of Buy Back Tax u/s.115QA of the Income- tax Act, 1961 of Rs.99,57,776/-levied by him and to re-compute its tax liability accordingly. 3:0 Re.: Deduction in respect of 'Education Cess on income-tax' and 'secondary and higher education cess on income-tax' (collectively referred to as 'education cess in income-tax') payable for the year under consideration, while computing the total income of the Appellant: 3:1 The Assessing Officer has erred in not allowing a deduction for the 'education cess on income-tax payable for the year under consideration. 3:2 The assessee submits that considering the facts and circumstances of its case and the law prevailing on the subject, 'education cess on income-tax' for the year under consideration, though not claimed as a deduction by the assessee while filing its return of income for the year under consideration, ought to have been allowed while assessing its income for the year under consideration. 3:3 The assessee submits that the Assessing Officer be directed to re-compute its total income and tax thereon after allowing deduction for 'education cess on income-tax'.

3 Aptara Technologies Private Limited 4:0 Re: General 4:1 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”

3.

Brief facts of the case are that the assessee is a Private Limited Company engaged in the field of providing IT enabled conversion services which include content conversion and management, e-learning solutions, imaging, graphic arts and other related services. The assessee Aptara Technologies Pvt. Ltd. (in short ‘APTL’) is a 100% subsidiary of Aptara Inc. USA which holds 100000 Equity shares of face value of Rs.10/- each. Along with the assessee, there is another subsidiary company namely Maximise Learning Pvt. Ltd. (in short ‘MLPL’) which is also 100% owned by the holding company Aptara Inc. USA.

4.

The assessee filed its original return of income u/s.139(1) of the Act on 25.11.2015 declaring income of Rs.1,66,65,240/-. After the regular processing of return u/s.143(1)(a) of the Act, case of the assessee selected for scrutiny followed by serving of valid notices u/s.143(2) and 142(1) of the Act. During the course of assessment proceedings, ld. Assessing Officer observed that there is an amalgamation in the nature of merger with MLPL (Transferor company) and Assessee-ATPL (Transferee company). Hon’ble Bombay High Court vide order dated 19.09.2014 has sanctioned the scheme of amalgamation effective from 01.04.2014 (Appointed date) u/s.391 to 394 of the Companies Act which has been subsequently filed with the

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