AKORN INDIA PVT. LTD.,GURGAON vs DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “F” NEW DELHI

BEFORE SHRI M BALAGANESH, ACCOUNTANT MEMBER
AND SHRI VIMAL KUMAR, JUDICIAL MEMBER

आ.अ.सं/.I.T.A No.1743/Del/2017
िनधा रणवष /Assessment Year:2012-13
AKORN INDIA PVT. LTD.
4th Floor, Building 9B,
DLF Cyber City, Gurgaon.
PAN No.AAJCA8290J
बनाम
Vs.
DCIT,
Circle 2(1),
New Delhi.
अपीलाथ Appellant
यथ/Respondent
आ.अ.सं/.I.T.A No.2074/Del/2017
िनधा रणवष /Assessment Year:2012-13
ACIT,
Circle 2(1), Room No.153A,
C.R. Building, I.P. Estate,
New Delhi.
बनाम
Vs.
AKORN INDIA PVT. LTD.
1105-1106, Ashoka Estate,
Barakhamba Road,
New Delhi.
PAN No.AAJCA8290J
अपीलाथ Appellant
यथ/Respondent
आ.अ.सं/.I.T.A No.6566/Del/2018
िनधा रणवष /Assessment Year:2013-14
AKORN INDIA PVT. LTD.
4th Floor, Building 9B,
DLF Cyber City, Gurgaon.
PAN No.AAJCA8290J
बनाम
Vs.
ACIT,
Circle 2(1), C.R. Building,
I.P. Estate, New Delhi.
अपीलाथ Appellant
यथ/Respondent
आ.अ.सं/.I.T.A No.6837/Del/2018
िनधा रणवष /Assessment Year:2013-14
DCIT,
Circle 2(1), Room No.153A,
C.R. Building, I.P. Estate,
New Delhi.
बनाम
Vs.
AKORN INDIA PVT. LTD.
1105-1106, Ashoka Estate,
Barakhamba Road,
New Delhi.
PAN No.AAJCA8290J
अपीलाथ Appellant
यथ/Respondent

आ.अ.सं/.I.T.A No.6567/Del/2018
िनधा रणवष /Assessment Year:2014-15
AKORN INDIA PVT. LTD.
4th Floor, Building 9B,
DLF Cyber City, Gurgaon.
PAN No.AAJCA8290J
बनाम
Vs.
ACIT,
Circle 2(1), C.R. Building,
I.P. Estate, New Delhi.
अपीलाथ Appellant
यथ/Respondent

आ.अ.सं/.I.T.A No.6838/Del/2018
िनधा रणवष /Assessment Year:2014-15
DCIT,
Circle 2(1), Room No.153A,
C.R. Building, I.P. Estate,
New Delhi.
बनाम
Vs.
AKORN INDIA PVT. LTD.
1105-1106, Ashoka Estate,
Barakhamba Road,
New Delhi.
PAN No.AAJCA8290J
अपीलाथ Appellant
यथ/Respondent
&
आ.अ.सं/.I.T.A No.7057/Del/2019
िनधा रणवष /Assessment Year:2016-17
AKORN INDIA PVT. LTD.
4th Floor, Building 9B,
DLF Cyber City, Gurgaon.
PAN No.AAJCA8290J
बनाम
Vs.
ACIT,
Circle 2(1), C.R. Building,
I.P. Estate, New Delhi.
अपीलाथ Appellant
यथ/Respondent

Assessee by Shri Nageshwar Rao, Advocate
Revenue by Ms. Monika Singh, CIT DR

सुनवाईकतारीख/ Date of hearing:
13.08.2025
उोषणाकतारीख/Pronouncement on 28.10.2025

आदेश /O R D E R
PER BENCH

All these appeals are filed by the Assessee against the common order of the Ld. CIT(Appeals), Delhi for various assessment years as referred to in the cause title above.
ITA No. 1743/Del/2017 – Asst Year 2012-13 – Assessee Appeal
ITA No. 2074/Del/2017 – Asst Year 2012-13 – Revenue Appeal
2. The assessee has raised the following additional ground of appeal before us:-
4. Impugned order failed to appreciate that it is impermissible to apply deeming fiction in section 50C beyond express purpose stated therein viz for deeming value prescribed for registration purpose as consideration received by seller as a result of transfer.
3. We have heard the rival submissions and perused the materials available on record. We find that the additional ground raised by the assessee is purely legal in nature and goes to the root of the issue in dispute before us. Hence the same is hereby admitted and taken up along with the other original grounds raised by the assessee as well as by the revenue.
4. The Ground Nos. 1 to 1.1. raised by the assessee ; the additional ground raised by the assessee and the grounds raised by the revenue are inter connected. The common issue that emanates in all these grounds is with regard to the determination of the value of Goodwill and claim of depreciation on Goodwill. The Ground Nos. 2 and 2.1. raised by the assessee are 4

challenging the denial of depreciation on Non-Compete Fee paid by the assessee.
5. We have heard the rival submissions and perused the materials available on record. The assessee company was incorporated on 29-08-2011 and this is the first year of its operation ]. The assessee is primarily engaged in the business of manufacturing all kinds of drugs, medicines, pharmaceutical and medicinal preparations such as sterile injectables, biologicals and antibiotics preparations through a newly acquired undertaking under slump purchase from Kilitch Drugs India Limited on 29-02-2012. The original return of income was filed by the assessee company on 29-09-2012 declaring loss of Rs
22,80,64,929/- . During the course of scrutiny assessment proceedings, the assessee vide its letter dated 9-2-2015 made an additional claim of depreciation by furnishing a revised computation of income, wherein the depreciation as per Income Tax Act has been increased to Rs 23,27,18,461/- in place of the original figure of depreciation shown at Rs 23,21,46,947/-. The Learned AO observed that the revised computation filed during the course of assessment proceeding cannot be accepted, since the same is not supported by a revised return filed under Section 139(5) of the Act. The Learned AO accordingly vide order sheet entry dated 3-3-2015 showcaused the assessee as to why the additional claim of depreciation made by the assessee which is not supported by a revised return of income under Section 139(5) of the Act be ignored. The assessee vide its submission dated 10-3-2015 stated that during the physical verification of the tangible assets conducted by the assessee in the month of September 2013, certain assets which were there in the Fixed Assets Register were not found to be present. Further, certain additional assets which were not mentioned in the Fixed Assets Register were found during the physical verification. Since these assets were related to the 5

business acquired by the assessee in financial year 2011-12 relevant to assessment year 2012-13, the corresponding adjustments were made by assessee in the income tax depreciation schedule for the year under consideration and for subsequent years. In the light of the above, the additional depreciation of Rs. 5,71,514/- was claimed by the assessee in its revised computation of income. Since the assessee is not in a position to statutorily revise its return for the year under consideration given the time limitation prescribed under Section 139(5) of the Act, it had filed the revised computation of income claiming the additional claim of depreciation thereon.
The Learned AO also observed that the schedule of fixed assets also includes
Goodwill and Non Compete Fees opening value of which has been shown at Rs 144,09,13,533/- and Rs 20,00,00,000/-. The Learned AO observed that in the income tax depreciation schedule attached with Annexure to Form 3CD by the assessee, there is no block of intangible assets which include the value of goodwill or amount paid as non-compete fee.
6. The assessee submitted that it had acquired certain business of Kilitch
Drug (India) Limited (KDIL) from 28-2-2012 at a net purchase consideration of Rs 281,28,95,923/-. The Book value of assets acquired was Rs
137,19,82,389/-. Hence the excess amount paid of Rs 144,09,13,534/- over and above the book value of assets was attributed towards Goodwill by the assessee. Apart from this, the assessee also entered into a Non-Compete
Agreement dated 6-10-2011 whereby the promoters of KDIL agreed to certain restrictive covenants for a consideration of Rs 20,00,00,000/- to not to compete with the assessee company. It was submitted that the assessee is of the view that these payments for goodwill and non-compete fee represent price paid towards bundle of business or/and commercial rights obtained by the assessee for carrying on its business more effectively and profitably and 6

strengthening its position in the market. Acquisition of these assets is of great significance to the assessee company as it represents acquisition of benefits /
advantages / reputation built over a period of time. Accordingly, the assessee believes that the goodwill and non-compete fee is of similar nature as know- how, patents, copyrights, trademark, licenses, franchise, all of which are brought into existence by experience and reputation and are not built overnight. Accordingly, the assessee by placing reliance on the various decisions on the impugned issue believed that acquisition of goodwill of Rs
144,09,13,533/- and non-compete fee of Rs 20,00,00,000/- represent business or commercial rights in accordance with the provisions of section 32(1)(ii) of the Act. The assessee clearly mentioned the aforesaid facts in the notes to financial statements and also in Form 3CD by stating that it reserves its right to claim of depreciation on goodwill and non-compete fees.
7. The Learned AO observed that the statutory auditor of the assessee company apparently has not found the amount of Rs 144.09 crores paid towards goodwill qualifying as an intangible asset eligible for claim of depreciation as per the Income Tax Act which is evident from the fact that the income tax depreciation schedule under the Act does not contain any block of intangible assets. Accordingly, the Learned AO concluded that the payment of Rs 144.09 crores made by the assessee company to KDIL has not been found apparently representing any asset or recognized as an intangible asset by the statutory and tax auditor. This shows the dissent the auditor apparently had with the assessee company due to which he himself has not recognized both the payments towards creation of intangible assets and accordingly had not mentioned the claim of assessee. Accordingly, the recognition of the excess amount paid by the assessee company over and above the book value of assets to KDIL of Rs 144.09 crores towards goodwill as intangible

asset was not accepted by the Learned AO. The assessee also placed reliance on the decision of the Hon’ble Supreme Court in the case of Smifs
Securities Ltd reported in 348 ITR 302 (SC). The Learned AO observed tha the assessee has to prove that the goodwill is actually existing or obtained from the transaction. Thus primarily, for claiming depreciation on goodwill, the onus is on the assessee to substantiate that the payment made as slump purchase consideration also include value paid for goodwill and also prove the benefit it expects to get from such transaction other than or in addition to the assets acquired. Thus, there must be a difference in the value of asset acquired with the purchase consideration paid. In the instant case, the valuation of goodwill itself is disputed at the first stage by the auditor who has not recognized the difference between the amount paid as net purchase consideration with the net book value. The Learned AO noted that the assessee company during the year under consideration had entered into a Business Transfer Agreement (BTA) on 6-10-2011 with Kilitch Drugs India
Limited (KDIL) to acquire the business of research, development, manufacturing, marketing, importing and exporting of generic pharmaceutical formulation products at its manufacturing facilities located at Village,
Nihalgarh, Tehsil Paonta Sahib, Himachal Pradesh, India.
8. The assessee submitted that in respect of acquisition of the assets on slump sale basis, the assessee company carried out a purchase price allocation , which was based on fair valuation of fixed assets conducted by independent valuers. Further, the net current assets were valued at respective book values agreed upon by the concerned parties. As a result, the following assets are taken in the books of the assessee company:-

Particulars

31-Mar-12
Assets

Rupees
Land

189,399,464
Buildings

215,657,936
Plant & Machinery

194,869,200
Electric Equipments

9,124,467
Vehicles

1,009,207
Furniture & Fixtures

5,437,519
Computer

1,000,752
Lab Equipments

1,408,593
Office Equipments

2,564,686
Capital Work-in-progress

698,538,734
Net Current Assets

52,971,831
Net Assets

1,371,982,389

Value of land and buildings also include stamp duty and registration charges amounting to Rs 7,76,90,800/-.
9. The assessee submitted the Accounting Treatment given for acquisition of the aforesaid assets in the books of accounts as under:-
“Accounting for above-mentioned acquisition of assets
(i)
Fixed and net current assets acquired have been accounted for at the above values in books of accounts of the Company.
(ii)
The difference between the acquisition price of Rs.2,812,895,923
and the value of above assets of Rs.1,371,982,389 amounting to Rs.1,440,913,534 has been capitalized as goodwill in books of the Company. This goodwill is amortized over a period of 5 years.
(iii)
Non Compete Agreement is recognized as a separate intangible asset and shall be amortized over the period of the agreement i.e., 4
years.
(iv)
Consideration of Rs.2,50,00,000
payable towards providing assistance/support in respect of expansion of General/Administrative block warehouse at Unit 2 manufacturing facility and development of Onocology plant has not been accounted for as services are yet to be performed and disclosed as other commitments.

(v)
Rs.25,000,000 paid for initiation of the commercial production of the hormone & Carbapenem injectable blocks has been accounted for under head Capital Work in Progress.
(vi)
Rs.2,50,00,000 for quality system upgrade has not been accounted for as services are yet to be performed. The same has been disclosed as other commitments.”
10. The Learned AO by referring to Clause 2.1.17 of Business Transfer
Agreement observed that the goodwill of the seller associated with the business and the transferred undertaking is also included in the list of transferred asset and liability. However, no specific valuation of the goodwill is mentioned in the Business Transfer Agreement or the valuation report of the Protocol Surveyors & Engineers Pvt Ltd. The assessee however furnished a final valuation report dated 19-9-2012 prepared by Price Waterhouse & Co which is an additional valuation report. As per this report, the goodwill valuation has been done at Rs 108,03,60,481/-. The assessee further furnished a reconciliation of this valuation to prove the valuation of goodwill at Rs 144,09,13,533/- as shown in the financial statement. The assessee in its letter dated 18-03-2015 explained the difference as the financial statement of the assessee are prepared on the basis of Indian Generally Accepted
Accounting Principles (IGAAP) whereas, the value of goodwill reported in the valuation report is after considering US GAAP adjustment. The learned AO observed that this does not answer the basic question of the basis of valuation and also as to what the goodwill represent in the instant case. Accordingly he concluded that the valuation of intangible asset is not proved and as such the difference of Rs 144,09,13,534/- attributed to the goodwill is to be rejected.
With regard to the valuation of tangible asset, reference was invited to Note
No.21 of financial statements as per which the value of land acquired under the Business Transfer Agreement was taken at Rs 18,93,99,464/-. This value

has been taken into account by the assessee company as value of land in its books of accounts. As per the copy of valuation report prepared by Protocol Survey & Engineers Private Limited with regard to the valuation of fixed assets such as land , building and plant and machinery, the gross book value pertaining to the land (unit 1 and unit 2 / building / plant and machinery/ electrical equipment / vehicles / furniture and fixture / computer
/ lab equipment / office equipment / mobile and CWIP as at 29-2-2012 has been reported at Rs 124,03,41,226/-. The net book value of the assets has been mentioned at Rs 99,60,37,973/-. The fair value of all these assets has been mentioned at Rs 124,14,13,118/-. As per Business Transfer Agreement, the total cash consideration for the transferred undertaking 1 and 2 is Rs
188,00,00,000/-. As against this, the assessee has taken value of land (unit 1
and unit 2 / building / plant and machinery / electrical equipment / vehicles /
furniture and fixture / computer / lab equipment / office equipment / mobile and CWIP as at 29-2-2012 at Rs 137,19,82,389/-. Thus the apparent difference can be seen among the valuation of assets and agreed cash consideration of unit 1 and 2 with the value taken by the assessee company in its books of accounts. The Learned AO noted that the value of land taken by Protocol
Surveyors & Engineers Pvt Ltd in their valuation report at Rs 12,69,00,000/- comprising of 57661 sq.mtr @ Rs 2200 per sq.mtr. A Google Search was carried out by the Learned AO to find out the value notified for the purpose of circle rate. As per the notification dated 30-3-2012, the rate of land at Revenue village Nihalgarh has been mentioned at Rs 20,00,000/- per Bigha on the National Highway. As there is no other rate mentioned in other columns, the rate of Rs 20,00,000/- per Bigha should be the applicable rate in respect of the Unit 1 & 2 transferred through the Business Transfer
Agreement. With this rate, the Learned AO noted that the value of land would be Rs 71,27,47,621/-, as against the assessee’s value of land considered at 11

Rs 18,93,99,464/- . The Learned AO also noted that eventhough the aforesaid rate prescribed in the notification is applicable for the period 1-4-
2012 to 31-3-2013, it atleast gives the real picture of the transaction. The Learned AO observed that similar thing cannot be ruled out in respect of buildings.
11. Further the Learned AO observed that the AIR information filed by the Tehsildar, Paonta Sahib for transaction of immovable property of land and building carried out by the assessee was reflecting the value of Rs
110,98,65,626/- for unit 1 & 2. This is the value for which sale deed has been registered with Sub-

AKORN INDIA PVT. LTD.,GURGAON vs. DCIT, NEW DELHI