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Income Tax Appellate Tribunal, DELHI BENCH “H” NEW DELHI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI CHALLA NAGENDRA PRASAD
आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the Ld.
Commissioner of Income Tax (Appeals)-22, New Delhi dated 29.01.2019 for the AY 2015-16. The Revenue in its appeal raised the following grounds: - 1. “Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in allowing depreciation on the Goodwill when the transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of section 47(iv) of the I.T. Act, 1961 and the Discount Cash Flow Method to value the Goodwill was found by the Assessing Officer to be erroneous? 1
2. The appellant crave leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.”
Ld. Counsel for the assessee at the outset submits that identical issue has been decided by the Tribunal for the AY 2012-13 in dated 29.03.2023 following the decision of the Hon’ble Supreme Court in the case of Smifs Securities Ltd. (348 ITR 302) and the Hon’ble Delhi High Court in the case of Triune Energy Services Pvt. Ltd. (237 ITR 230), wherein a depreciation on Goodwill has been allowed.
Ld. DR fairly submits that the issue has been decided in favour of the assessee in assessee’s own case for the AY 2012-13 by the Tribunal.
Heard rival submissions, perused the orders of the authorities below and the order of the Tribunal, we find that the identical issue has come up before the Tribunal in assessee’s own case for the AY 2012-13 in and the Tribunal by order dated 29.03.2023 following the decisions of the Hon’ble Supreme Court in the case of Smifs Securities Ltd. (supra) and the decision of the Jurisdictional High Court in the case of Triune Energy Services Pvt. Ltd. (supra) sustained the order of the Ld.CIT(A) in allowing the depreciation on Goodwill observing as under:
“12. After considering the facts and submissions, and after drawing support from the BTA, the Id. CIT(A) was convinced that the assessee has acquired business for a consideration of Rs. 19,85,22,900/-.
The Id. CIT(A) further found that the assessee has furnished all the details at the assessment stage itself. The Id. CIT(A) was not convinced with the observations of the Assessing Officer that the assessee has over valued the projections for valuation of good will and drawing support from the decision of the Hon'ble Supreme Court in the case of Smifs Securities Ltd 348 ITR 302 and the decision of the Hon’ble Jurisdictional High Court in the case of Triune Energy Services Pvt Ltd 237 ITR 230, came to the conclusion that depreciation is an inherent claim under the Act and claim of deprecation by the assessee on goodwill is based on relevant provision of law and in due deference to the decision of the Hon’ble Supreme Court as well as the Hon’ble Jurisdictional High Court and, accordingly, deleted the disallowance of depreciation on goodwill of Rs. 1,62,87,624/.
Before us, the Id. DR strongly supported the findings of the Assessing Officer and read the operative part of the assessment order.
Per contra, the Id. counsel for the assessee reiterated what has been stated before the lower authorities.
We have carefully perused the orders of the authorities below. We find that the main objection of the Assessing Officer is that the assessee has overvalued the valuation of goodwill. In our considered view, the Assessing Officer has completely ignored the commercial prudence of an assessee relating to valuation of an asset. Determination of fair market value has to be as per prescribed methodology and even the Assessing Officer has accepted the discounted cash flow method as appropriate method for valuation of goodwill.
In such a method, valuation is done on the basis of information and material available on the date of valuation and projection of future Revenue. Merely because performance did not match projections, valuation cannot be challenged, as such approach is not only irrational but lacks material foundation since the valuation is intrinsically based on projections which can be affected by various factors. 18. One must not forget that valuation is not an exact science and, therefore, cannot be done with arithmetic 3
precision and such technical and complex problem should be left to the consideration and wisdom of experts in the field of accountancy.
Due Diligence Report of the assessee company was provided by Price Waterhouse Cooper, a well known global accounting firm, which shows that the market value of goodwill was acceptable by an independent third party.
Interestingly, in its ground of appeal
, the Revenue has challenged that transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of Section 47(iv) of the Act. But, we find that in the hands of TIEL, while framing the assessment order dated 26.03.2015 u/s 143(3) of the Act for A.Y 2012-13, the Assessing Officer has accepted income from long term capital gain for slump sale of business, thereby accepting the transfer u/s 47(iv) of the Act.
21. Reliance on the decision of the Hon'ble Supreme Court and of the Hon'ble Jurisdictional High Court [supra] is well founded. Therefore, considering the facts of the case in totality, in light of the judicial decisions, we do not find any error or infirmity in the findings of the Id. CIT(A). Ground raised by the Revenue is dismissed.”
5. Facts being identical, respectfully following the decision of the Tribunal, we uphold the order of the Ld.CIT(A) and reject the ground raised by the Revenue.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 23.05.2023