“amalgamation”
The decision most relied on for amalgamation is CIT v. Smifs Securities Ltd. (348 ITR 302), cited in 540 judgments on BharatTax.
Leading authorities on amalgamation
Goodwill, whether arising from an amalgamation or a slump sale, is an intangible asset eligible for depreciation under Section 32(1) of the Income-tax Act. While the assessee must prove the existence and valuation of such goodwill, it is recognized as a depreciable asset.
A notice issued under section 148 to a non-existent entity, such as an amalgamating company post-merger, is a substantive illegality, rendering assessment proceedings void ab initio. Participation in such proceedings does not estop the assessee from challenging the validity of the notice.
An assessment framed in the name of a company that has ceased to exist due to amalgamation is invalid, even if the amalgamated company participated in the proceedings. Such a defect cannot be cured under section 292B of the Income-tax Act.
An assessment framed by the Assessing Officer in the name of a defunct transferor company is valid if the assessee failed to intimate the AO about the merger or amalgamation.
Upon amalgamation, the amalgamating company ceases to exist in the eyes of the law. Therefore, any assessment or proceeding initiated against a non-existent amalgamating company is invalid as it is no longer considered a 'person' under the Income-tax Act.
An assessment order can be deemed erroneous due to the Assessing Officer's non-application of mind or inadequate inquiry, warranting revision under Section 263. However, the Principal Commissioner of Income Tax must establish the order is both erroneous and prejudicial to the revenue, and cannot use this power merely to direct further inquiries without such a finding.
Goodwill arising on amalgamation is entitled to depreciation. This principle is established by multiple High Court decisions.
Goodwill arising on amalgamation is an intangible asset qualifying for depreciation under Section 32 of the Income Tax Act.
