Axter Pharmaceuticals India Private Limited Vs ACIT (Gujarat High Court)
Axter Pharmaceuticals India Private Limited challenged notices issued under Section 148 of the Income Tax Act, 1961 for the Assessment Years 2015-16, 2016-17, and 2017-18 before the Gujarat High Court. The petitioner’s primary grievance was against reopening of assessments beyond the four-year period under Section 147, contending that there was no failure to disclose material facts and that the Assessing Officer (AO) lacked jurisdiction to issue the notices.
Read SC Judgment: No Reassessment on Issues Already Scrutinised in Regular Assessment: SC
For Assessment Year 2015-16, the petitioner had declared a loss of ₹33.86 crore while paying Minimum Alternate Tax (MAT) of ₹8.00 crore on book profits of ₹43.28 crore. The AO conducted a regular scrutiny under Section 142(1), seeking details regarding amalgamation, demerger, intangible assets, additional depreciation, and other relevant matters. After considering the petitioner’s submissions, an assessment was completed under Section 143(3) on 22.12.2017.
Subsequently, the AO issued notices for reopening under Section 148 in March 2021, to which the petitioner filed returns consistent with the original ones and requested reasons for reopening. The AO cited three main grounds:
1. Depreciation on goodwill: The petitioner acquired the injectable business from its holding company, Claris Lifesciences Ltd., via Slump Sale for ₹554 crore, claiming depreciation of ₹1.30 crore on goodwill of ₹5.23 crore. The AO contended that the Slump Sale agreement was unavailable and sought to disallow depreciation.
2. Additional depreciation: The petitioner claimed additional depreciation on assets acquired post-1.11.2014, totaling ₹3.75 crore, which the AO alleged was in excess.
3. Non-existence of assets transferred: Based on the holding company’s submission before the Settlement Commission under Section 245D(4) regarding accommodation entries for capital assets, the AO argued that assets transferred via Slump Sale may not exist, and claimed depreciation of ₹29.53 crore and deductions under Section 32AC of ₹22.49 crore should be disallowed.
The petitioner objected, emphasizing that all material facts were fully disclosed during the regular assessment, that the reopening notice was issued beyond four years, and that the AO had no jurisdiction. The petitioner also submitted that the assets acquired were part of a legitimate Slump Sale, duly valued and verified by a qualified valuer, with consideration paid forming the basis for depreciation, not the book value of assets in the seller’s accounts. Additional depreciation was correctly claimed at 10% for assets acquired post-1.10.2014, distinct from regular depreciation on machinery obtained via Slump Sale.
