Ammann India Private Limited Vs PCIT (ITAT Ahmedabad)
The appeal before the Income Tax Appellate Tribunal, Ahmedabad arose from an order passed by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 for Assessment Year 2020–21. The revisionary order held that the assessment framed under Section 143(3) read with Section 144B was erroneous and prejudicial to the interest of revenue on two grounds: allowance of depreciation on goodwill and non-taxation of forfeited security deposits.
The assessee had filed its return declaring income of ₹44.60 crore, which was assessed at ₹51.41 crore after scrutiny. Subsequently, the PCIT invoked Section 263, observing that depreciation of ₹7.47 crore on goodwill had been wrongly allowed and that forfeited deposits of ₹5.63 lakh, noted in the audited accounts, were not treated as income. The PCIT directed the Assessing Officer to pass a fresh assessment after examining these issues.
Before the Tribunal, the assessee contended that the assessment order was neither erroneous nor prejudicial. It was submitted that depreciation on goodwill had been consistently claimed since Assessment Year 2014–15, when the goodwill arose from a business acquisition, and had been allowed by the department. Once depreciation on goodwill is allowed in the first year, subsequent depreciation must follow the written down value (WDV), and the quantum of goodwill could not be re-examined in later years. The Tribunal noted that the PCIT had relied on an earlier upward adjustment made in Assessment Year 2014–15, but that adjustment had already been deleted by a coordinate bench of the Tribunal. Further, reopening proceedings initiated in another year on the same goodwill issue had been quashed by the High Court. In these circumstances, the Tribunal held that the PCIT could not treat the assessment order for the year under appeal as erroneous on the goodwill issue, particularly when there was no allegation that depreciation had been allowed on an incorrect WDV.
