Manjushree Technopack Limited Vs PCIT (ITAT Bangalore)
PCIT’s 263 Order Quashed: Goodwill Depreciation Allowed in Slump Sale Acquisition
In a significant ruling, the Bangalore ITAT quashed a revision order passed under section 263, holding that the PCIT wrongly treated a slump sale acquisition as an amalgamation while questioning depreciation claimed on goodwill arising from the acquisition of a business undertaking. The Tribunal observed that Manjushree Technopack had acquired the business of National Plastics through a Business Transfer Agreement (BTA) on a slump sale basis and had claimed depreciation on goodwill and other intangible assets after obtaining valuation reports and after detailed scrutiny by the Assessing Officer.
The Tribunal noted that the very foundation of the PCIT’s revisionary action was flawed because the provisions relating to amalgamation and WDV continuity were inapplicable to a slump sale transaction. It further held that where two plausible views exist and the Assessing Officer has adopted one after conducting enquiries, the assessment order cannot be branded as erroneous and prejudicial to the interests of the Revenue merely because the PCIT prefers another view. The Tribunal also observed that judicial precedents on depreciation of goodwill support the existence of a debatable issue, thereby taking the matter outside the scope of section 263.
On the issue of business acquisition expenses such as valuation fees, consultancy charges and legal fees incurred for acquiring the business, the Tribunal relied on Supreme Court jurisprudence and held that expenditure incurred for facilitating the smooth conduct and expansion of an existing business could not be treated as capital merely because it related to an acquisition. Since the Assessing Officer had examined the claim and adopted a legally sustainable view, revision under section 263 was held to be unjustified. Accordingly, the entire revisionary order was quashed and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No.1282/Bang/2025 is filed by Manjushree Technopack Limited [the assessee/appellant] against the revisionary order passed u/s. 263 of the Income Tax Act, 1961 [the Act] by the Principal Commissioner of Income Tax, Bengaluru-2 [ld. PCIT] for the AY 2020-21 dated 31.3.2025 wherein it is held that the assessment order passed u/s 143(3) r.w.s. 144B of the Act dated 28.9.2022 is erroneous and prejudicial to the interests of the revenue and therefore the assessment order was set aside for the purpose of making fresh assessment where the ld. AO is directed to revise the assessment after disallowing the assessee’s claim for depreciation on goodwill after verifying the allowability of business acquisition expenses.
