Case Law Details
DCIT Vs Aichelin Unitherm Heat Treatment Systems India Pvt Ltd (ITAT Pune)
ITAT noted that that the assessee has shown goodwill for Rs.7,02,53,750/-on which claimed depreciation @ 25% to an extent of Rs.1,75,63,438/-.
The AO issued show cause notice dated 07-03-2014 requesting the assessee as to why the depreciation charged on goodwill should not be disallowed which is reproduced at page 2 of the assessment order.
The assessee replied to such show cause notice contending that the assessee was formed as a result of joint venture agreement between Unitherm Engineers Limited and Aichelin GMBG Austria. The assessee purchased furnace division of Unitherm Engineers Limited by way of slump sale for a consideration of Rs.14,28,89,936/- and value of net tangible assets at Rs.2,15,99,936/-. The balance amount of Rs.12,12,90,000/-(Rs.14,28,89,936/- – Rs.2,15,99,936/-) was shown as intangible assets. According to the assessee, the value of goodwill is the amount paid over and above the tangible assets and after reducing there from the values assigned to other intangible assets and placed reliance on the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. reported in 348 ITR 302 (SC).
According to the AO, the goodwill is commercial benefit and the assessee is not entitled to depreciation u/s. 32(1)(ii) of the Act.
The CIT(A) held the issue is covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. (supra) and by the order of Co-ordinate Bench of this Tribunal in the case of Johnson Matthey Chemicals India Pvt. Ltd. in ITA No. 1507 & 2036/PUN/2012 vide order dated 12-12-2017.
The ld. DR did not dispute the same and no order contrary brought on record to the view taken by the Co-ordinate Bench of this Tribunal in the case of Johnson Matthey Chemicals India Pvt. Ltd. (supra).
ITAT held that, we find no infirmity in the order of CIT(A) and it is justified. Thus, the assessee is entitled to claim depreciation on goodwill and the grounds raised by the appellant-revenue are dismissed.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the Revenue against the order dated 07-08-2020 passed by the Commissioner of Income Tax (Appeals)-6, Pune [‘CIT(A)’] for assessment year 2011-12.
2. We find that this appeal was filed with a delay of 89 days. Upon hearing both the parties, we find that the delay of 89 days is saved by the decision of Hon’ble Supreme Court passed during National Lockdown imposed on account of pandemic Covid-19. Therefore, the delay of 89 days is condoned.
3. The appellant-revenue raised six grounds of appeal amongst which the only issue emanates for consideration is as to whether the CIT(A) is justified in allowing depreciation on goodwill in the facts and circumstances of the case.
4. We note that the assessee has shown goodwill for Rs.7,02,53,750/-on which claimed depreciation @ 25% to an extent of Rs.1,75,63,438/-. The AO issued show cause notice dated 07-03-2014 requesting the assessee as to why the depreciation charged on goodwill should not be disallowed which is reproduced at page 2 of the assessment order. The assessee replied to such show cause notice contending that the assessee was formed as a result of joint venture agreement between Unitherm Engineers Limited and Aichelin GMBG Austria. The assessee purchased furnace division of Unitherm Engineers Limited by way of slump sale for a consideration of Rs.14,28,89,936/- and value of net tangible assets at Rs.2,15,99,936/-. The balance amount of Rs.12,12,90,000/-(Rs.14,28,89,936/- – Rs.2,15,99,936/-) was shown as intangible assets. According to the assessee, the value of goodwill is the amount paid over and above the tangible assets and after reducing there from the values assigned to other intangible assets and placed reliance on the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. reported in 348 ITR 302 (SC). According to the AO, the goodwill is commercial benefit and the assessee is not entitled to depreciation u/s. 32(1)(ii) of the Act. The CIT(A) held the issue is covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. (supra) and by the order of Co-ordinate Bench of this Tribunal in the case of Johnson Matthey Chemicals India Pvt. Ltd. in ITA No. 1507 & 2036/PUN/2012 vide order dated 12-12-2017. The ld. DR did not dispute the same and no order contrary brought on record to the view taken by the Co-ordinate Bench of this Tribunal in the case of Johnson Matthey Chemicals India Pvt. Ltd. (supra). Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, the assessee is entitled to claim depreciation on goodwill and the grounds raised by the appellant-revenue are dismissed.
5. In the result, the appeal of Revenue is dismissed.
Order pronounced in the open court on 09th February, 2023.
