ACIT Vs Claris Limited (ITAT Ahmedabad)
ITAT Allows Depreciation on Amalgamation Goodwill Because Finance Act 2021 Amendments Apply Prospectively; Goodwill Arising From Excess Consideration in Amalgamation Eligible for Depreciation; ITAT Rejects Revenue’s Claim of Artificially Inflated Goodwill in Amalgamation Scheme; Exchange of Shares Valid Consideration for Acquisition of Goodwill; ITAT Upholds DCF Valuation Method While Allowing Goodwill Depreciation Claim.
In ACIT Vs Claris Limited, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) dismissed Revenue appeals for Assessment Years 2017-18 and 2018-19 and upheld deletion of disallowance of depreciation on goodwill arising from amalgamation.
The assessee revised its return pursuant to a Composite Scheme of Arrangement approved by the Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 29.10.2018. Under the scheme, several companies amalgamated with Altheon Enterprises Limited, later known as Claris Limited. Shares were issued to shareholders of amalgamating companies based on valuation reports obtained from an independent valuer. The excess of consideration discharged over net assets acquired was recognized as goodwill in accordance with Accounting Standard-14 (AS-14).
During assessment proceedings, the Assessing Officer disallowed depreciation of Rs. 771.66 crore claimed under Section 32(1)(ii) on goodwill amounting to Rs. 3086.65 crore. The Assessing Officer held that there was no goodwill in the books of amalgamating companies and questioned the valuation methodology, nature of goodwill, and retrospective effect of the scheme.
