ACIT Vs FLSmidth Private Limited (ITAT Chennai)
ITAT Chennai held that the excess payment over the net book value of assets and liabilities acquired on account of amalgamation is in the nature of ‘goodwill’ and is eligible for depreciation u/s.32(1)(ii) of the Income Tax Act.
Facts- The assessee is a member of the FLSmidth Group and is engaged in the manufacture and supply of machinery, parts and supervision of erection and commissioning services to cement / minerals industries among other activities. The company has three segments, namely, project segment, engineering segment and financial shared services segment. The AO issued the order of assessment for AY 2014-15, AY 2015-16 and AY 2017-18 wherein he made additions such as transfer pricing adjustments, disallowance u/s.14A of the Act and disallowance of depreciation on goodwill arising on amalgamation. The ld. CIT(A) has partially allowed the appeals of the assessee. Now the Revenue has filed appeals.
Conclusion- There is no dispute with regard to the fact that FPIL is a wholly owned subsidiary of the asseesee. We find that as per the Scheme of Amalgamation approved by the Order of the Hon’ble Bombay High Court, the consideration paid by the assessee is much more than the net value of assets and liabilities taken over by the assessee. Such excess consideration paid by the assessee has been treated as goodwill and the assessee has claimed depreciation thereon at the applicable rate. Thus, the excess payment over the net book value of assets and liabilities acquired on account of amalgamation is in the nature of ‘goodwill’ and is eligible for depreciation u/s.32(1)(ii) of the Act.
