Ammann India Private Limited Vs ACIT (Gujarat High Court)
Gujarat High Court recently ruled in favor of Ammann India Private Limited, quashing a notice issued under Section 148 and an order passed under Section 148A(d) of the Income Tax Act, 1961, by the Assessing Officer (AO) for the Assessment Year 2018-19. The petitioner, Ammann India, challenged these actions, contending that the AO failed to consider a crucial order passed by the Income Tax Appellate Tribunal (ITAT) in the petitioner’s own case for an earlier assessment year.
The genesis of the issue lies in the petitioner’s claim of depreciation on goodwill, an intangible asset created upon the acquisition of Gujarat Apollo Industries Ltd. (GAIL) in Financial Year 2013-14. In Assessment Year 2014-15, the Transfer Pricing Officer (TPO) had made an upward adjustment, leading to a disallowance of depreciation on goodwill as per the directions of the Dispute Resolution Panel (DRP). Subsequently, similar disallowances were made in later assessment years. However, the ITAT, in an order dated January 3, 2022, for Assessment Year 2014-15, deleted the addition made on the basis of the DRP’s recommendation, although on the legal ground of the inapplicability of Section 92BA of the Act, which was omitted by the Finance Act, 2017.
Read SC Judgment in this case: Tribunal Order cannot Be Treated as Fresh Information for Reopening: SC
In the reasons recorded for issuing the notice under Section 148A(b) for Assessment Year 2018-19, the AO alleged that the claim of depreciation on goodwill by Ammann India was in violation of the Income Tax Act. The AO noted the TPO’s upward adjustment in Assessment Year 2014-15 and the DRP’s direction for disallowance. In its reply to the show cause notice, Ammann India pointed out that it had claimed a lower depreciation amount than mentioned in the notice and, more importantly, highlighted the ITAT’s order deleting the very basis of the disallowance in the earlier year.
Despite this, the AO passed the impugned order under Section 148A(d), stating that the reply was not acceptable. The AO reiterated the initial observations regarding the goodwill and the depreciation claimed, and while acknowledging the ITAT’s order, noted that the Tribunal had not decided the issue on the facts of the case but on the applicability of a provision that was no longer in the statute. The AO concluded that income chargeable to tax had escaped assessment, justifying the issuance of the notice under Section 148.
The Gujarat High Court, however, found fault with the AO’s approach. The court observed that the AO had failed to adequately consider the implication of the ITAT’s order, which had effectively removed the foundation for the disallowance of depreciation on goodwill. The High Court noted that since the addition made in Assessment Year 2014-15 was deleted by the ITAT, there was no question of escapement of income in Assessment Year 2018-19 on account of the claim of depreciation on the Written Down Value of the goodwill. Consequently, the Gujarat High Court quashed and set aside the notice under Section 148 and the order under Section 148A(d), thereby disposing of the petition in favor of Ammann India Private Limited.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
