Case Law Details
TUV Rheinland NIFE Academy Private Limited Vs ACIT (ITAT Bangalore)
Conclusion: Since excess amount paid over and above the net asset value on acquiring a business concern should constitute goodwill however, eligibility of assessee to claim depreciation on Goodwill to AO was restored after affording adequate opportunity of hearing.
Held: Assessee-company was a subsidiary of TUV Rheinland (India) Pvt. Ltd.. The ultimate parent company was TUV SUD Group, Germany. Assessee-company was engaged in the business of providing Vocational training to the students in the fields of fire safety, lift technology, fiber optics, etc. It had claimed depreciation on goodwill. AO noticed that assessee had acquired a vocational training institute giving training to the students from a person named Shri M.V. Thomas, who was running the said institution under the name and style “NIFE ACADEMY” and the holding company of assessee had entered into a Business Transfer Agreement (BTA) with Shri M.V. Thomas for acquiring the academy NIFE for a lumpsum amount of Rs.28.50 Crores plus some adjustment on slump sale basis. Assessee had paid aggregate amount of Rs.30.56 crores (Rs.25.38 crores plus Rs.5.18 crores) and treated the same as “Good will” and claimed depreciation thereon. AO examined the financials of “NIFE Academy” as on 30.1.2014 and took the view that the slump sale price of Rs.30.56 crores was higher than the value of assets. Further, assessee had submitted before the AO that the purchase consideration paid over and above the value of tangible assets was treated as “Good Will”. However, AO noticed that assessee had treated the entire consideration paid by it as Goodwill. Accordingly, AO took the view that assessee has adopted a colourable device to reduce tax liability by claiming higher amount of depreciation and for the purpose, it had paid higher amount for purchasing assets on slump sale. Accordingly, AO disallowed depreciation claimed by assessee on goodwill. It was held that the excess amount paid over and above the net asset value on acquiring a business concern should constitute goodwill. However, the said legal principle could be applied only if the facts relating to the case were clear. As the facts were not clear in the instant case, accordingly, in the interest of natural justice, assessee should be provided with an opportunity to present the relevant facts. Accordingly, the order passed by CIT(A) was set aside and the same was restored to the file of AO. for examining afresh.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed this appeal challenging the order dated 21.10.2019 passed by Ld. CIT(A)-7, Bengaluru and it relates to the assessment year 2016-17. The grounds of appeal urged by the assessee given rise to the following issues:-
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