PCIT Vs Aculife Healthcare Pvt Ltd (Supreme Court of India)
The dispute arose from revision proceedings initiated under Section 263 of the Income Tax Act, 1961, against an assessment order allowing depreciation on goodwill following a demerger. The assessee had filed its return for Assessment Year 2015–16 declaring a substantial loss, which was accepted by the Assessing Officer under Section 143(3) after complete scrutiny. The Principal Commissioner of Income Tax later invoked Section 263, holding that the assessment was erroneous and prejudicial to the interests of the Revenue. According to the Principal CIT, goodwill created pursuant to a court-approved demerger had no actual cost in the hands of the demerged company, as no goodwill existed on its balance sheet prior to the demerger. Consequently, the written down value of such goodwill in the hands of the resulting company was “nil” under Section 43(6), and depreciation under Section 32 was not allowable.
The assessee challenged the revision order before the Income Tax Appellate Tribunal. The Tribunal examined the assessment records and found that the issue of depreciation on goodwill had been specifically examined during the original assessment proceedings. The assessee had furnished factual and legal submissions, relied on judicial precedent, and placed on record the High Court’s order approving the demerger, board resolutions, and a valuation report. The Tribunal concluded that the Assessing Officer had applied his mind and taken a legally plausible view while allowing depreciation on goodwill. On this basis, the Tribunal set aside the revision order passed under Section 263.
