Case Law Details
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.
The Revenue carried the matter in appeal before the Gujarat High Court, raising questions on whether the Tribunal erred in setting aside the revision order and in not considering statutory provisions and precedent cited by the Revenue. After examining the Tribunal’s reasoning, the High Court noted that the Assessing Officer had conducted inquiries and considered the assessee’s explanations before allowing depreciation. Relying on the Supreme Court’s ruling in Smifs Securities Ltd., the High Court observed that goodwill is recognized as an intangible asset eligible for depreciation under Section 32. It held that where the Assessing Officer has adopted a plausible view after due examination, the revisionary jurisdiction under Section 263 cannot be invoked merely because the Commissioner holds a different view. Accordingly, the High Court dismissed the Revenue’s appeals, holding that no substantial question of law arose.
The Revenue thereafter approached the Supreme Court of India by way of a special leave petition. The Supreme Court noted that the petition was filed with a delay of 658 days. Upon perusing the impugned High Court order, the Court found no error giving rise to any question of law. The petition was therefore dismissed both on the ground of delay and on merits, and all pending applications were disposed of. This brought finality to the issue, affirming that depreciation on goodwill allowed after due scrutiny could not be disturbed through revision proceedings.
Also Read HC Judgments: Section 263 Revision Quashed as AO Examined Depreciation on Goodwill: Gujarat HC
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. This petition is reported to be beyond time by 658 days.
2. We have perused the order impugned to assess whether a lenient view on the delay be taken. Upon perusal of the impugned order, we do not find any such error which may give rise to a question of law. Consequently, this petition is dismissed both on the ground of delay as well as merits.
3. Pending application(s), if any, shall stand disposed of.
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