Goodwill arising from amalgamation qualifies as intangible asset eligible for depreciation u/s 32 on actual cost to amalgamated company for AY 2020-21; no S.14A disallowance without exempt income.

ORDER

Per: SHRI. SANDEEP GOSAIN, J.M.:

The present appeal has been filed by the revenue challenging the impugned order dt. 16.08.2024 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2020-21. The revenue has raised the following grounds of appeal:

1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the assessee was entitled to depreciation claim of Rs. 209,42,61,048/- on goodwill whose valuation was done at Rs. 834,77,96,858/- by placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. (2012) 348 ITR 302(SC)?

2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was correct in placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. (2012) 348 ITR 302(SC) ignoring the fact that the issue involved in that case was only whether goodwill is an intangible asset eligible for depreciation within the meaning of section 32(1) of the Income Tax Act, 1961 and the issue of valuation of goodwill and allowability of depreciation on goodwill in the light of Explanation 7 to Section 43(1) and 6th proviso to section 32(1)(ii) of the Act were never discussed by the Hon'ble Supreme Court in the said case?

3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that the value of all the intangible assets of all the transferee and the transferor companies amounted to only Rs. 2,42,44,595/- at the end of the assessment year 2019- 2020 and the maximum depreciation allowable on the intangible assets for the. Α.Υ. 2020-2021 at the rate of 25% in the hands of the assessee company (amalgamated company) would be only Rs. 60,61,149/- or lesser.

4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that in the light of the provisions of Explanation 7 to Section 43(1) and Explanation 2 to Section 43(6) of the Income Tax Act, 1961, the actual cost of "Goodwill" arising out of amalgamation in the books of the amalgamating companies was not correctly recorded in the books of the amalgamated company?

5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that the depreciation admissible to the assessee on goodwill post amalgamation should have been at the same value had there been no amalgamation at all, and accordingly depreciation on goodwill arising out of amalgamation should have been NIL in the light of the 6th proviso to section 32(1)(ii) of the Income Tax Act, 1961.

6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that no disallowance u/s 14A could be made as the assessee had not earned any exempt income during the year?

7. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate the CBDT had issued Circular No. 5 of 2014 dated 11.02.2014 clarifying that Rule 8D read with section 14A of the Income Tax Act, 1961 provides for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income?

8. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that even after issue of Circular No. 5 of 2014 by the CBDT, some, courts have taken a view that if there is no exempt income during a year, no disallowance under section 14A of the Act can be made for that year and in order to make the intention of the legislature clear and to make it free from any misinterpr