आदेश/ORDER

PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These two appeals are filed by the Revenue as against separate appellate orders dated 20.05.2022 and 08-06-2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment orders passed under section143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years 2017-18 and 2018-19 respectively. Since common issue of disallowance of depreciation on Goodwill is involved in both the assessment years, for the sake of convenience the same are disposed of by this common order

2. Brief facts of the case is that the assessee company is engaged in the business of (i) manufacturing of solid Bio-Fuel and Wood Pallet (ii) Trading in solar Rooftop and Renewal Energy Devices (iii) trading in tissue culture plants and (iv) Product Development Services. For the Asst. Year 2017-18, the assessee filed its original return of income declaring Nil total income on 06.11.2017. Thereafter, pursuant to the Composite Scheme of Arrangement (Scheme) approved by Ahmedabad Bench of National Company Law Tribunal (NCLT) vide order dated 29.10.2018 the Assessee revised its return of income for A.Y. 2017-18 on 30.11.2018 declaring loss of Rs.752,51,42,451/-. The return was revised to give effect of the Scheme of Amalgamation approved by Ahmedabad Bench of NCLT vide order dated 29.10.2018.

2.1. Assessee's case was selected for Limited Scrutiny assessment and regular assessment was completed u/s. 143(3) of the Act on 29.12.2019 by disallowing the claim of depreciation on Goodwill of Rs. 771,66,20,460/- under section 32(1) r.w.s. 43(1) r.ws. 43(6)(c) r.w.s. 49(1)(iii)(e) r.w.s. 55(2)(a)(ii) of the Act and total income was determined at Rs.19,14,86,009/-.

3. Aggrieved against the order, the assessee filed an appeal before Ld. CIT(A) who held that the assessee company had acquired goodwill by way of purchase in the process of Amalgamation and hence the claim of depreciation on goodwill acquired at the time of Amalgamation is in accordance with the provisions of law and deleted the addition made by the A.O. by passing a speaking order as follows:

“After considering the appellants submissions and AO findings in the assessment order, following facts emerge:

a) It is apparent from the findings of the AO in the assessment order that the depreciation on goodwill was disallowed by the AO on the premise that there was no goodwill value in the books of the amalgamating companies. The AO has completely ignored the situation of purchase of goodwill by amalgamated company in the process of amalgamation as was the case in the facts of Smifs Securities Ltd. as well as in the case of Zydus Wellness Ltd decision. It has been clearly brought out by the appellant that the goodwill value was on the basis of differential between the consideration paid vs. value of net assets of amalgamating companies taken over Thus, in the current facts of the case where goodwill is acquired through purchase in the process of amalgamation, the provision of section 55(2)(a)(i) will apply rather than the AO's view point of applying section 55(2)(a)(ii) of the Act for considering the value of goodwill. In the first case, the value of goodwill is taken at purchase consideration paid for acquisition of goodwill where as in the second case, the value of goodwill generated in the process of business for the goodwill generating company is taken as Nil. For this factual reason that the appellant had acquired goodwill by way of purchase for consideration paid in the process of amalgamation, the provisions of the proviso to section 32(1), section 49(1)(ii)(e), Explanation 7 to section 43(1) and/or Explanation 2(b) to section 43(6)(c) and section 55(2)(a)(ii) are not applicable to the current facts of the case as argued and contended by the appellant in the submissions reproduced herein above. This view point also gets suppor