Income Tax Appellate Tribunal - Ahmedabad
The Dy. Cit, Circle-4(1)(2),, ... vs M/S. Zydus Wellness Ltd,, Ahmedabad on 18 June, 2018
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'डी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD सम : ी मोद कुमार, लेखा सद य एवं सु ी मध ु मता रॉय, या यक सद य BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No.529/Ahd/2017 ( नधा रण वष / Assessment Year : 2013-14) The DCIT, बनाम/ M/s.Zydus Wellness Ltd.
Circle-4(1)(2) Vs. House No.6 & 7 Ahmedabad Sigma Commerce Zone
Nr.Iscon Temple, S.G.Highway,
Ahmedabad-380 015
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACC 7740 G
(अप ीलाथ% /Appellant) .. ( &यथ% / Respondent)
अपीलाथ% ओर से / Appellant by : Shri V.K. Singh, Sr.DR
&यथ% क( ओर से/Respondent by : Shri Jigar M.Patel, AR
ु वाई क( तार+ख /
सन D at e o f H e a r i ng 07/06/2018
घोषणा क( तार+ख /Dat e o f P r o n ou n c e m e n t 18/ 06 /2018
आदे श / O R D E R
PER Ms. MADHUMITA ROY - JM:
The Instant appeal has been filed by the Revenue against the order dated 06.12.2016 passed by the Commissioner of Income Tax(Appeals)-8, Ahmedabad [Ld.CIT(A) in short] u/s.250(6) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year (AY) 2013-14 arising out of the order dated 11.01.2016 passed by the DCIT, Circle- 4(1)(2) Ahmedabad.
2. The main issue involved in this appeal as to whether the order passed by the CIT(A) in treating the balancing figure of Rs.12,13,33,735/- at the time of amalgamation as goodwill and allowing the depreciation of Rs.3,03,33,434/- on the same is sustainable in the eye of law.
-2- ITA No.529/Ahd/2017DCIT vs. M/s.Zydus Wellness Ltd.
Asst.Year - 2013-14
3. The assessee-company is engaged in the business of manufacturing and sale of Neutraceuticals and trading in low caloric and cosmecueticals products. The assessee in the AY 2013-14 had claimed depreciation of Rs.3,03,33,434/- on goodwill of Rs.12,13,33,735/-. The AO asked for the details regarding the cost of acquisition of goodwill. The assessee in response to the same, submitted the details showing that the goodwill has arisen on account of amalgamation of Consumer Product Division of Cadila Healthcare Ltd. with Carnation Nutra Analogue Ltd. (now known as Zydus Wellness Ltd.) w.e.f. 01.04.2008. The details of valuation of goodwill were also submitted by the assessee. However, the AO held that the cost of acquisition of goodwill is NIL and consequently depreciation will not be allowed on it. The assessee's claim of depreciation of Rs.3,03,33,434/- on goodwill was thus disallowed and added back to the total income of the assessee. In the appellate proceeding, the assessee duly submitted before the Ld.CIT(A) that the similar issue has been decided by his predecessor in the assessee's own case for the AYs 2010-11 & 2011-12. It has relied upon the judgements governing the field. The Ld.CIT(A) ultimately allowed the appeal preferred by the assessee deciding the issue of depreciation on goodwill in favour of assessee upon quashing the order of addition made by the Ld.AO following the order passed by his predecessor. While allowing the claim of the assessee, the Ld.CIT(A) observed as follows:-
"After considering all material on record and judgments available on this issue, it is noted that it has already been established by the judicial authorities that 'goodwill' is to be treated as capital asset and is eligible for depreciation. In the appellant's case the issue raised by the AO is about the valuation of goodwill. In view of the direction of Hon'ble Gujarat High Court given in the Approved Scheme, the appellant has treated the excess of liabilities over assets as 'goodwill' and has claimed depreciation there upon. As stated above the AO has held that since the above amount is only the 'balancing amount', the same cannot be treated as cost of goodwill. The appellant relied on the judgment of Supreme Court in the case of Smifs Securities Ltd. which the AO denied by stating that in this case the Supreme Court has decided that goodwill is an asset but has not clearly adjudicated as far as the valuation of goodwill is concern. However, as discussed by the CIT(A) in her order for the A.Y. 2011-12 -3- ITA No.529/Ahd/2017 DCIT vs. M/s.Zydus Wellness Ltd.
Asst.Year - 2013-14 the issue with identical facts as in the appellant's case has been dealt by Hon'ble ITAT, Mumbai in order dated 13.10.2014 in the case of Toyo Engineering India Ltd. where the bench has discussed explanation 7 of section 43(1) of the Act and decided the issue against the assessee. But in its subsequent order (as the matter was restored back to ITAT on the directions of Hon'ble Bombay High Court), after discussing the judgment of Supreme Court in case of Smifs Securities Ltd. the issue was decided in favour of assessee.
After relying on the judgment of ITAT Mumbai in above mentioned case and also Hon'ble ITAT, Ahmedabad in the case of D.B.Corporation, ITA No.1113/Ahd/2011 A.Y. 2007-08, order dated 05.09.2014 on similar facts, the CIT(A)-4, Ahmedabad decided that the appellant has rightly valued the goodwill and is entitled to claim depreciation. .....
I have duly considered the facts of the case in the light of the applicable legal position and find no reason to differ with findings in earlier appeal orders in the appellant's own case for the AY. 2011-12 and 2012-13 (as discussed above) and conclude that the appellant is eligible for depreciation on 'goodwill' on WDV of Rs.12,13,33,735. Hence the claim of depreciation of Rs.3,03,33,434/- is allowed. Accordingly this ground of appeal is allowed."
The said order is impugned before us.
4. At the time of hearing of the instant appeal, the Ld.representative for the Revenue relied upon the order passed by the AO. The Ld.AR submitted before us that the Hon'ble Gujarat High Court has decided the issue in regard to depreciation on goodwill in assessee's own case for the AYs 2010-11, 2011-12 and 2012-13, copies whereof were also placed on record by him.
5. We have heard the Ld.representatives of the respective parties. We have perused relevant materials on record. We have also gone through the judgement of the Hon'ble Gujarat High Court wherein the issue has been decided in favour of assessee in assessee's own case for AYs 2010-11, 2011-12 & 2012-13. The Hon'ble Gujarat High Court while -4- ITA No.529/Ahd/2017 DCIT vs. M/s.Zydus Wellness Ltd.
Asst.Year - 2013-14 dismissing the appeal preferred by the Revenue against the order passed by this Ld.Tribunal in Tax Appeal No.346 of 2018, dated 16.04.2018 observed as follows:-
"6. With respect to the claim of depreciation, the decision of Supreme Court in case of Smifs Securities Ltd. (supra) would squarely apply. There is no material referred to by the Assessing Officer to hold that the claim of depreciation was fictitious. If we read his entire expression in this respect, he seems to be suggesting that being an intangible asset acquisition thereof would not qualify for depreciation. If that be so, the view of the Assessing Officer was opposed to the decision of the Supreme Court in case of Smifs Securities Ltd. (supra). On the other hand, if the observations of the Assessing Officer can be seen as his findings that the claim itself was baseless, there was no discussion or reference to any material to enable him to come to such a conclusion.
7. In the result, tax appeal is dismissed."
6. The Coordinate Bench of this Tribunal in ITA No.80/Ahd/2016 for AY 2012-13, dated 01.02.2018 while rejecting the appeal preferred by the Revenue in assessee's own case observed as follows:-
"4. Before us, the ld.counsel for the assessee has placed on record copy of the Hon'ble Gujarat High Court order in the case of assessee reported in Pr.CIT Vs. Zydus Wellness Ltd., 87 taxmann.com 82 (Guj.) rendered in Tax Appeal No.779 of 2017 dated 3.10.2017. Hon'ble High Court upheld order of the ITAT vide which depreciation was granted to the assessee on goodwill. Similarly, in the Asstt.Year 2011-12, Tribunal has dismissed appeal of the Revenue whereby the Tribunal has upheld grant of depreciation on goodwill at the end of ld.CIT(A) vide order dated 8.6.2015. Considering judgement of the Hon'ble Gujarat High Court and order of the Tribunal in the case of assessee in different assessment years, we are of the view that the assessee is entitled for depreciation on goodwill. The ld.CIT(A) has examined all these facts, and thereafter, allowed the depreciation. The ld.CIT(A) has rightly appreciated the controversy and no interference is called for in his order. Accordingly, the appeal of the Revenue is dismissed."
7. Taking into consideration of the entire aspects of the matter, we find that the issue is covered in assessee's own case by number of judgements and orders passed by this Ld.Tribunal as well as the Hon'ble Jurisdictional High Court. We, therefore, respectfully -5- ITA No.529/Ahd/2017 DCIT vs. M/s.Zydus Wellness Ltd.
Asst.Year - 2013-14 following the decision of the Coordinate bench as mentioned above in assessee's own case as well as the judgement passed by the Hon'ble Jurisdictional High Court, find no reason to interfere with the order passed by the Ld.CIT(A) allowing the claim of depreciation of goodwill made by the assessee.
8. In the result, appeal filed by the Revenue is dismissed.
This Order pronounced in Open Court on 18/ 06/2018
Sd/- Sd/-
( मोद कुमार) (स
ु ी मध ु मता रॉय)
लेखा सद य या यक सद य
( PRAMOD KUMAR ) ( Ms. MADHUMITA ROY )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 18/ 06/2018
ट+.सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क ! त#ल$प अ%े$षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &यथ% / The Respondent.
3. संबं2धत आयकर आयु3त / Concerned CIT
4. आयकर आयु3त(अप ील) / The CIT(A)-8, Ahmedabad
5. 6वभागीय त न2ध, आयकर अपील+य अ2धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड; फाईल / Guard file.
आदे शानुसार/ BY ORDER, स&या6पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 11.6.18(dictation-pad 11-pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...11.6.18
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......18.6.18
7. Date on which the file goes to the Bench Clerk.....................
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................