Income Tax Appellate Tribunal - Bangalore
Autodesk India Private Limited, ... vs Assistant Commissioner Of Income Tax, ... on 9 February, 2023
IT(TP)A No.553/Bang/2022
Autodesk India Pvt. Ltd., Bangalore
IN THE INCOME TAX APPELLATE TRIBUNAL
"B'' BENCH: BANGALORE
BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND
MS. PADMAVATHY S., ACCOUNTANT MEMBER
IT(TP)A No.553/Bang/2022
Assessment Year: 2017-18
Autodesk India Pvt. Ltd.
Unit A4, A Wing, 2nd Floor
Divyasree Chambers ACIT
Langford Road Circle-1(1)(1)
Vs.
Shantinagar Bengaluru
Bengaluru 560025
PAN NO : AABCA6924B
APPELLANT RESPONDENT
Appellant by : Shri T. Suryanarayana, A.R.
Respondent by : Shri Sunil Kumar Singh, D.R.
Date of Hearing : 08.02.2023
Date of Pronouncement : 09.02.2023
ORDER
PER PADMAVATHY S., ACCOUNTANT MEMBER:
This appeal is against the final order of assessment passed by the Assistant Commissioner of Income Tax Circle 1(1)(1), Bangalore (the AO) passed u/s.143(3) r.w.s.144C(13) of the Income-tax Act,1961 ['the Act' for short] dated 26.04.2022 for the assessment year 2017-18.
2. The Assessee is engaged in the business of providing technical support and software development services to its AEs. During the financial year 2016-17 relevant to the assessment year 2017-18, the IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 2 of 18 Assessee also started software distribution services wherein Delcam software products are imported from AE and sold to re-sellers and customers in India. The assessee filed the return of income for AY 2017- 18 on 29.11.2017 declaring a total income of Rs.21,89,91,210. The case was selected for scrutiny under CASS and the statutory notices were duly served on the assessee. During the previous year relevant to the assessment year 2017-18, the relevant international transaction that took place between the Assessee and its AE was the provision of software distribution services (SDS), the revenue from which amounted to Rs. 10,45,82,209/-. On a reference being made by the AO, the TPO passed an order dated 20.12.2019 determining a TP adjustment of Rs. 69,54,717/-in respect of the SDS segment. The AO passed the draft assessment order in which the aforesaid TP adjustments were incorporated. Further, the Assessing Officer proposed a disallowance of the claim made by the Assessee of depreciation on goodwill, on the ground that the assets acquired from the selling entity did not include goodwill or even intangible assets as defined under Section 32(1)(ii) of the Act. Aggrieved, the Assessee filed its objections before the DRP which, vide its directions dated 24.03.2022 disposed of the objections by granting partial relief to the Assessee.
3. In line with the directions issued by the DRP, the Assessing Officer passed the impugned final assessment order on 26.04.2022, in which the TP adjustment towards SDS segment was reworked to Rs. 38,80,000/-, and the disallowance of claim of depreciation on goodwill was sustained. Aggrieved by the final assessment order, the Assessee is in appeal before Tribunal.
IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 3 of 18
4. The issues contended through various grounds raised by the assessee are -
(i) Ground Nos. 1, 2 & 7 - General
(ii) Ground No.3 (Ground No.3.1 to 3.7) - TP adjustment in SDS
segment
(iii) Ground No.4 (Ground 4.1 to 4.5) - Disallowance of
depreciation on Goodwill
(iv) Ground No.5 - Short Grant of credit for TDS
(v) Ground No.6 - Initiation of penalty
SOFTWARE DISTRIBUTION SEGMENT (SDS Segment)
5. In this segment, the assessee has chosen Transaction Net Margin Method (TNMM) as the most appropriate method. Operating Profit by Operating Cost (OP/OC) is the profit level indicator (PLI). The margins in this segment as reported in the TP study of the assessee is as given below -
Operating Revenue Rs.10,45,82,209/-
Operating Cost Rs.10,14,44,743/-
Operating Profit (Op. Rev. - Op. Cost) Rs. 31,37,466/-
Operating/Net mark-up (OP/OR) 3%
5.1. The assessee selected the following comparables using the data base from PROWESS & CAPITALINE PLUS.
Sl. No. Name of the company Weighted
average (in %)
1. Avance Technologies Ltd. -0.77
2. Unisys Softwares& Holdings Inds. Ltd. 0.01
3. J M D Ventures Ltd 0.14
4. P S I T Infrastructure & Services Ltd. 0.30
5. Compuage Infocom Ltd. 1.97
6. Omni Infoworld Pvt. Ltd. 2.60
IT(TP)A No.553/Bang/2022
Autodesk India Pvt. Ltd., Bangalore
Page 4 of 18
7. Sonata Information Technology Ltd. 3.41
8. DuconInfratechnologies Ltd. 3.52
th
35 Percentile 0.14
Median 1.14
65th Percentile 2.60
5.2. Accordingly the assessee concluded that the international transaction in the SDS segment is at Arm's length. The TPO out of the above rejected 6 comparables and accepted only Sonata Information Technology Ltd., and Ducon Infra technologies Ltd. The TPO applied his own filters to add one more comparable to the list and the final listed of comparables arrived at by the TPO is as under -
Sl. No. Name of the Company Mark-up on Total Costs (WC-unadj) - (in %)
1. Sonata Information Technology Ltd. 3.42
2. DuconInfratechnologies Ltd. 3.52
3. K7 Computing Pvt. Ltd. 22.00 Average 9.65 5.3. Accordingly the TPO arrived at the TP adjustment in the SDS segment as under -
Taxpayers operating revenue 10,45,82,209/-
Taxpayer operating cost 10,14,44,743/-
Taxpayers operating profit 31,37,466/-
Taxpayers PLI 3%
Average Margin of comparable set 9.65%
Profit as per Arm's Length Price 1,00,92,183/-
Revised cost (ALP) 94,490,026/-
Taxpayer's related party cost 10,14,44,743/-
Excess cost being adjustment 69,54,717/-
5.4. Aggrieved the assessee filed its objections before the DRP. The DRP directed the TPO to recompute the margins of K7 Computing Private Ltd. and Sonata Information Technology Ltd., and rejected all the other contentions of the assessee. As per the directions of the DRP IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 5 of 18 the TP adjustment was reworked to Rs. 38,80,000. Aggrieved the assessee is in appeal before the Tribunal.
5.5. Out of the grounds raised with regard to the impugned TP adjustment, the ld AR during the course of hearing presented arguments only with regard to the following -
a. The DRP erred in upholding the action of the TPO in including K7 Computing Private Limited in the final list of comparables. (Ground No. 3.3) b. The DRP erred in upholding the action of the TPO in excluding Avance Technologies Ltd., Unisys Softwares & Holdings Inds. Ltd., P S I T Infrastructure & Services Ltd., JMD Ventures Ltd. and Compuage Infocom Limited from the final list of comparables. (Ground No. 3.5) c. The DRP erred in upholding the action of the TPO in excluding the additional comparableslike Redington India Ltd., Dynacons Systems & Solutions Ltd. and Fourth Dimension Solutions Limited from the final list of comparables. (Ground No. 3.6).
Exclusion of K7 Computing Private Limited
6. The ld AR submitted that this company is engaged in software consultancy business apart from distribution services, and segmental details as regards the two segments are unavailable. It is submitted that the consultancy services rendered by the company are not comparable to the services rendered by the Assessee, and therefore the company ought to be excluded from the final list of comparbles. The ld AR also submitted that the DRP's finding that the revenue from software development services amounts to only 10% of the revenue and therefore the company can be retained in the list of comparables, is erroneous. The ld AR further submitted that in the absence of segmental details, the impact of the software development segment on the margin of the company cannot be determined and therefore, the company cannot be IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 6 of 18 retained in the final list of comparables. The ld AR drew our attention to the fact that the margin of this company is significantly higher than the margin of the other two companies selected by the TPO and those of the companies selected by the Assessee in its TP study, demonstrating that the company's margin is not reflective of the industry standard, leading to the presumption that the SWD services segment of the company has a significant impact on the margin of the company. That apart, it is submitted that the company incurs expenditure in the technical services. It is also submitted that the company owns significant IPRs of over 98% of the intangible assets, as opposed to the Assessee which does not own any IPR. The ld AR further submitted that, the company is selling its own proprietary products, unlike the Assessee which is selling the product of another entity. Therefore, the ld AR prayed that the company ought to be excluded from the final list of comaprables. Reliance in this regard is placed on the decision of the Mumbai Bench of this Hon'ble Tribunal in the case of Red Hat India (P.) Ltd. v.
Additional/Joint/Deputy/Assistant Commissioner of Income- tax/Income-tax Officer, National Faceless Assessment Centre, Delhi ([2022] 136 taxmann.com 52 (Mumbai - Trib.)).
7. The ld DR relied on the order of the lower authorities.
8. We heard the rival submissions and perused the material of record. As per the Annual report of K7 Computing Pvt., ltd., the company is engaged in the business of providing Anti-virus software solutions and the principal business activity of the company as per Annual return in MGT 9 is as extracted below:-
IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 7 of 18 Sl.N. Name and description of ITC Code of the % to main products service rendered total turnover of the Company
1. Consultancy services in 99831315 100% Systems security including antivirus and other applications
2. Design and development 99831413 services of software including customized and packaged applications 8.1 It is also noticed from the Profit and Loss account of the company that the company is deriving income from sale of own software and also from software development & supporting services whereas the segmental details with regard to these two lines of businesses are not available in the annual report. We also notice that the Mumbai Bench of the Tribunal in the case of Red Hat (supra) has considered the issue of exclusion of K7 Computing Pvt. Ltd., and held that -
29. We have examined profile of the assessee company from its financials extracted at page A333 of the paper book wherein K7's flagship products are K7 total security and K7 Enterprise Security. From annual report of K7 available at page A332 of the paper book it is apparent that the K7 owns and employs plant and equipment comprising 61% of its total tangible assets. Similarly, from its annual report i.e. note to the financial assets (fixed assets) available at page A332 it is proved on record that K7 owns significant intellectual property right of 91.5% of its total fixed assets. It is also apparent in the financials of K7 available at page A332 of the paper book that K7 incurred Rs. 15.75 crore on promotions which comes to 27.55% of the sale.
30. When we compare all these facts vis-à-vis assessee, we are of the considered view that assessee is a limited risk reseller having no plant and equipments, owning no intangible assets, having no expenses on promotions and is not selling its product. So K7 is not a valid comparable vis-à-vis K7, hence ordered to be excluded.
IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 8 of 18 8.2 From the above ruling it is clear that the Hon'ble Tribunal has upheld the exclusion on the ground that K7 owns significant intellectual property rights and the company derives income from sale of its flagship products are K7 total security and K7 Enterprise Security. We see merit in the submission of the ld AR that there is no change in the nature of business of K7 during the year under consideration (refer page 2 of annual report) and therefore the ratio of the above decision of the Hon'ble Mumbai Tribunal is applicable for AY 2017-18 also. We notice that in assessee's case, the assessee distributed the Delcam software products that are imported from AE and sold to re-sellers and customers in India. Therefore in our view the functional profile of the assessee, assets employed and the risk assumed are different from K7 and accordingly the company is not a comparable with assessee. We direct the AO/TPO to exclude K7 from the list of comparables.
8.3 The assessee vide Ground No.3.5 and 3.6 is seeking inclusion of Avance Technologies Ltd., Unisys Softwares& Holdings Inds. Ltd., P S I T Infrastructure & Services Ltd., JMD Ventures Ltd., Compuage Infocom Limited, Redington India Ltd., Dynacons Systems & Solutions Ltd. and Fourth Dimension Solutions Limited.
8.4 In this regard the ld AR submitted that that all the above companies are engaged primarily in trading of software and that they came to be rejected/ their rejection came to be upheld on the sole ground that the companies did not feature in the search matrix of the TPO. The ld AR also submitted that the TPO and the DRP have not explicitly disputed the functional comparability of these companies to the IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 9 of 18 Assessee and the mere fact that a company was not part of the search matrix of the TPO cannot be a reason to exclude an otherwise comparable company. The ld AR placed reliance in this regard on the decision of coordinate bench of the Tribunal in the case of Prism Networks Pvt. Ltd. v. ACITin IT(TP)A No. 349/Bang/2021.
8.5 The ld DR submitted that the data based used by the assessee and the TPO are different. The ld DR therefore fairly conceded that if the only reason for rejecting the comparables is that it is not found in the search matrix, then the issue can be remitted back to the AO/TPO for fresh consideration.
9. We heard the rival submissions and perused the material on record. We notice that the issue of rejecting the inclusion of a comparable on the ground that the same is not appearing in the search matrix of the TPO has been considered by the coordinate bench in the case of Prism Networks Pvt. Ltd (supra) where it is held that -
18. We heard the rival submissions. It is clear from the order of the DRP that the DRP has not considered the plea of the Assessee in proper perspective. The fact that the TPO rejected the TP study of the Assessee cannot be the basis not to consider the claim of the Assessee for inclusion of comparable companies. The TPO excluded these companies only on the ground that information related to these companies was not available in the public domain and this fact was shown to be an incorrect assumption by the Assessee in the submissions before the DRP. In such circumstances, it was incumbent on the part of the DRP to have adjudicated the question of inclusion of these companies as comparable companies. The fact that these companies do not figure in the search matrix of the TPO is not and cannot be a ground not to consider inclusion of these companies as comparable companies. Since the DRP has failed to do so, we are of the view that the issue regarding inclusion of the IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 10 of 18 aforesaid companies as comparable companies should be set aside to AO/TPO for fresh consideration in the light of the information available in public domain. Thus ground No. 7 is treated as allowed for statistical purposes.
9.1 In assessee's case the facts are identical since the reason for rejecting the comparables is that the companies are not appearing in the search matrix of the TPO and therefore the ratio laid down by the coordinate bench in the above case is applicable to the assessee. Therefore respectfully following the same we remit the issue back to the AO/TPO for fresh consideration after giving a reasonable opportunity of being heard to the assessee. It is ordered accordingly.
Ground No. 4: Disallowance of depreciation claimed on acquired goodwill
10. During the year under consideration, the Assessee had entered into a business transfer agreement ("BTA") with Delcam Software India Pvt. Ltd. ("Delcam")for purchase of business/undertaking by way of a slump sale for a lump sum consideration of Rs. 11,33,11,028/-. The book value of net liabilities transferred amounted to Rs. 5,58,25,006/-, resulting in a goodwill of Rs. 16,91,36,034/-. The Assessee claimed depreciation on the total acquired goodwill of Rs. 16,91,36,034/- at 25%, under Section 32(1)(ii) of the Act, which was Rs. 4,22,84,009/-.
10.1 The Assessing Officer disallowed the depreciation claimed by the Assessee on the grounds that -
(i) the acquisition was not a slump sale as claimed by the Assessee but an asset transfer since Delcam's assets and liabilities are not transferred in its entirety IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 11 of 18
(ii) the assessee has only taken over the shares of Delcam;
(iii) No intangible assets/goodwill was transferred from the seller; and
(iv) the valuation of goodwill has not been justified. 10.2 The Assessing Officer also claimed as per Finance Bill, 2021, goodwill is not a depreciable asset.
10.3 The DRP rejected the contentions of the Assessee and upheld the finding of the AO on the ground that land and building not having been transferred by Delcam, the sale was not a slump sale. The DRP also held that there was no goodwill in existence before the slump sale and that under the BTA there was no valuation of any goodwill.
10.4 The ld AR submitted that during the financial year 2016-17, the Assessee entered into a business transfer agreement ("BTA") with Delcam on 01.08.2016 for purchase of business/undertaking under slump sale for a lumpsum consideration of Rs. 11,33,11,028/-. The purchase consideration was not allocated to any individual asset or liability. The ld AR drew our attention to the relevant clauses of the agreement to substantiate that the business was taken over as going concern and the transaction is a slump sale of the undertaking/business and not an individual asset sale. The ld AR submitted that the list of the assets and liabilities that are not included are the cash necessary to discharge excluded liabilities and land & buildings and the excluded liabilities are just the statutory tax liabilities of Delcam. It is submitted that these excluded assets and liabilities are not core to the functioning of the business taken over.
IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 12 of 18 10.5 The ld AR submitted that it is settled position that the mere fact that certain assets and liabilities are not transferred would not lead to the conclusion that the undertaking is not transferred as a whole. Reliance is placed on the following decisions:
- Rohan Software Pvt. Ltd. v. ITO [2008] 304 ITR 314 (ITAT, Mum)
- Commissioner of Income-tax, Jalandhar-I vs Max India Ltd [2009] 178 Taxman 196 (Punjab & Haryana) 10.6 The ld AR further submitted that there is no basis for the AO to conclude that what is transferred is the shares of Delcam. The valuation report although values the shares of Delcam, it is only a yardstick for the assessee to determine the value of the business being acquired and would not mean that what is purchased is the share itself. The ld AR also submitted that the authorities have failed to appreciate that the excess of purchase consideration over the net assets/liabilities would be accounted as goodwill and would be eligible for depreciation under section 32(1)(ii) of the Act according to the ratio of the Supreme Court's decision in the case of CIT, Kolkata vs. Smifs Securities Ltd. [2012] 348 ITR 302 (SC). The ld AR submitted that the goodwill in consideration, represents various quantifiable / unquantifiable intangible such as business contracts, know how, skilled workforce, access to wider market etc. which was acquired as a part of the acquisition of business/ undertaking of Delcam, on payment of certain consideration. In this regard reliance is also placed on the decision of the jurisdictional High Court in the case of CIT vs. Manipal Universal Learning (P.) Ltd. [2013] 34 taxmann.com 9 (Karnataka HC).
IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 13 of 18 10.7 The ld AR further submitted that the amendment brought in through the Finance Act, 2021, are prospective in nature and would not apply in the case of the Assessee for Assessment year 2017-18. The ld AR also submitted that the the DRP is not correct in holding that the decision in the case of Smiffs Securities was arrived at without considering the 6th proviso to section 32(1), section 49(1)(iii)(c), Explanation 7 to section 43(1) etc., since those provisions deal with a case where an asset is transferred by a predecessor to a successor and would not apply where goodwill arises for the first time on slump sale. Therefore, the ld AR prayed that the depreciation allowance as claimed by the Assessee ought to be allowed.
10.8 The ld DR relied on the order of the AO. The ld AR submitted that the assessee has not submitted the financials of Delcam as on the date of transfer which is one of the reasons for questioning the value at which goodwill is recognised. The ld DR also submitted that the case law relied on by the assessee Smifs Securities Ltd (supra) is distinguishable since the same was rendered in the context of amalgamation and the depreciation on the goodwill recorded in the books of accounts.
11. We heard the rival submissions and perused the material on record. We will first look at some of the relevant clauses of the BTA agreement entered into by the assessee with Delcam.
IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 14 of 18 11.1 From the above it is clear that the assessee has acquired the local business of Delcam as a going concern including the employees but excluding certain assets and liabilities which according to the assessee are not core to the functioning of the business taken over. The first contention of the revenue is that the entire assets have not been taken over leaving certain assets such as land & building etc., and therefore the entire transaction is not a slump sale. In this regard we will look at the definition of "slump sale" as contained in section 2(42C) of the Act which reads as under -
Slump sale means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. Explanation 1.--For the purposes of this clause, "undertaking" shall have the meaning assigned to it in Explanation 1 to clause (19AA). Explanation 2.--For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities Explanation 1 to clause (19AA) - "undertaking"
For the purposes of this clause, "undertaking" shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.
11.2 From the plain reading of the above provisions it is clear that the for the purpose of a transaction to be considered as a slump sale there should be a transfer of an undertaking / business and the assets or liabilities not constituting a business activity are excluded from undertaking / business. Therefore in assessee's case the transaction culminated between the assessee and Delcam cannot be held to be not a slump sale for the reason that entire assets and liabilities are not transferred. The next contention of the revenue is that there is specific IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 15 of 18 intangible asset that is transferred as part of the agreement. We notice that the valuation report submitted by the assessee is rejected by the AO stating that the report has no merits. In this regard the ld AR submitted that the valuation of the business that is transferred as part of slump sale is carried out by the independent Chartered Account who has done the valuation using DCF method. The ld AR also submitted that Delcam has paid the capital gain arising out the slump sale on the consideration which is paid basis the said valuation. Therefore ld AR submitted that the revenue is not justified in rejecting the valuation report in total without any finding to the contrary. From the agreement, we notice that the local business of Delcam is purchased by the assessee as a going concern and the consideration paid basis the valuation report is towards the business contracts, know how, skilled workforce, access to wider market etc. as contended by the ld AR. Once the department accepted the capital gain offered by the seller the same transaction cannot be doubted in the hands of purchaser. We therefore see no merit in the finding of the AO that the assessee has attributed a fictitious value to goodwill and has not valued it correctly. Under slump sale no value is attributed to the individual assets wherein the difference between the net book value and the consideration paid basis a recognised method is recorded as good will in the books of the assessee which in our view is done correctly.
11.3 On the issue of invoking the sixth proviso to Section 32(1) of the Act we are of the considered we that the same is not applicable in assessee's case where the goodwill recorded is arising out of the difference between the sale consideration of a slump sale and the net IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 16 of 18 book value of the assets acquired. It is applicable, only in case of assets already existing in the books of predecessor company on which predecessor company was claiming depreciation before slump purchase, and it is not applicable on assets recognized only by successor company pursuant to such slump purchase. The legislative intent behind the introduction of the said proviso was to curb the practice of claiming' depreciation on the 'same assets' by both the predecessor company and the successor company. This evident from the memorandum explaining the provisions of Finance Bill, 1996, which introduced the sixth proviso (erstwhile fifth proviso) to section 32(1) of the Act. Thus, a commonality of assets should exist between predecessor and the successor goodwill arising pursuant to acquisition belongs only to successor company.
11.4 Now coming to the issue of the depreciation on goodwill, the Hon'ble Supreme Court in the case of Smifs Securities Ltd (supra) has considered a similar issue and held that -
4. Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b).
5. In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act.
6. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) ['CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 17 of 18 Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee-Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased. This finding has also been upheld by Income Tax Appellate Tribunal ['ITAT', for short]. We see no reason to interfere with the factual finding.
11.5 The jurisdictional High Court in the case of Manipal Universal Learning (supra) has followed the above decision of the Apex Court and held that -
4. The Apex Court in the case of CIT v. SMIFS Securities Ltd. [2012] 24 taxmann.com 222/210 Taxman 428 has held that Explanation 3 to Section 32(1) of the Act, which defines the expression 'asset' includes intangible asset like goodwill. Therefore, the goodwill is an asset under Explanation 3(b) to section 32(1) of the Act. Therefore, the depreciation is leviable even on the goodwill. In view of the law declared by the Apex Court in the aforesaid judgment, the substantial question of law framed is answered in favour of the assessee and against the Revenue. No merits. Dismissed.
11.6 Respectfully following the above judicial pronouncements we hold that the depreciation on goodwill should be allowed considering the facts in assessee's case. The disallowance made in this regard is deleted.
Ground No. 5: Short grant of credit of taxes deducted at source of Rs. 7,074/-
12. The ld AR submitted that the assessee is eligible for credit of Rs. 31,06,189/- as per Form 26AS. While so, the Assessing Officer has granted credit of only Rs. 30,99,115/- resulting in short credit of Rs. 7,074/-. We in this regard, direct the Assessing Officer to examine the IT(TP)A No.553/Bang/2022 Autodesk India Pvt. Ltd., Bangalore Page 18 of 18 claim of the assessee based on evidences and grant credit of taxes deducted at source accordingly. Needless to say that the assessee be given an opportunity of being heard.
13. Ground no.6 is consequential not warranting any separate adjudication.
14. In result the appeal of the assessee is partly allowed.
Order pronounced in the open court on 9th Feb, 2023.
Sd/- Sd/-
(N.V. Vasudevan) (Padmavathy S.)
Vice President Accountant Member
Bangalore,
Dated 9th Feb, 2023.
VG/SPS
Copy to:
1. The Applicant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR, ITAT, Bangalore.
6. Guard file
By order
Asst. Registrar, ITAT, Bangalore.