DYNASPEDE INTEGRATED SYSTEMS PRIVATE LIMITED,SALEM, TAMIL NADU V. DEPUTY COMMISSIONER OF INCOME TAX, SALEM

ITA 1860/CHNY/2024

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The case involves Dynaspede Integrated Systems Pvt. Ltd., which appealed against the orders of the Commissioner of Income-tax (Appeals) regarding the disallowance of depreciation on goodwill amounting to Rs. 2,74,15,039/- arising from amalgamation. The initial assessments for the years 2013-14 and 2014-15 declared nil income and were later reopened, leading to the disallowance based on the interpretation of the fifth proviso to section 32(1) of the Income Tax Act. The CIT(A) dismissed the appeal due to non-compliance in submitting necessary documents. The Tribunal, after hearing the arguments and reviewing precedents, decided to remand the issue back to the CIT(A) for a detailed examination with specific directions to the assessee to provide all relevant documents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775426 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 04-07-2024
• Other Referred Cases: CIT vs. Smifs Securities Ltd. [2012] 348 ITR 302 (SC), M/s. Pentasoft Technologies vs. DCIT [2014] 41 taxmann.com 120 (Mad.), M/s. Dorma India Pvt. Ltd. vs. ACIT in ITA Nos.1664 to 1666/Chny/2019 (Chennai-Trib.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Assessee Lawyers: NARAHARI NAVAKANTH; C.A
• Keywords: Set aside; Depreciation
• Section: 148; 143(3)

Judgement Text

"आयकर अपीलीय अिधकरण ‘सी’ \u0010ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI मा ननीय \u001bी मनु क ुमा र िग र, \u0010ा ियक सद एवं मा ननीय अिमता भ शु'ा , लेखा सद क े सम) BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI HON’BLE AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA Nos.1860 & 1861/Chny/2024 िनधा =रण वष= /Assessment Years: 2013-14 & 2014-15 Dynaspede Integrated Systems Pvt. Ltd., 136-A, SIPCOT Industrial Complex, Salem – 635 126. [PAN: AAACD 7414N] Vs. The Dy. Commissioner of Income Tax, Circle-1(1), Salem. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीलाथJ की ओर से/ Appellant by : Shri Narahari Nava Kanth, C.A LMथJ की ओर से /Respondent by : Ms. R. Anitha, Addl. CIT सुनवाई की तारीख/Date of Hearing : 17.06.2025 घोषणा की तारीख /Date of Pronouncement : 08.09.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member): These two appeals by the assessee are directed against orders of even dated 07.05.2024 passed by the Ld. Commissioner of Income- tax (Appeals), NFAC Delhi [in short 'the Ld. CIT(A)'] for assessment years 2013-14 & 2014-15. Printed from counselvise.com ITA Nos.1860 & 1861/Chny/2024 Dynaspede Integrated Systems Pvt. Ltd. :- 2 -: 2. In both the appeals facts are identical hence adjudication in ITA No.1860/Chny/2024 for AY 2013-14 will apply mutatis mutandis to ITA No.1861/Chny/2024 for AY 2014-15. 3. The sole issue in the present appeal relates to the assessee’s claim of depreciation of Rs. 2,74,15,039/- on goodwill arising from amalgamation in the hands of the resultant entity, M/s. Dynaspede Integrated Systems Pvt. Ltd. 4. Briefly stated facts of the case are that the assessee is a company engaged in manufacturing engineering products, filed its return of income for AY 2013-14 on 28.09.2013 declaring Nil income. The return was initially processed u/s 143(1) of the Act and subsequently taken up for scrutiny u/s 143(2) of the Act, resulting in an assessment u/s 143(3) of the Act dated 17.03.2016, wherein the reported loss was recomputed. Thereafter, the assessment was reopened by issuance of notice u/s 148 of the Act dated 27.03.2018, and reassessment u/s 143(3) r.w.s. 147 of the Act was completed on 14.12.2018 by the ACIT, Circle-1, Hosur, disallowing depreciation on goodwill amounting to Rs. 2,74,15,039/-. The reopening was initiated based on the interpretation of the proviso to section 32(1) of the Act and the decision of the ITAT Bangalore Bench in the case of United Printed from counselvise.com ITA Nos.1860 & 1861/Chny/2024 Dynaspede Integrated Systems Pvt. Ltd. :- 3 -: Breweries Ltd. The assessee objected to the reopening vide letter dated 15.11.2018, however, the objections were rejected by the AO. It was held that depreciation on goodwill arising from amalgamation was not allowable in view of the fifth proviso to section 32(1) of the Act. Aggrieved by the same, the assessee preferred an appeal before Ld. CIT(A). However, the Ld. CIT(A) partly allowed the appeal and dismissed the ground relating to depreciation on goodwill arising from amalgamation by observing as under: The AR of the appellant was specifically called out to submit the said documentation to decide the issue, but unfortunately it has chosen not to comply to the same. In view of the above non-compliance, it is held that Ld.JAO’s decision was correct, the ground of appeal is dismissed. Aggrieved, assessee preferred an appeal before us. 5. At the outset, the learned Counsel for the assessee submitted that the disallowance of depreciation on goodwill, arising out of amalgamation, by invoking the provisions of the fifth proviso to section 32(1) of the Act, is unsustainable. In support of this contention, the learned AR relied upon the following judicial precedents: I. CIT vs. Smifs Securities Ltd. [2012] 348 ITR 302 (SC); II. M/s. Pentasoft Technologies vs. DCIT [2014] 41 taxmann.com 120 (Mad.); Printed from counselvise.com ITA Nos.1860 & 1861/Chny/2024 Dynaspede Integrated Systems Pvt. Ltd. :- 4 -: III. M/s. Dorma India Pvt. Ltd. vs. ACIT in ITA Nos.1664 to 1666/Chny/2019 (Chennai-Trib.). 6. The learned Departmental Representative, on the other hand, supported the order of the Assessing Officer and prayed for dismissal of the assessee’s appeal. 7. We have heard the rival submissions and perused the orders of the authorities below. We find that on the issue of ‘depreciation on goodwill arising from amalgamation’, the ld. CIT(A) has not given any specific finding as the assessee failed to provide additional documents such as Amalgamation order, Pre amalgamation and post amalgamation financials, Goodwill calculation etc. The assessee also did not dispute these facts as discernible from Sr. No. 32 of the statement of facts filed before us. Therefore, we set aside the issue relating to ‘depreciation on goodwill arising from amalgamation’ to the file of the ld.CIT(A) who will proceed with aforesaid issue a fresh after calling requisite details/documents from the assessee. Needless to say, the ld.CIT(A) will grant proper opportunity of hearing to the assessee before deciding the issue. The assessee is free to file all such documents in support of the issue in question. Further, if the issue in question is decided against the assessee by the ld. CIT(A) then the assessee is entitled to raise legal/jurisdictional grounds again Printed from counselvise.com ITA Nos.1860 & 1861/Chny/2024 Dynaspede Integrated Systems Pvt. Ltd. :- 5 -: before us. The ld. CIT(A) will dispose of the issue keeping in mind the judgments/orders referred supra. 8. Our above order is equally applicable to the ITA No.1861/Chny/2024 for AY 2014-15. 9. In the result, both the appeals filed by the assessee are allowed for statistical purposes. Order pronounced on 08th day of September, 2025 at Chennai. Sd/- Sd/- (अिमताभ शु'ा) (Amitabh Shukla) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member (मनु क ुमार िग र) (Manu Kumar Giri) \u0010ाियक सद / Judicial Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 08th September, 2025. EDN/- आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai /Madurai/Coimbatore/Salem 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF Printed from counselvise.com "