AI Insights
Mylan Laboratories Limited filed a writ petition under Article 226 of the Constitution of India challenging a draft assessment order issued by the Additional Commissioner of Income Tax, which disallowed depreciation on goodwill for the Assessment Year 2018-19. The petitioner argued that the order was contrary to a previous decision by the Income Tax Appellate Tribunal and a Supreme Court judgment, both favorable to the petitioner. The respondents contended that the writ was premature as the draft order had not attained finality and was subject to review by the Dispute Resolution Panel. The court highlighted the importance of following judicial precedents and the binding nature of Supreme Court decisions, regardless of the department's appeal against them.
Appeal Details
Counselvise Citation
[2022] 140 COUNSELVISE.COM (IT) 798662 (HC-TELANGANA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
04-01-2022
Assessment Year
misc
Judgement Text
"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (SPecial Original Jurisdiction) TUESDAY, THE FOURTH DAY OF JANUARY TWO THOUSAND AND TWENTY TWO THE HONOURABLE SRI JUSTICE UJJAL BHUYAN AND THE HONOURABLE SMT JUSTICE P.MADHAVI DEVI PRESENT tTto NO: 2 279 F 202 WR TPE Between: lvlvlan Laboratories Limited. Plot No 564/4/22 Road No 92'.Jubilee Hills' Hyderebad' 500096 Tetangan\". R\"pr\"s\"ntJi'iv\"'ul.iinJ*eo- i\"presentative [vls. sarada Kalyani Bhagawati ...PETITIONER The Additional / Joint / Deputy / Assistant Commissioner' of lncome Tax/ lncome- ##[Jilfl \"Jg,5s\":$Jnf'3\",i:i\"\"'*$:?*'f ilt8r?xDepartment The PrinciDal Chief Commissloner of lncome Tax NationalFaceless Assessment ae\"ni;,'i#;.; i-a, oepa.tment]b-erni +ir' Ftoot' c-Block' s P N'l civic center' Delhi - 110001 . ANO 1 2 ...RESPONDENTS Petition Undgi Article 226 of the Constitution of lndia praying that in the \"ii\"r.\"t\"\"\"J\" stated in tre affiiavit filed therewith' the High Court may be pleased to issue (a) writ of mandamus /-prohibition or any other appropriate writ' order or direction quashing the 'fm['gneO Ordel no, .IIBAIAST lF 114401?02'l- 2211035972812(1 aarld ZAtOstZdil\" paiseA OV Respondent No l (b) issue a writ of certiorari / mandamus proniOition.or any other ippropriate writ' order' or direction to Respondent No. 1 to pass u .p\"'ft'ng orOer Oeiting with-all the obiections raised by the Petitioner (c) Grant tne uiiiierii' retief as priyed for by the Petitioner and d Grant. IA NO: oF 2021 1 Petition under section 151 cPC praying that in the circumslances stated in i# riilo*,iiir\"o in support of ihe petition -thd High Court may be pleased to siay iir\" \" \"p\";rii\"\" of the r.ouqnSo order dated 28togl2o21 bearing No IrBA/AST/F/144C tZOZt-ZzloSidtietzlr 1 p\"..\"0 by Respondent No 1' till the ;l;;;\", of the presenr *r.it - pltrtion and pass an order of interim in junction' |.\".i-\" \"g the responoents, lheir officers employees subordinates agents or any ;;;;;';;;:\";; \"iiins o, claimins to act undei them from lakins anv sleps in anv manner whatsoeu\", in pur\"urnlS ot tn\" trprgn\"o order passed for AY 201 8-19 by ii\".p\"\"o\"\"i No.1 pending disposal of the present writ petition' Counsel for the Petitioner : SRI'GANOHAM DURGA BOSE counsel for the Respondents : sRl.J'V'PRASAD (SC FOR lNcoME TAX) The Court made the following ORDER I I JUDGMENT AND ORDERT eet Hon'bte Sr i Justice Uijat Bh van) Heard Mr. Eashwar, leamed Senior Counsel for the petitioner andMr.Prasad,leamedStandingCounselforRevenue'appearingfor the respondents. 2. The matter was heard on 23.12'2021 and yesterday was fixed for delivery of judgment. For unavoidable circumstances' judgment could not be delivered yesterday and is now being dictated in the open Couft. 3. By filing this petition under Article 226 of the Constitution of India, petitioner seeks quashing of order ciated 28 09 2021 passed by respondent No.l and fufiher seeks a direction to respondent No'l to pass a speaking and reasoned order dealing with all the objections raised by the Petitioner. 4. Petitioner is a company engaged in the business of manufacturing active pharmaceutical ingredients' finished dosage formulations, injectable formulations, besides conducting research and development activities. It is an assessee under the Income Tax Act' l96l (briefly,'the Act' hereinafter')' AND THE HONOURABLE SRI JUSTICE P' MADHAVI DEVI Writ Petition No.26279 of 2021 ( I wp -2627 g _2o2 5. For the Assessment year 201g-19, petitioner filed retum of income on 27 .ll .2018 declaring loss of Rs.45g,2 6,55,237.00. The case of the petitioner was selected for scrutiny under the Computer Aided Scrutiny Selection (C.A.S.S.) system of the Income .fax Department. 6. Pursuant thereto, notice dated 23.09.2019 was issued to the petitioner under Section 143(2) of the Act which was responded to by the petitioner vide its letters dated 15.10.2019 and 20.07.2020. Further, notice dated, 10.12.2020 was issued by respondent No.l to the petitioner under Section 142(l) of the Act. This was also respondecl to by the petitioner on 24.12.2020. 7, Petitioner was asked to justifz liability of depreciation on goodwill by further notices dated 13.09.2021 and 24.08.2021 issued under Section I42(1) ofthe Act. These notices were again responded to by the petitioner vide letters dated 19.0g.2021 and 26.0g.2021. 8. Finally, show-cause notice was issued to the petitioner by the respondent no.1 on 16.09.2021 calling upon the petitioner to show- cause as to why the proposed variation should not be made as per the draft Assessment Order (copy of which was enclosed with the show_ cause notice). Petitioner was asked to file its response on or before 2t .09.202t . 9. Owing to the shoft period lor submitting response i.e., five days, petitioner submitted executive summary of its responses on L UB,J & PMD,J wp_26279_2021 20.09.2021 calling upon respondent No.l to drop the show-cause notice while accepting the explanation of the petitioner' It was pointed out that in the draft Assessment Order respondent no l had erred in seeking to disallow depreciation on goodwill' It was further pointed out that the Transport Pricing Officer in his order for the same Assessment Year, i.e., 2018-19 had treated depreciation on goodwill as 'operative expenditure' of the petitioner, while computing the arm's length price of the intemational transactions undertaken by the petitioner. It was contended that if the very same depreciation on goodwitl was disallowed by respondent No.1 it would lead to an anomalous situation. 10. Pursuant to further notice dated 21.09.2021 of respondent no 1, petitioner filed detaited submissions on 23 -09.2021 and also rbquested for a personal hearing. Personal hearing was granted through video- conferencing on 27 .09.2021 at 03:00 p.m. 11. Thereafter,. respondent no.1 passed the impugned order dated 28.09.2021 which has been impugned in the present Writ Petition' The impugned order is a draft Assessment Order under Section l44C of the Act. It is dated 28.09.2021. 11.1 After elaborate discussion, depreciation claimed on goodwill to the extent of Rs.1247,45,3i,301.00 was disallowed whereafter the total income was computed at Rs.3071,11,53,860.00, further f- recording that penalty proceedings would be initiated separately under Section 270A ofthe Act for under-reporting of income. 12. The impugned challenge has been made on the ground that resporldent No.l while passing the draft Assessment Order had completely overlooked the decision in the petitioner,s own case passed by the Inconte Tax Appellate Tribunal, Hyderabad .A, Bench, Hyderabad in I.T.A.No.2335llilD./2018 for the Assessment year 2014-15 dated 1 3. 1 1 .20 1 9. Further conrention of the petitioner is that such disallowance of depreciation of goodwill is contrary to judgment of the Supreme Coufi in C.I.T. vs. SMIFS Securities Ltd,r. 13, When the matter was being heard, this Courl passed an order on 29.10.2021 that the Dispute Resolution Panel shall not pass final order on the draft Assessmenr Order, which order has been continued since then. 14, Respondents have filed counter-affidavit contending that the Writ Petition is premature, it being directed against the draft Assessment Order. Even after the draft Assessment Order is finalised, there is a hierarchy of appeals for the petitioner to avail of if it is aggrieved. Interference at this stage would not be justified. That apart, disallowance of depreciation on goodwill has been justified on merit. ' 1zo rzl :.tr rrn :oz 1sc1 wp_26279_)021 I UB,J & PMD,J wp _2627 9 -2021 15. In the reply-afflidavit, petitioner has reiterated the averments made in the Writ Petition besides contending that the impugned draft Assessment Order is in contravention of the principles of natural justice and on the face of binding judicial precedents. 16. Mr. Eashwar, leamed Senior Counsel, appearing ior the petitioner, has taken us to paragraph No.4.7.6 of the draft Assessment Order to point out that respondent No.l has acted in a manner contrary to established norms and judicial discipline. Though he is bound by the order of the jurisdictional Income Tax Appellate Tribunal, he has deliberately decided to disregard the same. Not only that, respondent no.l has also tried to distinguish the binding precedent olthe judgment of the Supreme Court in SMIFS (1 supra). Referring to Article i41 ol the Constitution of India, he submits that the decision of the Supreme Court is binding on all authorities within the length and breath of the country and all such authorities are bound to give effect to the decision ofthe Supreme Court. 17. Learned Senior Counsel has submitted two volumes of case laws in support of his submissions. In particular, he has referred to the decision of the Supreme Court in Calcutta Discount Co, Ltd. Vs. lncome Tax Officer2, more particularly, to paragraph No.26 thereof and submits that where an action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Court will issue ' r96r(2) s.c.R.24r l, I wp_26279_lo:1 appropriate orders or directions to prevent such consequences. He has also placed reliance on a recent decision ofthe Bombay High Coufi in B.A. Continuum India Pvt. Ltd. Vs. Union of India3 and submits therefrom that violation of principles of natural .justice would render an order non est in the eye of law. In such an eventuality, the right of appeal would not be so much a true right of appeal as a corrected remedy. In that case, Bombay High Court had not only set aside the order in original while remanding the matter back for fresh decision, but had also directed the Commissioner of Service Tax, Mumbai to assign another competent officer to deal with the matter on remand. 18. Mr. J.V. Prasad, Ieamed Standing Counsel for Income Tax Department, submits that the Writ petition is premature as it is directed only against a draft Assessment Order. The assessment proceeding has not yet attained finality. The draft Assessment Order would be subject to scrutiny by the Dispute Resolution panel. Therefore, at this stage, no interference is called for. He has also filed a compilation oljudgments wherefrom he has referred to the case of Commissioner of Income-Tax vs. Chhabil Dass Agarwala to contend that the High Court would not interfere in writ jurisdiction if there is an adequate and efficacious alternative remedy available to the person aggrieved and he has approached the High Court without availing such alternative remedy. I (2021) 85 C.S.T. tq9 r Bonrha)) ' (201i) ls7 LT.R. 157 (S C.) { UB,J & PMD,J wp _26219 _2021 19. Responding to the above contention of Mr' J'V' Prasad, Mr. Eashwar, leamed counsel for the petitioner has referred to Section 144C of the Act, more particularly, to Sub-section (2) thereof, and submits that the Dispute Resolution Panel does not have the mandate to set aside the draft Assessment Order and remand the same to the Assessing Officer fbr fresh consideration. He has also highlighted what was extracted by the Bombay High Courl in B'A' Continuum (3 supra) the observations of Megarry, J in Leary Vs. National Union of Vehicle Builderss lhar \"if the rules and the law combine to give the member the right to a fair trial and the right of appeal, why he should be told that he ought to be satisfied with an unjust tial and a fair appeal\". He therefore submits that the present is a fit case where this Court should intervene in the matter and grant the reliefs to the petitioner. 20. Submissions made by learned Counsel tbr the parties have received the due consideration ofthe Court. Zl, As noticed above, what we have before us is a draft order of assessment passed under Section l44C of the Act which is under impugnment. : I ,22. Before we deal with the said order, it would be apposite to r, adveft to the provisions of Section l44C ol the Act. This provision deals with reference to Dispute Resolution Panel and was inserted in the Act by the Finance (2) Act,2009 with retrospective effect from 5 (l9l l) 1 ch.34 I S;--,, , - . I wp_26279 _2 01.04.2009. Since this provision is germane to the //s before us, the same is extracted in its entirety, as under: ' 144C. (1 ) The Assessing Officer stalt, notwithstand.ing anAthing to the contrary contained tn this Act, in the first instance, foru.tard a draft of the proposed order of assessment (hereafter tn thi_s section refeffed. to as the draft order) to the eligible assessee if he proposes to make, on or after the jst dag of October, 2OO9, ang uartation tn the income or loss retumed uhich is prejudicial to the interest of such assessee. (2) On receipt of the drafi order, the eligible assessee shall, wlthin thitA dags of the receipt bg him of the dlafi. order,_ (a) Jite hb acceptance of th_e uaiations to the Assesstq Officer; or (b) file his objections, if ang, to such uari.ation uith- (i) the Dispute Resolution panel; ond. (ii) the Assessing Officer (3) The Assessing Offtcer shall camplete the assessment on the basis oj the drafi order, if- @) tfLe assessee intimates to the Assessing Olficer the acceptance of the uariation; or (b) no objections are receiued uithin the peiod_ specified in sub-section (2). (4) The Assessing Olfcer sho,ll, notuittLstand.ing angthing contained in section 153 or Section 153E., pass the essessment order under sub-section (3) wtthtn one manth from the end of the month in uhich,- / (a) the acceptance is receiued; or 9 (b) the peiod of Jiting oJ objections under sub-section (2) expLres 6) fhe DisPute Resolution Panel sho'll, in a cqse where ang objection ts receiued' und.er sub-section (2), i'ssue such directi.ons, as it thinks fit, for the guidance o1 the Assessing Officer to enqbLe him to complete the assessment (6) The DisPute Resolution Panel shall issue the directions referred to in sub- section (5), afier con'sideing the following, nameLg:- (a) drafi order; (b) objections rtbd bA the assessee; (c) euidence furnished bg the assessee,' (d) repon, if ang, of the Assessing Officer, Valuation Officer or Transfer Prtcing Officer or ana other authoitA; (e) records relating to the drafi order; (fl euidence collected. bg, or caused to be collected bA, it; and (g) result of ang enqtiry made bg, or caused to be made bA' it. (ct) make such further enquiry, as it thinks fit; ar (b) cause ang further enquiry to be made bA anA income-tax authoritq and report the result of the same to it (8) The Dtspute Resolution Panel mag confrm' reduce or enhance the uaiations proposed in the drafi order so, houteuer, that it sha,lt not set aside ang proposed urrriation or issue ang direction under sub'section (5) for furTher enquiry and passing of the assessment order' lqxptanqtion - For the remoual of doubts, it is herebg declared. that the power of the Dispute Resolution Panel to enhdnce the uariation shall include and shqll be deemed ahaags to taue included the power to consider anA matter arising out of the assessment proceedings relating to the d.raft order, notuithstanding that such matter was raised or not bg the eligible assessee./ t (7) The Di.spute Resolution Panel mag, before issuing anA directions rekrred to in sub-section (5I- UB,J & P I 4 D,J wp 26279-2a21 l ) t- wp_26279 -2o (9) If the members of the Dispute Resolution panel differ in opinion on ang point, the point shatt be decid.ed, according to the opinion of the majoritg of the members . (10) Euery direction i.ssued. bg the Dispute Resotution panel shall be btnding on the Assessing Offtcer. (1 1) No direction under sub-section (S) shall be issued unless an opportunitg of beitg heard is gtuen to the assessee and_ the Assessing Offi.cer on such directions which are prqudicial to the interest of the assessee or the interest of the reuenue, respectiuelg. (12) Na dircction under sub section (5) shall be issued. afier nine months from the end aJ the month in uhich the drajt order is foroarded to the eligible assessee. (13) Upon receipt of the directions issued. und_er sub_section /5/, lhe Assessing Officer shatt, in conformitg with fie directions, complete, noturith.standing anAthing to the contrary contained in section 153 or Section jS3B, the assessmen, uithout prouiding ang further opportunitg of being heard. to the assessee, withi\"n one month from the end, of the month in whtch such direction i.s receiued. (14) The Board maA make ntles for the purposes of the effi.ctent functioning of the Dlspute Resolution pqnel and. expeditious disposal of the objecttons ftted. under sub_section (2) bg the eligible assessee. [(14A) Tlw provisions of this sectton shqll not (lpplg to ang assessmenl or reassessment order passed bg the Assessing Ofrt.cer with the pior approuctl of the lprtncipaL Commtsstoner orl Commissioner as prouided in sub-section (12) of section 144BA.l [(laB) The Central Gauernment maA make a scheme, bA notifi.cation in the Ofrt.cial Gazette, for the purposes of issuance of directions bA the dispute resolution panel, so as to impart greater effi.ciencg, transparencg and accountabilitg bu- I l ::ll:: (a) eliminQting the interface between the dispute resolution paneL and the etigible @ssessee or anA other person to the ertent technologicallg feasible; (b) opamising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a mechanbm uith dgnamic jurisdiction for issuance of d.irectiorLs by di.spute resolution paneL lG4C) The Central Gouemment maA, for the purpose of giuing effect to the scheme made under sub-section (laq' bg notification in the Offciat Gazette direct thctt anA of the prouisions of this Act shatl not applg or shall applg tt'tith such exceptions, mod.ifi.cations and adaptations as mag be spectfied in the notification : Proaided that no d.irection shall be issued afier the 31n daA of March, 2022. (14D) Euery notification issued under sub-section (148) and sub-section (14C) sha1, as soon as mag be ctfter the ruotifrcation is issued, be taid before each House of Parliament.l (15) For the purposes o/ this section,- UB,,J & PMD,,] wp_25279_2021 (a) .Dispute Resolution Panel\" means a collegium compising- 'oj threi Pincipal Commissioners or three Commissioners of income-tax constitllted bA the Board for this purpose; (b) \"eligible assessee\" medns,- (i) anA person in whose case the uariatton rekned to in sub' section (1) grises as a consequence of the order of the Trqnsfer Picing Officer passed under sub-section (3) of section 92CA; and (ii) ang non-resident not being a companA' or ang foreign mmpang,' 23. From a perusal ofthe above, we find that as per Sub-Section (1) the Assessing Officer shall in the first instance forward a draft of the proposed order of assessment to the eligible assessee if he proposes to make any variation which is prejudicial to the interest ol such ) ASSESSEC I wP _26279 _2 24. Sub-Section (2) says that on receipt of the draft Assessment Order, the eligible assessee shall within thirty (30) days on receipt by him of the draft order either file his acceptance of the variations proposed or file his objections to the Dispute Resolution panel or to the Assessing Officer. 25. As per Sub-Section (5), the Dispute Resolution panel shall, in case where any objection is received under Sub-section (2), issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. While issuing such directions, the Dispute Resolution panel shall consider the factors enumerated in Sub-Section (6). It can also make enquiry or fi.rther enquiry before issuing any such directions. 26, This brings us to Sub-Section (8), as per which, the Dispute Resolution Panel rnay confirm, reduce or enhance the variations proposed in the draft assessment order. However, it shall not set aside any proposed variation or issue any direction under Sub-Section (5) fbr fuither enquiry and passing of the Assessment Order. As per the Explanation below Sub-section (8), the power of the Dispute Resolution Panel to enhance the variation shall include and shall always be deemed to have included the power to consider any matter arising out of the assessment proceedings whether such matter was raised or not by the eligible assessee. I I t :: 13: : UB,] & PMD,,) wp_26279_2021 21, Sub-section (10) makes it clear that every direction of the Dispute Resolution Panel shall be binding on the Assessing Officer' Sub-section (13) says that upon receipt ofthe directions issued by the Dispute Resolution Panel under Sub-Section (5), the Assessing Officer shall in conformity with such directions complete the assessment. 28. \"Dispute Resolution Panel\" is defined in Sub-Section (15)(a) to fiean, \"a collegium comprising of three Principal Commissioners or three Commissioners of Income-tax constituted by the Board for this purpose\". 29, From the above, it is evident that Dispute Resolution Panel is a high-powered body constituted under the Act as an oversight body for the guidance of the Assessing Officer. The object behind constitution of Dispute Resolution Panel appears to be to ensure that the assessment proceedings are kept within the bounds of law while adhering to the principles of natural justice. Though the Assessing Offrcer has been empowered under Section 144C to frame draft assessment order, the same is however subject to confirmation by the Dispute Resolution Panel. 30. We have already noticed that under Sub-Section (5), the , Dispute Resolution Panel has the mandate to issue directions lor Buidance of the Assessing Officer while framing the assessment and under Sub-Section (8) the Dispute Resolution Panel may confirm or I wp _26 179_2 reduce or enhance the variatior.rs proposed in tl.re draft assessment order. Both Sub-Sections (5) and (8) have to be read together, and from a conjoint reading of the two provisions it is clearly discemible that the final say, insofar assessment is concemed, rests with the Dispute Resolution Panel. This has been made further clear by Sub_ Section (10) which says that every direction issued by the Dispute Resolution Panel shali be binding on the Assessing Officer. The words used in Sub-Section (8), viz., confirm, reduce or enhance which lays down the broad frarnework of the power of the Dispute Resolution Panel must be given their full and complete meaning so as to give effect to the provisions of Section 144C. Giving a restricted meaning to the above words would intrude into, rather curtail, the jurisdiction of the Dispute Resolution panel ,\"vhich could not have been the intent of the Legislature. While Dispute Resolution panel shall not set aside any proposed variation, it certainly has the power and.jurisdiction to reduce the variations proposed in the draft orcler. 31. Having noticed the above, we may now advert to the proposed variations made in the draft assessment order highlighted by the petitioner. 32. Paragraph No.4.7.6 of the draft assessment order reads as under \"4.7.6 Shou.t case notice u..tr.s issued to the Assessee on. 16.09.2021 to tDhich it replied on 20.09.202j and 23.09.2021. Also since assessee had. d.emand_ed. I ' I ::15:: personal hearing, therefore the same u.tas conducted through Video Conference on 27.09.2021. TIE contentions and c'rguments of the assessee are considered and the final order is being issued u.tith follouing remarks : (a) It is reiterated that slnce the appeal in gour case is pending [n Hon'ble Htgh Court os the department hos not accepted the judgment of Hon'ble ITAT, therefore the issue of addition has not Aet attained frnatitA. It is contended by Assessee that the draft order disregards all the factuol findings bg Hon'ble Tibuna| being the highest fact finding authoritA. Hou.teuer, it is to be noted that Hon'ble ITAT in its order has onlg mentioned the arguments presented by Ld. DR such cs those on net asset uolue being negatiue and outgo in the form of pagmenls to Sr. Manager5 hou.teuer it ha,s not specificalty commented on them / gaue a different finding. The arguments formed bg Hon'ble ITAT in reaching a conclusion tuhich is fauourable to the assessee has been appealed before the Hon'ble High Courl and hence cannot be taken as final. (b) Assessee has relied on Hon'ble Supreme Court judgment in Smfs Securities cctse. Howeuer, as far as ,his aase is concerned, the onlg issue for consideration uas uthether goodtLtitl is at7 asset uithin the meaning of Section 32 of the Income Tax Act which the coutl ansuered in afJinnotiue. Houeuer, it mag be noted that that the decision in Smfs Securities tuas without considertng the prouisions uthich uere releuant to the issue on hand, such as prouiso 6 to Sectton 32, as the same Luere not argued before the Court. Hence, the deciston of Hon'bte Courl in Smfs Securltles case cannot be ertended on the points Luhich uere not argued or eualuated at au. In other words, while the court hrzs decided that goodu.till is a deprec[able asset, it is to be noted that there u)as no cofttention before the I UB,J & PMD,J wp _26)7 9 -2021 I wp_26279 2 court as to Luhether difference aising out of amalgamalion was goodrDill eligible for depreciation. (c) 1n lls submissiorls, assessee has also relied on Hon'ble ITAT judgment in its own case for AY-2014-15. A fi.ne reading of Hon'ble ITAT judgment in assesse's case for AY 2014-15 reueols that the Tribunal has not specificallg concluded on tLrc applicabilitg of sixth prouiso to Section 32(1) of the Act in case of goodu.till aising on amalgamation. The case of United Breu.teies though distinguished bg the Tribunal on facts but without anA detailed discussion on appticabilitg of sirth prouiso to Section 32(1) of the AcL (d) It is held by ITAT in assessee's case for AY 2O14- 15 that since the transaction LUas between unrelated parties and excess paAment uas made, tlrcrefore excess paAment utas totuards nothing but goodtuill. The Tibunal did not disanss tlrc correct ualue of goodutill on u,thich depreciation is claimed. Thus, the Tibunal has not made anA comment on the ualuation reporl of the assessee (e) It has been contended that Memorandum to Finance Act 2021 enuisages disallou.tance of depreciation on goodu.tilt in some situations u.thich is not the case of taxpayer. Hou.teuer, it is to affirm that Finance Ac| 2021 has made fetu amendments u-thich clearly has the effect of disallouing depreciation i.n any case. Had the intent of legislature been to allow depreciation [n some cira)mstances of goodu-till, the same utould haue been reJlected in amendments made to the Act. Anyhou..t, this in no uaq meon that the Finance Act 2021 is being made applicable to proceedings for the releuant AY. This argument is ' merelg meant to suggest that tfle AmEndfiLent to Finance Act, 2021 is intending to disallou-t depreciation on gooduill in all cases. I I ::17:: UB,] & PMD,.] wp_26279_2021 (J) Moreouer, the Income Tox Act 1961 has uaious prouisions uhich, uhen read comprehensiuely, iead to the conclusion that if certain condittons are satisfied tn amalgamation, it has to be treated os neutral for tax purposes. If depreciation on goodwill is altowed in tox neutral amalgamations, then the entire intent of the statute, as is euident from the comprehensiue reading of the prouisions, tailt get uiotated. The oma[gamation utill not remain tax neutra[ if deprectatiotl on goodwill is alloued- merelg because it aises out of accounting entries as is required bg the Accounting Standards' (g) As regards double addition made due to TPO adjustment and disaltouLance made in Assessment Order, it is brought out that TP adjustment is being made on book profits after consideing the depreciation that ltas been ctaimed in books. Hou;euer, disallou.tance in Assessmenl Order is being made in relation to d.epreciation claimed bg the Assessee by consideing the sc,me as tntangible Clearlg, the rate of depreciation / amortisation is dffirent as per Accounting Standards and os per Income Tax Act. In uiew of aboue discussions, depreciation cLaimed on Goodrttitt dt Rs.414'62,02 '0O4 00 in respect of is disall.outed.\" 33. The approach of the Assessing Officer, as manifest in Clauses (a) to (d) as extracted above, to our mind is problematic' lnsofar the decision of the Income Tax Appellate Tribunal, Hyderabad 'A' Bench, Hyderabad in respect of petitioner's own case lor the Assessment Year 2014-15 is concemed, the Assessing Officer has stated that the Department has not accepted the said decision. The views of the Income Tax Appellate Tribunal is not acceptable to the Department, and therefore, it has been appealed before the High I 1t wP _26279_ Court. As such, the issue of addition of depreciation claimed on goodwill has not attained finality. 34. We are afraid such a. view taken by the Assessing Officer can be justified. Ratlrer, it is highiy objectionable for an Assessing Officer to say that decision of the Income Tax Appellate Tribunal is not acceptable; and that since it has been appealed against, the issue of allowability of depreciation on goodwill has not attained finality. Unless there is a stay, order / decision of the jurisdictional Income Tax Appellate Tribunal is binding on all income tax authorities within its .jurisdiction. 35. In Union of India vs. Kamlakshi Finance Corporation Ltd.6, Supreme Court held and reiterated that the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order ofthe appellate authority is not acceptable to the department, which in itself is an objectionable phrase, and is the subject matter of an appeal can be no ground for not following the appellate order unless its operation has been suspended by a competent cour1. If this healthy ruie is not followed, the result will only be undue harassment to the assessee and chaos in administration of the tax laws. i 6 1992 Supp (l) S.C.C.443 t' : i l9:: UB,] & PMD,,] wp_25279_2021 36. Following the above decision, Supreme Court again tn Collector of Customs vs. Krishna Sales (P) Ltd'7, reiterated the proposition that mere filing of an appeal does not operate as a stay or suspension ofthe order appealed against lt was pointed out that ifthe authorities were ofthe opinion that the goods ought not to be released pending the appeal, the straight-forward course for them is to obtain an order ofstay or other appropriate direction lrom the Tribunal or the Supreme Court, as the case may be. Without obtaining such an order they cannot refuse to implement the order under appeal' 37, Following the above decisions of the Supreme Court, a Division Bench of the Bombay High Coutt in Canesh Benzoplast Limited vs. Union of India8 held that non-compliance of orders of the appellate authority by the subordinate original authority is disturbing to say the least as it strikes at the very root of administrative discipline and may have the effect of severely undermining the efficacy of the appellate remedy provided to a litigant under the statute. Principles ofjudicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. 38. This principte has been reiterated by the Bombay High Couft in Himgiri Buildcon & Industries Limited Vs. Union of India, decided on February 08, 2021 . 7 1994 Supp (3) S.C.C. ?3 3 2o2o (374) ELT 552 tt< I I wp_25 279 _) 39. Therefore, the stand taken by the Assessing Officer that since the decision of the Income Tax Appellate Tribunal in the case of the petitioner itself for the assessment year 2014-15 has been appealed against the issue in question has not attained finality, is not only wrong but is required to be deprecated in strong terms being highly objectionable. 40. The second view expressed by the Assessing Officer vis_d_vis the decision ol the Supreme Court in SMIFS (l supra) is still more problematic. It is not open to the Assessing Olficer to tty to evade from the binding effect of a Supreme Court decision by trying to find out 'distinguishing features'. Though unnecessary, we are still compelled to refer to Article l4 1 of the Constitution of India which says that the law declared by the Supreme Court shall be binding on all Courts within the teritory of lndia. Therefore, it is the bounden duty of all autl,orities whether administrative or quasi judicial or judicial to follow the law declared by the Supreme Court. 41. While we agree rvith the leamed Standing Counsel that the draft Assessment Order has not yet attained finality as it still has to be placed before the Dispute Resolution panel and therefore, in the circumstances, we feel that interfering at this stage may not be justified as it would pre-empt decision-mai
Other Referred Cases
C.I.T. vs. SMIFS Securities Ltd, Union of India vs. Kamlakshi Finance Corporation Ltd, Collector of Customs vs. Krishna Sales (P) Ltd, Canesh Benzoplast Limited vs. Union of India, Himgiri Buildcon & Industries Limited Vs. Union of India
Laws Referred To
Article 226 of the Constitution of India, Income Tax Act, 1961
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