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The Tax Publishers Capita India (P) Ltd. v. ACIT [ITA Nos. 2350 & 2810/Mum/2015, dt. 23-3-2016] : 2016 TaxPub(DT) 2261 (Mum-Trib) Addition under section 69C due to impairment of goodwill on acquisition of a business. Facts The assessee in the business of ITES industry had 4 section 10A eligible units. The assessee acquired one Prudential Process Management services (PPMS) Pvt. Ltd. on a slump sale on as is where is basis for a consideration of Rs. 86.69 crores. The book value of PPMSs business was found to be at Rs. 20.11 crores, the difference was thus disclosed in the notes to accounts as well as good will on acquisition to the tune of Rs. 66 crores approx. Subsequently, the assessee wrote off the entire goodwill as it was found to be worthless out of impairment in the books. While offering income the good will was added back in the return and claimed the entire profit as exempt under section 10A. Assessing officer show caused as to why the good will should not be added under section 69C as unexplained expenditure which was upheld by the Commissioner (Appeals) that the assessee had adopted a colourable method to siphon out money. On appeal the assessee cited that such write off of goodwill was done as per AS 26 of the ICAI. The writing off of goodwill did not bring in any tax evasion structure nor was there any siphoning out of money proved. The adjustment of writing off of goodwill was only a book entry. Thus pleaded the assessee - Held in favour of the assessee that the addition under section 69C could not be sustained.

The Tax Publishers

Capita India (P) Ltd. v. ACIT [ITA Nos. 2350 & 2810/Mum/2015, dt. 23-3-2016] : 2016 TaxPub(DT) 2261 (Mum-Trib)

Addition under section 69C due to impairment of goodwill on acquisition of a business.

Facts

The assessee in the business of ITES industry had 4 section 10A eligible units. The assessee acquired one Prudential Process Management services (PPMS) Pvt. Ltd. on a slump sale on as is where is basis for a consideration of Rs. 86.69 crores. The book value of PPMSs business was found to be at Rs. 20.11 crores, the difference was thus disclosed in the notes to accounts as well as good will on acquisition to the tune of Rs. 66 crores approx. Subsequently, the assessee wrote off the entire goodwill as it was found to be worthless out of impairment in the books. While offering income the good will was added back in the return and claimed the entire profit as exempt under section 10A. Assessing officer show caused as to why the good will should not be added under section 69C as unexplained expenditure which was upheld by the Commissioner (Appeals) that the assessee had adopted a colourable method to siphon out money. On appeal the assessee cited that such write off of goodwill was done as per AS 26 of the ICAI. The writing off of goodwill did not bring in any tax evasion structure nor was there any siphoning out of money proved. The adjustment of writing off of goodwill was only a book entry. Thus pleaded the assessee -

Held in favour of the assessee that the addition under section 69C could not be sustained.