Everllence India Pvt. Ltd. v. PCIT

Case snapshot

Sections / provisions: 263; 32

Questions before the Court / Tribunal

• Merger goodwill opening WDV and revision: The reported ruling concerns section 263 revision of depreciation on opening goodwill arising from an earlier merger. It reportedly rejects revision merely because the successor officer would have preferred additional verification.

Material facts and background

Brief facts of the case are that the assessee is a Private

Limited company engaged in the business of manufacturing activity of assembling of Diesel Engines and Steam Turbines for various Marine and Power Plant applications. Income of Rs.62,26,88,510/- declared in the return of income for A.Y. 2018-19

u/s.143(1) of the Act. Thereafter, the assessee’s case has been

ITA No.1339/PUN/2025 Everllence India Private Limited

selected for scrutiny under CASS for the following four reasons:

Claim of any other amount allowable as deduction in Schedule BP

International Related Party Transactions in respect of Intangible property

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

On the other hand, ld. Departmental Representative

Court / Tribunal analysis and reasoning

written submissions filed before ld.CIT(A) and also referred to the paper book running into 219 pages and submitted that the depreciation has been claimed on the opening written down value (WDV) of the Goodwill which has been created in the books in the preceding financial year. Therefore, ld. Assessing Officer has rightly allowed the claim of depreciation on WDV of Goodwill. He also submitted that the assessment proceedings were carried out for the specific reasons (mentioned supra) and therefore there was no jurisdiction with the Assessing Officer to deal with the other issues. As regards the warranty expenses is concerned, he submitted that the provision made during the year has already been added back to the income and the assessee has only claimed the actual amount of warranty expenses incurred during the year as against the income for the year and which is much lower to the provision of warranty expenses. He therefore stated that the revisionary proceedings deserve to be quashed. 6.

record placed before us. We find that the provision of Section 263 of the Act has a direct bearing on the issue raised before

us, therefore, it is pertinent to take note of this section which reads as under: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,(a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include(i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer...

7.1. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would...

during F.Y. 2017-18 relevant to F.Y. 2016-17 has been allowed to the assessee and the issue of creation of such Goodwill and the depreciation thereon is not pending before the Revenue authorities at any stage as has been claimed by the ld. Counsel for the assessee. Now once the claim of creation of Goodwill and the depreciation charged thereon in the first year, i.e. F.Y. 2016-17 has been accepted by the Revenue authority, then during the year under consideration, there is opening balance of written down value on which depreciation has been claimed @25% as provided under the Act. Audited balance sheet and Tax Audit report have been e-filed in which the claim of the assessee has been examined by the Auditors and therefore ld. Assessing Officer had no reason to suspect the depreciation claimed on the opening written down value. 9.

Gera Developments Pvt. Ltd. Vs. PCIT (supra) referred and relied on by ld.DR is concerned, we find the facts in that case are totally different because in that case the total written down value of the Goodwill has been impaired to Nil amount but the assessee claimed depreciation as per the Income Tax Act on the written down value of the Goodwill. So on one hand there is total impairment of Goodwill and the asset has been

Operative decision and relief

issue of warranty expenses also, the order of the Assessing Officer cannot be said to be erroneous and prejudicial to the interest of Revenue. 11. To conclude, we are of the considered view that ld. PCIT failed to assume correct jurisdiction u/s.263 of the Act for the issues referred in the show cause notice and in light of our observations made hereinabove we quash the impugned order u/s.263 of the Act and the assessment order dated 30.06.2022 being neither erroneous nor prejudicial to the interest of Revenue is hereby restored to its original place. Grounds of appeal raised by the assessee are allowed. 12. In the result, the appeal of the assessee is allowed. Order pronounced on this 09th day of March, 2026.

Authorities and precedents appearing in the judgment

• Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following
• Rampyari Devi Saraogi v. CIT
• ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Merger goodwill opening WDV and revision. The operative result is classified as Remanded Or Restored. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Merger goodwill opening WDV and revision. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

Related Finin2min guidance