2013 (8) TMI 947 - AT - Income Tax

Depreciation on goodwill - Held that - Claim of depreciation on goodwill, intangible asset, allowed by the decision of ITAT in assessee s own case for AY 2004-05 & 2005- 06 wherein held that Goodwill is an asset under Explanation 3(b) to Section 32(1) of the Act

Summary

Issues:
- Appeal against order of CIT(A) for AY 2002-03, 2006-07 & 2007-08
- Reduction of loss declared by the appellant
- Claim of depreciation on goodwill as intangible asset

Analysis:
1. The appeals were filed against the CIT(A)'s order for the assessment years 2002-03, 2006-07, and 2007-08. The appellant raised common grounds challenging the reduction of loss declared and claiming depreciation on goodwill as a valuable intangible asset under Section 32 of the Income Tax Act. The appellant contended that the CIT(A) erred in denying the allowance of depreciation on goodwill.

2. The ITAT examined the issue and referred to a previous decision in the assessee's own case for AY 2004-05 & 2005-06. In that decision, the ITAT had held that "Goodwill" is an asset under Explanation 3(b) to Section 32(1) of the Act. Citing the decision of the Hon'ble Apex Court, the ITAT vacated the findings of the CIT(A) and directed the AO to allow the claim of depreciation on goodwill. Consequently, the ITAT allowed the appellant's appeal based on the precedent set in the earlier case.

3. Relying on the precedent and the decision of the ITAT in the assessee's previous case, the ITAT in the current case directed the Assessing Officer to allow the claim of depreciation on goodwill. The ITAT upheld the appellant's contention that goodwill qualifies as an intangible asset eligible for depreciation under the Income Tax Act. Therefore, the appeals of the assessee were allowed, and the claim for depreciation on goodwill was accepted.

4. In conclusion, the ITAT pronounced the decision in favor of the appellant, allowing the appeals and directing the Assessing Officer to permit depreciation on goodwill as claimed by the assessee. The judgment emphasized the recognition of goodwill as an asset for depreciation purposes, in line with the legal provisions and precedents cited during the proceedings.