2015 (10) TMI 1613 - AT - Income Tax

Disallowance of depreciation on goodwill - Held that - Respectfully following the decision of CIT Vs. SMIFS Securities 2012 (8) TMI 713 - SUPREME COURT wherein the doctrin of ejusdem generic is applied and held that the Goodwill is of like nature of intangible asset as prescribed, therefore, we hereby hold that under the totality of the facts and circumstances of the case the assessee is entitled for the claim of depreciation on the DWV of the goodwill for the year under consideration. - Decided in favour of assessee.

Summary

Issues:
Disallowance of depreciation on goodwill.

Analysis:
The appellant contested the disallowance of depreciation on goodwill by the Ld. Commissioner of Income Tax(A) for Assessment Year 2006-07. The Assessing Officer disallowed the depreciation claimed by the assessee, leading to an appeal. The Ld. Commissioner of Income Tax (Appeals) upheld the disallowance. However, the appellant argued that the issue was covered by a previous ITAT order for Assessment Year 2003-04, where depreciation on goodwill was allowed. The appellant provided the Tribunal's order in support. The Tribunal reviewed the facts and found that the issue was indeed covered by the previous order. The Tribunal considered arguments from both sides regarding the nature of goodwill as an asset under Section 32 of the Income Tax Act. The Tribunal referenced relevant case laws, including CIT Vs. SMIFS Securities, to establish that goodwill falls under intangible assets eligible for depreciation. The Tribunal emphasized the principle of ejusdem generic in interpreting the term "any other business or commercial rights of similar nature" in Explanation 3(b) of Section 32(1) of the Act. Relying on precedents like B. Raveendran Pillai case, the Tribunal concluded that goodwill is akin to intangible assets like trademarks and is eligible for depreciation. Consequently, the Tribunal allowed the appeal and deleted the disallowance of depreciation on goodwill for the year in question.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the claim for depreciation on goodwill for the relevant assessment year. The decision was based on the interpretation of goodwill as an intangible asset falling under Explanation 3(b) of Section 32(1) of the Income Tax Act. The Tribunal's decision aligned with previous judgments and established that goodwill is comparable to other intangible assets like trademarks, making it eligible for depreciation. The Tribunal emphasized the consistent application of legal principles and precedents to support its ruling, ultimately granting relief to the appellant and overturning the disallowance of depreciation on goodwill.