2017 (11) TMI 1835 - AT - Income Tax

Depreciation on goodwill - depreciation not been claimed in the return of income - HELD THAT - On perusal of the above provision of Explanation 5 to Sec.32(1) it is clear that even if the assessee had not claimed any deduction in respect of depreciation in computing the total income, the deduction is allowable as per the provisions of S.32(1) . We, therefore, do not see any valid ground to interfere with the findings given by the Ld.CIT(Appeals). Hence, the departmental appeal is dismissed.

Summary

Issues:
Appeal against deletion of depreciation on goodwill by Ld.CIT(Appeals)

Analysis:
The Department filed an appeal against the Order of Ld.CIT(Appeals)-22, New Delhi, specifically challenging the deletion of depreciation on goodwill amounting to ?10,29,60,726. The primary contention was that the depreciation was disallowed as it was not claimed in the return of income. The Assessing Officer (A.O.) observed this discrepancy during scrutiny after the assessee had filed a return declaring a loss. The Ld.CIT(A) allowed the claim of the assessee by citing Explanation 5 to Sec.32(1) of the Income Tax Act, which mandates the grant of depreciation irrespective of whether it was claimed by the assessee or not.

The Department, represented by the Ld.Sr.D.R., supported the A.O.'s decision, while the assessee, represented by the Ld.Counsel, stood by the Ld.CIT(A)'s order. The Tribunal considered the arguments of both parties and examined the provisions of Explanation 5 to Sec.32(1) of the Act, which clarify that depreciation is applicable even if not claimed by the assessee in computing total income. Consequently, the Tribunal found no valid reason to overturn the decision of the Ld.CIT(A) and dismissed the departmental appeal.

In conclusion, the Tribunal upheld the Ld.CIT(A)'s order based on the statutory obligation under Explanation 5 to Sec.32(1) of the Income Tax Act, which ensures the allowance of depreciation on goodwill regardless of whether it was claimed by the assessee. The departmental appeal was therefore dismissed, affirming the decision in favor of the assessee.