2015 (7) TMI 1342 - AT - Income Tax

Depreciation on goodwill being intangible assets - HELD THAT - We find from the record that the assessee has rightly claimed depreciation on goodwill being intangible assets. We also find from the record that similar issue was raised by the assessee in the assessment year 2008-09, which was decided in favour of the assessee and thus, the issue is squarely covered in favour of the assessee by its own case in the earlier years. FAA for the assessment year 2008-09 decided in favour of the assessee holding that the assessee was entitled to depreciation on goodwill by following the decision of Apex Court in the case of Smifs Securities Ltd 2012 (8) TMI 713 - SUPREME COURT . We, therefore, are of the considered opinion that the case of the assessee stands covered by the earlier decision by the order of FAA - Decided against revenue.

Summary

Issues:
- Appeal against the direction of CIT(A) regarding depreciation on intangible assets
- Interpretation of CBDT circular No. 549 dated 31.10.1989
- Allowability of depreciation on goodwill as intangible assets

Analysis:
1. The appeal was filed by the revenue against the CIT(A)'s order for A.Y. 2009-10. Despite the absence of the assessee, the appeal was decided ex-parte based on available material and hearing the ld.DR.

2. The primary issue raised in the appeal was against the CIT(A)'s direction on depreciation of intangible assets, citing the decision of the Apex Court in CIT V/s Smifs Securities Ltd. The revenue contended that the facts of the cited case were different from the present case and the CIT(A) disregarded the CBDT circular No.549 dated 31.10.1989.

3. The assessee initially declared income for A.Y. 2009-10 at &8377; 63,71,94,610/-, revised it to &8377; 33,90,50,860/-, and claimed depreciation on intangible assets. The AO disallowed the depreciation, leading to an appeal by the assessee before the CIT(A).

4. The AO rejected the assessee's claim for depreciation on goodwill, resulting in additions to the total income. The CIT(A) allowed the appeal based on the precedent set in a previous case, directing the AO to allow depreciation on intangible assets as per the audited books of account.

5. The ITAT considered the submissions and records, noting that the issue of depreciation on goodwill had been previously decided in favor of the assessee for A.Y. 2008-09. The ITAT found that the case was covered by the earlier decision and upheld the CIT(A)'s order, dismissing the revenue's appeal.

6. The ITAT emphasized that the assessee was entitled to depreciation on goodwill as intangible assets, citing the precedent set by the Apex Court in the Smifs Securities Ltd case. The decision was based on consistency with the earlier ruling and the factual circumstances of the case.

7. Ultimately, the ITAT dismissed the appeal of the revenue, affirming the CIT(A)'s direction to allow depreciation on intangible assets, specifically goodwill. The judgment was pronounced on 25th July 2016.