2016 (8) TMI 1475 - AT - Income Tax

Depreciation on goodwill - whether goodwill is an intangible asset under section 32 hence eligible for claim of depreciation? - HELD THAT - This issue is no more res integra in view of the decision of Hon ble Supreme Court in Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT where the Hon ble Supreme Court has held that goodwill is in the nature of any other business or commercial rights as provided under Explanation 3(b) of section 32(i) r/w section 32(1)(ii). The other decisions of the Tribunal relied upon by learned Authorised Representative also express similar view. Therefore respectfully following the ratio laid down in the decision referred to above we uphold the order of the learned Commissioner (Appeals) on the issue. Accordingly grounds raised by the Department are dismissed.

Summary

Issues:
1. Assessee's appeal regarding deduction of expenditure on work force.
2. Revenue's appeal on the allowance of assessee's claim on goodwill.

Assessee's Appeal - Deduction of Expenditure on Work Force:
The assessee raised grounds related to the deduction of expenditure incurred on the work force. However, the counsel representing the assessee informed that the grounds were not pressed and were subsequently dismissed. As a result, the assessee's appeal was dismissed.

Revenue's Appeal - Allowance of Assessee's Claim on Goodwill:
The Revenue's appeal revolved around the allowance of the assessee's claim on goodwill. The assessee, engaged in the transportation business, had filed a revised computation of income claiming depreciation on payment made for goodwill. The Assessing Officer disallowed the claim as it was not made through a revised return of income, citing a Supreme Court decision. However, the Commissioner (Appeals) considered various legal aspects, including the entitlement of taxpayers to claim deductions before appellate authorities, and directed the Assessing Officer to allow depreciation on intangible assets, including goodwill. The Commissioner (Appeals) relied on legal precedents and the Supreme Court's interpretation of goodwill as an intangible asset eligible for depreciation. The Tribunal upheld the Commissioner (Appeals)'s decision, dismissing the Revenue's appeal. The Tribunal emphasized that the appellate authority can entertain fresh deduction claims if supported by facts on record, even if not made through a revised return of income. Additionally, the Tribunal rejected the Department's argument based on a CBDT circular, citing relevant High Court decisions. Ultimately, the Tribunal upheld the allowance of depreciation on goodwill as an intangible asset, in line with legal precedents and the Supreme Court's interpretation.

In conclusion, both the assessee's and the Revenue's appeals were dismissed by the Tribunal, with detailed analyses provided for each issue raised in the judgment.