2016 (7) TMI 1558 - AT - Income Tax

Depreciation on goodwill being intangible assets - HELD THAT - After considering the relevant records, orders of authorities below, we find that the similar issue has been decided by the FAA for the assessment year 2008-09 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 . - Decided against revenue.

Summary

Issues:
Appeal against CIT(A)'s order for AY 2009-10 - Allowability of depreciation on goodwill - Interpretation of CBDT circular No.549 dated 31.10.1989.

Analysis:
The appeal pertains to the allowability of depreciation on goodwill for AY 2009-10. The assessee initially declared total income of &8377; 63,71,94,610/-, later revised to &8377; 33,90,50,860/- by claiming depreciation of &8377; 29.81 crores on intangible assets. The AO disallowed the depreciation, resulting in a revised assessment of &8377; 63,71,94,610/- under normal provisions and &8377; 42,00,26,450/- under section 115JB. The CIT(A) allowed the appeal, directing the AO to permit depreciation on intangible assets as per audited books. The revenue contended that the CIT(A) erred by following a decision on goodwill from a different case and by ignoring the CBDT circular.

Upon review, the ITAT found that the assessee correctly claimed depreciation on goodwill as intangible assets. Notably, a similar issue was decided in favor of the assessee for AY 2008-09, establishing a precedent. The ITAT observed that the CIT(A)'s decision was consistent with the earlier ruling and the Apex Court's decision in the Smifs Securities Ltd case. Consequently, the ITAT upheld the CIT(A)'s order, dismissing the revenue's appeal.

In conclusion, the ITAT affirmed the CIT(A)'s decision regarding the allowability of depreciation on goodwill for AY 2009-10. The judgment highlighted the importance of precedent and consistency in tax assessments, emphasizing the relevance of past decisions and legal interpretations in determining current tax liabilities.