2021 (9) TMI 1541 - AT - Income Tax

Disallowance of depreciation on goodwill - As per the scheme of amalgamation, where value of liabilities and amount of equity capital allotted /payment to the equity shareholders exceeds the value of assets of the transferor company taken over, such excess shall debited to the goodwill account - HELD THAT - We find that this claim is no more res-integra as the issue has been settled in favour of the assessee and against the revenue by the decision of in the case of Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT We do not find any error or infirmity in the findings of the CIT(A). Decided against revenue.

Summary

Issues:
Deletion of addition made by AO on account of disallowance of depreciation on goodwill.

Analysis:
The case involved two appeals by the Revenue against separate orders of the CIT(A)-3, Delhi regarding the deletion of addition made by the AO on account of disallowance of depreciation on goodwill. The appellant company underwent amalgamation with another company, and as per the scheme of amalgamation, the excess amount debited to the goodwill account was claimed as depreciation by the assessee. The AO denied this claim, leading the assessee to appeal before the CIT(A) reiterating its claim of depreciation on goodwill. The CIT(A) allowed the depreciation, emphasizing that goodwill, being a non-tangible asset, is eligible for depreciation under section 32 of the Act.

The DR strongly supported the Assessment Order before the Tribunal, arguing against the allowance of depreciation on goodwill. However, the Tribunal referred to a decision of the Hon'ble Supreme Court in the case of Smifs Securities Ltd. 348 ITR 302, where it was settled that goodwill is eligible for depreciation. The Tribunal found no error or infirmity in the CIT(A)'s findings and dismissed both appeals filed by the Revenue. The decision was announced in the open court in the presence of both representatives on 08.09.2021.