2023 (6) TMI 383 - AT - Income Tax

Depreciation on the Goodwill - transaction of sale of slump sale to subsidiary company - HELD THAT - We find that the identical issue has come up before the Tribunal in assessee s own case for the AY 2012-13 2023 (4) TMI 384 - ITAT DELHI following the decisions of Smifs Securities Ltd 2012 (8) TMI 713 - SUPREME COURT and the decision of Triune Energy Services Pvt. Ltd. 2015 (11) TMI 1218 - DELHI HIGH COURT sustained the order of the Ld.CIT(A) in allowing the depreciation on Goodwill - Decided against revenue.

Summary

Issues Involved:
The issues involved in the judgment are:
1. Whether depreciation on Goodwill can be allowed when the transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of section 47(iv) of the I.T. Act, 1961 and the Discount Cash Flow Method to value the Goodwill was found to be erroneous?
2. Whether the appellant has the right to add, amend, modify, vary, omit, or substitute any grounds of appeal before or at the time of hearing?

Issue 1:
The first issue revolved around whether depreciation on Goodwill could be allowed when the transaction of sale of slump sale to a subsidiary company was not considered a transfer under section 47(iv) of the Income Tax Act, 1961, and the Discount Cash Flow Method used to value the Goodwill was deemed erroneous. The Tribunal referred to previous decisions by the Supreme Court and the Delhi High Court where depreciation on Goodwill had been allowed. The Tribunal upheld the order of the Ld.CIT(A) in allowing the depreciation on Goodwill based on relevant provisions of law and previous judicial decisions. The Tribunal emphasized that valuation of assets, such as Goodwill, should consider commercial prudence and recognized methodologies like the discounted cash flow method. The Tribunal also noted that the independent Due Diligence Report by Price Waterhouse Cooper supported the market value of Goodwill. The Tribunal dismissed the Revenue's challenge regarding the transaction of sale of slump sale to a subsidiary company not being regarded as a transfer under section 47(iv) of the Act, citing acceptance of such transfer in a previous assessment order.

Issue 2:
The second issue dealt with the appellant's request to modify the grounds of appeal before or at the time of the hearing. The Tribunal, considering the identical nature of the facts with a previous case, upheld the order of the Ld.CIT(A) and rejected the appellant's request to modify the grounds of appeal. The appeal of the Revenue was ultimately dismissed by the Tribunal.

This judgment by the Appellate Tribunal ITAT Delhi addressed the issues of allowing depreciation on Goodwill in a specific context and the appellant's request to modify the grounds of appeal, ultimately dismissing the Revenue's appeal based on previous decisions and established legal principles.