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TMI Blog2017 (3) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Anil Chaturvedi, AM Appellant by : Shri S.C. Tiwari Respondent by : Shri Suhas Kulkarni ORDER Per Sushma Chowla, JM This appeal filed by the assessee is against the order of CIT(A)-I, Pune, dated 28.03.2014 relating to assessment year 2007-08 against order passed under section 143(3) of the Income-tax Act, 1961 (in short 'the Act'). The only issue raised in the present appeal is against the disallowance of depreciation on goodwill amounting to ₹ 15,21,394/-. 2. The assessee has raised the following grounds of appeal:- 1. The learned CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of depreciation on goodwill of ₹ 15,21,394/-. 2. The order of the Commissioner (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts was treated as goodwill. The date of incorporation of the company was 20th July, 2006. The Assessing Officer was of the view that as per section 32(1) of the Act, depreciation was allowed for two types of assets, namely, tangible assets and intangible assets. The Assessing Officer further elaborated on the scope of intangible assets and relying on the ratio laid down by the Hon'ble Bombay High Court in Commissioner of Income Tax Vs. M/s. Techno Shares Stocks Ltd. & Others in ITA No. 971 of 2006 and ITA No. 218 of 2007 held that no depreciation or amortization was allowable on goodwill. Accordingly, the sum of ₹ 15,21,394/- claimed as depreciation was disallowed and added back as income of the assessee. An alternate plea was made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that goodwill is an asset within the meaning of Explanation 3(b) to section 32(1) and hence, eligible for depreciation. The learned Authorized Representative for the assessee pointed out that the Commissioner of Income Tax (Appeals) had held that the difference between the consideration paid on the fair market value of the assets and liabilities was not goodwill at all. In this regard, reliance was placed on the ratio laid down by the Hon'ble Delhi High Court in Triune Energy Services Private Limited & Ors. Vs. Deputy Commissioner of Income Tax & Ors. reported in (2016) 237 Taxman 230 (Delhi) wherein on identical facts, the Hon'ble High Court held that the surplus arising out of slump sale consideration is the value of goodwill in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appeal is in relation to the claim of depreciation on goodwill. The assessee had taken over the sole proprietary concern under the name and style of Avalon Aviation Academy as a going concern as per the agreement dated 09th September, 2006. The said going concern was taken over along with all the assets, liabilities, rights, privileges, pending contracts, permissions, etc. as a slump sale, in an as-is-where-is is condition for the good and valuable consideration. As per the term of the agreement the total consideration was fixed at ₹ 75,00,000/-. It was agreed between the parties that the sale of the 'acquired business undertaking' by the seller to the purchaser pursuant thereto was as and by way of a slump sale and the purchase con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific price was attributed to the assets and liabilities since it was a case of sump sum consideration being paid for takeover of the assets. The copy of the agreement is placed at pages 27 to 40 of the paper book. Under such facts and circumstances the assessee while filing the return of income had worked out the excess consideration over the value of the assets and liabilities at ₹ 60,85,577/-, as under : Particulars Fair Value (Rs.) Fixed Assets 10,59,825 Current Assets 5,81,943 Current Liabilities (2,27,345) Net Assets 14,14,423 Consideration 75,00,000 Goodwill 60,85,577 10. On such goodwill, the assessee claimed depreciation which has been denied by the authorities below holding that the excess amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax & Ors. (supra) on similar issue of slump sale as per business transfer agreement wherein lump sum consideration was paid, had held that the balance consideration after deducting the value of assets and liabilities is goodwill which expression "goodwill" subsumes within it a variety of intangible benefits that were acquired when a person acquires a business of another as a going concern. It was further held that "it is well established that 'goodwill' is an intangible asset, which is required to be accounted for when a purchaser acquires a business as a going concern by paying more than the fair market value of the net tangible assets, that is, assets less liabilities". The Hon'ble High Court therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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