Special Bench tackles appeal hearing objections, goodwill depreciation, and Bench composition

The Special Bench addressed preliminary objections concerning the appeal's hearing, the allowance of depreciation on goodwill, and the constitution of the Bench. The issue of depreciation on goodwill was central, with the Senior Advocate and Departmental Representative proposing different formulations for consideration. The matter was referred to the President of ITAT for reframing the question. Concerns over potential prejudice led to the recusal of a Judicial Member, prompting the President of ITAT to determine the composition of the Special Bench. The decision highlighted the importance of clarity, fairness, and judicial discipline in the proceedings.

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Issues involved: Preliminary objections to hearing of the appeal by the Special Bench, allowability of depreciation on goodwill, constitution of the Special Bench.

Preliminary Objections: The appellant's Senior Advocate raised objections regarding the framing of the question and potential impact on a related case pending before the High Court. The Special Bench's composition was also questioned due to a member's prior opinion on a similar issue. The Departmental Representative responded by agreeing to modify the question and asserting that the issues in the related case were distinct. The decision on reconstitution of the Bench was left to the President of ITAT.

Allowability of Depreciation on Goodwill: The main question raised was whether the appellant could claim depreciation on intangible assets, specifically goodwill, under section 32 of the Income-tax Act. The Special Bench considered different formulations of the question proposed by the Senior Advocate and the Departmental Representative. It was decided that the controversy would be addressed by determining the entitlement to claim depreciation on goodwill acquired for Rs. 10 crore. The matter was referred to the President of ITAT for reframing the question.

Constitution of the Special Bench: Due to concerns about potential prejudice and judicial discipline, one of the Judicial Members expressed a decision to recuse himself from hearing the appeal. The President of ITAT was tasked with deciding on the composition of the Special Bench, and the hearing was adjourned pending further action.

This judgment addressed preliminary objections to the appeal's hearing, the issue of depreciation on goodwill, and the constitution of the Special Bench, emphasizing the need for clarity on the questions raised and ensuring fairness and judicial discipline in the proceedings.

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