Goodwill qualifies for depreciation under Income-tax Act, 1961. Tribunal upholds decision.

The Tribunal upheld the decision of the ld. CIT (A) allowing depreciation on Goodwill under section 32 of the Income-tax Act, 1961. Citing precedent and the nature of Goodwill as an intangible property right, the Tribunal dismissed the Revenue's appeal, affirming that Goodwill qualifies for depreciation as per law. The order was pronounced on August 30, 2017.

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Issues:
1. Allowability of depreciation on Goodwill under section 32 of the Income-tax Act, 1961.

Analysis:
The judgment revolves around the issue of whether depreciation on Goodwill amounting to Rs. 99,33,180/- is allowable under Explanation 3(b) of section 32 of the Income-tax Act, 1961. The Appellant, Deputy Commissioner of Income-tax, challenged the order of the Commissioner of Income-tax (Appeals) which allowed the depreciation claimed by the assessee on Goodwill. The Assessing Officer disallowed the claim of depreciation made by the assessee on Goodwill of Rs. 10,44,49,250/-. The assessee, in response, cited the Business Transfer Agreement (BTA) dated 15.12.2005, where the consideration paid over and above the book value of the net current asset was recorded as Goodwill and claimed depreciation on the same as an intangible asset. The assessee also presented a valuation report by an independent valuer, M/s. Grant Thornton, assigning values to the intangible assets acquired under the BTA.

The matter was taken to the ld. CIT (A) by the assessee through an appeal, which was allowed. The Revenue, feeling aggrieved, approached the Tribunal challenging the impugned order passed by the ld. CIT. During the proceedings, the ld. Authorized Representatives of the parties presented their arguments, and the Tribunal examined the documents and orders passed by the revenue authorities below in light of the facts and circumstances of the case.

The Tribunal referred to a previous order in the assessee's own case for AY 2007-08, where it was held that Goodwill is an asset covered under Explanation 3(b) to section 32(1) of the Act and is entitled to depreciation as an intangible property right. The Tribunal relied on the judgment of the Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Limited, which established that Goodwill falls under 'any other business or commercial rights of similar nature'. The Tribunal dismissed the appeal filed by the Revenue, upholding the decision of the ld. CIT (A) and affirming that Goodwill is eligible for depreciation as per law.

In conclusion, the Tribunal found no illegality or perversity in the order passed by the ld. CIT (A) and dismissed the appeal filed by the Revenue, pronouncing the order on August 30, 2017.

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