Disallowance of Goodwill Depreciation for 2012-13 upheld as it ceased to exist in accounts, no business benefit.

The Tribunal upheld the disallowance of depreciation on Goodwill for the Assessment Year 2012-13, as the Goodwill had ceased to exist in the books of accounts, and the assessee was not deriving any benefit from it. The Tribunal emphasized that depreciation can only be claimed on assets that exist in the books of accounts and are used for business purposes, which was not the case with the Goodwill in question.

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Issues:
Disallowance of depreciation on Goodwill

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of depreciation on Goodwill for the Assessment Year 2012-13. The assessee contended that depreciation on Goodwill should be allowed under Section 32(1) as intangible assets were acquired and paid for in past years. The Assessing Officer disallowed the depreciation on the grounds that the asset ceased to exist in the books of accounts, and the assessee was not deriving any enduring benefit from the Goodwill. The Commissioner upheld the disallowance, stating that depreciation cannot be claimed on a non-existing asset from which the assessee is not benefiting. The Tribunal referred to a previous case for AY 2009-10 where depreciation on Goodwill was allowed, citing the decision of the Hon'ble Supreme Court. However, in the current case, since the Goodwill was impaired and not treated as an asset in the books of accounts, and the assessee was not benefiting from it, the Tribunal upheld the disallowance of depreciation on Goodwill. The Tribunal concluded that once an asset ceases to exist in the books of accounts and the assessee does not derive any benefit from it, depreciation cannot be claimed.

The Tribunal noted that the provision of Section 32(1) allows depreciation on Goodwill as an intangible asset, but the asset must exist in the books of accounts, be used for business purposes, and the assessee must be the owner of the asset. In this case, the Goodwill was fully written off in the books of accounts, and its value was shown as 'Nil' as of 31/03/2012. Since the Goodwill ceased to exist in the books of accounts, the assessee did not claim any depreciation on it. The Tribunal emphasized that depreciation is calculated on the written down value of the block of assets, and if the asset ceases to exist in the books of accounts, no depreciation is allowable. The Tribunal agreed with the Assessing Officer and Commissioner that once an asset ceases to exist and the assessee does not benefit from it, depreciation cannot be claimed. The Tribunal upheld the order of the Commissioner and dismissed the appeal filed by the assessee.

In conclusion, the Tribunal confirmed the disallowance of depreciation on Goodwill for the Assessment Year 2012-13, as the Goodwill had ceased to exist in the books of accounts, and the assessee was not deriving any benefit from it. The Tribunal emphasized that depreciation can only be claimed on assets that exist in the books of accounts and are used for business purposes, which was not the case with the Goodwill in question.

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