Tribunal rules in favor of assessee, allows depreciation on goodwill. Precedent and consistency key.

The Tribunal allowed the appeal in favor of the assessee, directing the deletion of the disallowance of depreciation on goodwill amounting to Rs. 1,02,00,357. The decision was based on the consistency of facts and the precedent set in the assessee's own case for the previous assessment year. The Tribunal set aside the CIT(A)'s findings and instructed the AO to delete the disallowance. The appeal was allowed on 04/01/2023 at Ahmedabad.

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Issues Involved:
1. Disallowance of depreciation on goodwill amounting to Rs. 1,02,00,357/-.

Detailed Analysis:

1. Disallowance of Depreciation on Goodwill:
The primary issue in this appeal is whether the learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in confirming the disallowance of depreciation on goodwill amounting to Rs. 1,02,00,357/-. The assessee, a limited company engaged in the business of trading and transportation of Natural Gas and manufacturing of Compressed Natural Gas, claimed depreciation on goodwill at Rs. 1,76,43,861/-. However, the Assessing Officer (AO) determined that the eligible depreciation should be Rs. 74,43,504/-, resulting in a disallowance of Rs. 1,02,00,357/-.

2. Appeal to CIT(A):
The assessee appealed to the CIT(A), who upheld the AO's disallowance. The CIT(A) based this decision on the precedent set by his predecessor in an earlier assessment year, which also disallowed excess depreciation claimed on goodwill.

3. Tribunal's Consideration:
The assessee then appealed to the Tribunal, arguing that in an identical case for the Assessment Year (AY) 2015-16, the Tribunal had allowed the appeal in favor of the assessee (ITA No. 1637/Ahd/2018, order dated 06.12.2019). The assessee contended that no excessive depreciation was claimed on goodwill.

4. Revenue's Position:
The Departmental Representative (DR) supported the orders of the lower authorities but did not provide any new arguments or evidence to counter the assessee's claims.

5. Tribunal's Decision:
The Tribunal reviewed the materials on record and the previous order of the Coordinate Bench in the assessee's own case for AY 2015-16. The Tribunal noted that the facts and circumstances were identical and that the earlier decision had allowed the depreciation claim. The Tribunal cited the relevant portion of the previous order, which detailed the background of the demerger, the approval by the Hon'ble Gujarat High Court, and the calculation of depreciation on goodwill.

In the earlier case, the Tribunal had determined that the goodwill and its depreciation should be recognized from the financial year in which the demerger was sanctioned (FY 2009-10, AY 2010-11), not retrospectively from the appointed date (01.01.2007). The Tribunal had also observed that the AO's reworking of the depreciation was not justified, and the assessee's claim for depreciation from AY 2010-11 was valid.

6. Final Judgment:
In the absence of any new evidence or changed circumstances, the Tribunal relied on the principles established in the earlier decision. Consequently, the Tribunal set aside the CIT(A)'s findings and directed the AO to delete the disallowance of Rs. 1,02,00,357/-. The appeal filed by the assessee was allowed.

Conclusion:
The Tribunal allowed the appeal in favor of the assessee, directing the deletion of the disallowance of depreciation on goodwill, based on the consistency of facts and the precedent set in the assessee's own case for the previous assessment year. The decision was pronounced on 04/01/2023 at Ahmedabad.

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