Depreciation on goodwill arising from amalgamation is allowable where previously accounted, so the claim is admitted for the assessment year.

Depreciation on goodwill arising from an amalgamation and already reflected in earlier accounts is allowable where judicial precedent establishes its tax permissibility; the article applies the principle from Smifs Securities Ltd and a co ordinate ITAT decision in the assessee's own case to conclude that the depreciation claim for Assessment Year 2017 18 is admissible. The operative effect is that goodwill recognized on acquisition under a court approved amalgamation and depreciated in a prior year may be claimed again in the impugned year consistent with those precedents.

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Issues: (i) Whether depreciation claimed on goodwill arising on amalgamation and accounted for in an earlier year is allowable for Assessment Year 2017-18.

Analysis: The question concerns depreciation on goodwill recognized on acquisition under a court-approved scheme of amalgamation, where the excess consideration over book value was recorded as goodwill and depreciation was claimed in an earlier year and again in the impugned year. The legal position as applied to the facts is governed by the decision in Smifs Securities Ltd and by a co-ordinate Bench ITAT decision in the assessee's own case for A.Y. 2016-17 which addressed depreciation on goodwill arising on amalgamation and accounted for in an earlier year. The impugned appellate order allowed the assessee's claim following these precedents. No contrary authoritative decision was placed on record by revenue to distinguish those precedents or the facts.

Conclusion: Depreciation on goodwill arising on amalgamation and accounted for in an earlier year is allowable for Assessment Year 2017-18; decision is in favour of the assessee.

Ratio Decidendi: Depreciation on goodwill arising from an amalgamation and reflected in the books in an earlier year is claimable where judicial precedent (Smifs Securities Ltd and the co-ordinate ITAT decision in the assessee's own case) establishes its allowability under the Income-tax Act, 1961.

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