TaxTMI 
TaxTMI 
2026 (1) TMI 1321
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....declaring a total income of Rs. 19,60,49,330/-. The return was processed under section 143(1) of the Act on 20.12.2021, determining income at Rs. 19,60,54,970/-. The case was selected for complete scrutiny under CASS. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had, during the relevant previous year, acquired a going concern manufacturing unit from M/s Anmol Antioxidants Pvt. Ltd., Vadodara, by way of slump sale, for an aggregate consideration of Rs. 21,00,00,000/-, pursuant to a Business Transfer Agreement dated 10.02.2020, with effect from 01.03.2020.As per the assessee, the consideration of Rs. 21 crores included Goodwill amounting to Rs. 9,79,55,271/-, representing excess of consideration over the value of assets and liabilities taken over. The assessee claimed depreciation at 12.5%, amounting to Rs. 1,22,44,409/-, under section 32(1)(ii) of the Act. The Assessing Officer examined the claim of depreciation on goodwill and issued notices under section 142(1) calling upon the assessee to furnish details regarding the method of valuation of goodwill, documentary evidence, and the agreement for acquisition. 3. After cons....
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....elevant. Thus, the learned CIT(A) confirmed the disallowance of depreciation on goodwill and dismissed related ground of the appeal. 8. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us and has raised the following grounds: "1. On the facts in the circumstances of the case, the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, erred in confirming the order of the Assessing Officer in respect of not allowing depreciation of Rs. 1,22,44,409/- on goodwill of Rs. 9,79,55,271/- arose on acquisition of manufacturing unit as going concern from Anmol Antioxidants Pvt. Ltd. on February 10, 2020 on slump sale basis. 2. On the facts and in the circumstances on the case, the said learned Commissioner of Income tax has also erred in not appreciating the fact, that the appellant had acquired manufacturing unit of Anmol Antioxidants Pvt. Ltd. at lump sum price of Rs 21,00,00,000/- while net assets of the said unit were only Rs. 11,20,44,729/-. Thus on the said transaction goodwill arose in the books of the appellant at Rs. 9,79,55,271/- and therefore appellant has claimed depreciation of Rs. 1,22,44,40....
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....d business rights enabling the assessee to carry on the acquired business without interruption. According to the learned Authorised Representative, such commercial rights and advantages, including intangibles such as trademarks and business rights, which were not individually identifiable or separately valued, are inherently embedded in the excess consideration paid and have rightly been subsumed and recognised as goodwill in the books of the assessee. 11. The learned Authorised Representative thus contended that the goodwill so recognised represents not merely an accounting residual but embodies commercial rights, business advantages, licences, approvals and other intangibles acquired as part of the slump sale of a going concern. He submitted that depreciation claimed on such goodwill was therefore in accordance with law and the provisions of section 32(1)(ii) of the Act. 12. The learned Authorised Representative further placed reliance on the judgment of the Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Ltd., wherein the Hon'ble Supreme Court has held that goodwill is an intangible asset falling within the expression "any other business or commercial rights ....
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....or acquisition of business and commercial rights embedded in a running business, including licences, approvals, regulatory permissions and business advantages. 18. The issue whether goodwill constitutes an intangible asset eligible for depreciation is no longer res integra. The Hon'ble Supreme Court in CIT v. Smifs Securities Ltd.(supra) has categorically held that goodwill falls within the ambit of "any other business or commercial rights of similar nature" under Explanation 3(b) to section 32(1). The Hon'ble Supreme Court has held as under: "A reading the words "any other business or commercial rights of similar nature" in clause (b) of Explanation 3 indicates that goodwill would fall under the expression "any other business or commercial rights of a similar nature". The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b)."(para 4) The Hon'ble Supreme Court further observed: "5. In the circumstances, we are of the view that "Goodwill" is an asset under Explanation 3(b) to Section 32(1) of the Act." Thus, the legal position is settled that goodwill arising as a result of acquis....