The appeal filed by the Revenue was directed against the order passed by the Commissioner of Income Tax (Appeals) for Assessment Year 2017-18, arising from an assessment framed under section 143(3) of the Income-tax Act, 1961.

The assessee, Siyaram Silk Mills Limited, is engaged in the business of manufacturing and marketing fabrics, value-added yarn, and ready-made garments. In the return of income, the assessee claimed depreciation amounting to ₹4,12,83,186 on goodwill under section 32 of the Act. The Assessing Officer disallowed the claim and added the amount to the total income.

On appeal, the Commissioner (Appeals) allowed the depreciation by relying on the judgment of the Hon’ble Supreme Court in CIT vs Smifs Securities Ltd (2012) 348 ITR 302 (SC), holding that goodwill qualifies as an intangible asset eligible for depreciation. Aggrieved by this relief, the Revenue carried the matter in appeal before the Tribunal.

During the proceedings before the Tribunal, it was submitted that the goodwill arose pursuant to a scheme of amalgamation approved by the Hon’ble Bombay High Court, whereby Balakrishna Synthetics Limited was amalgamated with the assessee with effect from 01.04.2015. The excess consideration paid over the net value of assets acquired was recognised as goodwill in the books, on which depreciation was consistently claimed. It was further pointed out that depreciation on the same goodwill had been allowed in the immediately preceding assessment year.

The Tribunal observed that the issue was squarely covered not only by the Supreme Court decision in Smifs Securities Ltd but also by the order of the coordinate bench of the ITAT, Mumbai, in the assessee’s own case for Assessment Year 2016-17, wherein depreciation on goodwill arising from amalgamation had been allowed.

The Department was unable to place any contrary judicial precedent to dislodge the findings of the Commissioner (Appeals). Respectfully following the binding precedent of the Supreme Court and the earlier decision in the assessee’s own case, the Tribunal found no infirmity in the appellate order.

Accordingly, the appeal filed by the Revenue was dismissed.

 

Source Link- https://itat.gov.in/public/files/upload/1767782133-4JhqPE-1-TO.pdf

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