The Pune Income Tax Appellate Tribunal ( ITAT ) has recently allowed depreciation on goodwill under section 32(1) (ii) of the Income Tax Act 1961.
Section 32(1) (ii) of the Income Tax Act 1961 states that for computing the total income any intangible assets like copyright, patent, trademarks etc acquired on or after the 1st day of April 1998 shall be considered for depreciation.
Assessee Aichelin Unitherm Heat Treatment Systems India Pvt. Ltd. has shown goodwill for Rs.7,02,53,750/- on which claimed depreciation at 25 per cent to an extent of Rs.1,75,63,438.But the assessing officer’s opinion is that the goodwill is a commercial benefit and the assessee was not entitled to depreciation under section 32(1)(ii) of the Income Tax Act 1961. When the matter was preferred before the Commissioner of Income-tax appeal CIT (A) they held the issue is covered in favour of the assessee.
Against the order of the CIT(A) revenue filed an appeal before the ITAT.
Krishna V. Gujrathi appeared for the assessee and Ramnath P. Mukund appeared for the revenue.
While considering the submission the bench observed that the assessee entered a joint venture agreement between Unitherm Engineers Limited and Aichelin GMBH Austria.
The assessee purchased the furnace division of Unitherm Engineers Limited by way of a slump sale for a consideration of Rs.14,28,89,936/- and the value of net tangible assets at Rs.2,15,99,936/-. The balance amount of Rs.12,12,90,000/- was shown as intangible assets.
According to the assessee, the value of goodwill was the amount paid over and above the tangible assets and after reducing there from the values assigned to other intangible assets.
Counsel for the revenue confirmed the decision of the lower authorities
After observation, the division bench of the ITAT comprising R.S. Syal, (Vice President) and S.S. Viswanethra Ravi,( Judicial Member) dismissed the appeal filed by the revenue and confirmed the order of CIT(A).
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