The Income Tax Appellate Tribunal (ITAT), Bangalore bench, directed readjudication regarding depreciation claims on goodwill arising from the acquisition of business under a slump sale. I&B Seeds Private Limited, the assessee, a private limited company engaged in R&D, production, and marketing of hybrid seeds, purchased proprietary concerns from Mr. Praveen Noojibail and M/s. Sasya Gentech Private Limited during AY 2015-16. The assessee claimed depreciation on the goodwill, the amount paid to the transferors beyond the value of net assets taken over.
For AY 2017-18, 2018-19, and the assessment year 2020-21, the Assessing Officer (AO) denied the depreciation claim on goodwill. The assessee, dissatisfied, appealed to the NFAC, which confirmed the disallowance. Subsequently, another appeal was filed before the tribunal.
Richa Bakiwala, Assessee Representative, referenced the Karnataka High Court’s decision in the Manipal Universal Learning P. Ltd case, arguing that the HC allowed depreciation on goodwill arising from the acquisition of business under a slump sale model.
Subramanian S., Counsel for Revenue, relied on the Karnataka High Court’s decision in the Padmini Products Pvt. Ltd. Vs. DCIT case, asserting that the transaction between the firm and the assessee-company fell under Section 47(xiii). Therefore, the assessee was entitled to depreciation based on the actual cost incurred with reference to intangible assets. However, the Supreme Court stayed the Karnataka High Court’s order after the revenue filed a Special Leave Petition (SLP) against it.
Following a review of facts and records, the two-member bench consisting of Chandra Poojari (Accountant Member) and Beena Pillai (Judicial Member) directed readjudication concerning depreciation claims on goodwill arising from the acquisition of business under a slump sale, considering the final outcome of the decision in the case of M/s. Padmini Products Pvt. Ltd.
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