Relief for Viacom 18 Media: ITAT Rules AO Made Adequate Inquiry on ₹195.32 Cr Depreciation of Goodwill, Quashes PCIT’s Revision [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) set aside a revisional order passed by the Principal Commissioner of Income tax (PCIT) under section 263 and held the AssessingOfficer (AO) had conducted thorough inquiries regarding the depreciation claim on goodwill and had adopted a plausible legal view.

Viacom 18 Media Pvt. Ltd. (assessee), assessee filed its regular return of income for the assessment year under consideration on 29/11/2019, which was further revised on 30/03/2020 declaring total loss of ₹289,31,48,390.

The PCIT invoked section 263 and considered the assessment erroneous and prejudicial to the Revenue. The issues related to the incorrect allowance of depreciation on 'goodwill' acquired on amalgamation.

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The dispute revolved around the assessee's claim of depreciation amounting to ₹195,32,57,760 on goodwill and other intangible assets. This amount included ₹85,655 on goodwill from the acquisition of the Studio 18 division in AY 2008-09 and ₹1,87,75,81,932 on goodwill resulting from the amalgamation of Prism TV Pvt. Ltd. into Viacom 18 in AY 2016-17.

The PCIT set aside the order passed by the AO and directed for fresh assessment with inquiries. Aggrieved by the PCIT’s order, the assessee filed an appeal before the ITAT.

The two-member bench comprising Om Prakash Kant (Accountant Member) and Raj Kumar Chauhan (Judicial Member), examined the assessment records and noted that the AO had issued notices under sections 143(2) and 142(1) of the Income Tax Act.

The tribunal also observed that the AO specifically asked the assessee to support the claim of depreciation on goodwill with documentary evidence. The tribunal observed that the assessee for the notices issued by the AO filed a detailed reply.

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The tribunal observed that the AO, after due examination, accepted the claim and stated in the assessment order that the issue of depreciation claimed was "examined and found correct".

The tribunal held that the AO had "thoroughly examined both the issues" and had carried out the inquiries which ought to have been carried out. The tribunal held that the AO followed a plausible and reasonable interpretation from the binding Supreme Court precedent in CIT v. Smifs Securities Ltd.

The tribunal concluded that the PCIT’s order was not sustainable in law on both legal and merit grounds. The appeal of the assessee was allowed.

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