American Express Services India Ltd. Vs ITO (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee concerning valuation of goodwill and allowability of depreciation on goodwill acquired for business purposes. The appeal had earlier been disposed of for statistical purposes on 30.11.2023, but was subsequently recalled through a rectification order under Section 254(2) of the Income Tax Act because grounds relating to goodwill had remained unadjudicated. The assessee argued that both issues were already covered in its favour by earlier Tribunal decisions in its own cases for AY 2002-03 and AY 2010-11. It was submitted that the Tribunal had previously held that the assessee had acquired business along with goodwill and that depreciation on such goodwill was allowable under Section 32 as an intangible asset. Reliance was also placed on the Supreme Court decision in CIT v. Smifs Securities Ltd. and subsequent Tribunal rulings, including Viacom 18 Media (P.) Ltd., which held that depreciation on goodwill arising from business acquisition or amalgamation was allowable for years prior to the amendment introduced by the Finance Act, 2021.
The Revenue argued that earlier orders had dealt only with valuation of goodwill and not depreciation, and further contended that Section 32(1)(ii), as amended with effect from 01.04.2021, excluded goodwill from the scope of depreciation. The Tribunal rejected this contention, observing that in the assessee’s own earlier cases depreciation on goodwill had already been allowed. The Tribunal also referred to decisions holding that the amendment made by the Finance Act, 2021 is prospective and therefore not applicable to earlier assessment years. Reliance was placed on the decision in Viacom 18 Media (P.) Ltd. and the Gujarat High Court ruling affirming that the amendment excluding goodwill from depreciation applies prospectively. Following the coordinate Bench decisions in the assessee’s own cases and other judicial precedents, the ITAT allowed the assessee’s grounds relating to valuation of goodwill and depreciation on goodwill, and accordingly allowed the appeal.
