Case Law Details
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.
FULL TEXT OF THE ORDER OF ITAT DELHI
The impugned appeal is put up for hearing after the appeal order was recalled for disposal of grounds no.18 & 19, which are as under:
Disregard of cost of goodwill
18. That on facts and circumstances of the case and in law, the learned CIT(A) has erred in restricting the cost of goodwill to Rs. Nil instead of Rs. 80,000,000/- on the basis that no goodwill exists in the business acquired.
Allowability of depreciation on goodwill
19. That on facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that goodwill purchased for the purpose of business should be considered as “intangible assets” and accordingly depreciation should be allowed as per section 32 of the Act.
2. This appeal of the assessee was allowed for statistical purposes by order dated 30-11-2023. After that the assessee has moved miscellaneous application No.223/Del/2024 for rectification the order. The rectification application was allowed by the Tribunal by order dated 09-01-2015 holding as under:
The application in hand has been filed under section 254(2) of the Income Tax Act, 1961 seeking rectification order dated 30-11-2023 and on hearing both sides we find that there is non-adjudication of ground of appeal No.18 &19 for which Ld. Counsel has submitted that the same are covered in favour of the assessee in assessee’s own decisions for earlier years.
2. In the light of the aforesaid order dated 30-11-2023 the order dated 30-112023 is recalled to the extent of adjudicating ground No. 18 & 19.
3. The application is accordingly allowed registry is directed to list the appeal in the course of hearing.
3. We have heard the rival contention of the parties and gone through the material available on record.
4. The Ld. AR of the assessee submitted that the both the issues are covered in favour of the assessee’s own case for earlier years for A.Y.2002-03 and 2010-2011. He also submitted that the assessee own appeal No.4106/Mum/2007 for A.Y.2002-04 was decided on 03-02-2014, after that the assessee has moved miscellaneous application and the ground no.6 & 7 was recalled for adjudication by order dated 06-062016. The grounds raised by the assessee was allowed by the Hon’ble Tribunal by order dated 29-10-2014 and the coordinate bench held as under”
3. At the time of hearing before us, the AR pointed out that the issue was impugned in the assessment year and the issue of valuation of goodwill travelled up to the ITAT, Mumbai and the co-ordinate Bench in the original order held that the valuation of Goodwill was correct and held that entire payment of Rs.12 crores was towards acquired business thereby allowing a claim.
4. Respectfully following the order of the ITAT in assessee’s own case, we hold that the assessee acquired the business along with goodwill and also that the valuation thereof was correct.
5. We now come to the issue of allowance of depreciation of goodwill acquired the assessee. The AO disallowed the claim of deprecation on goodwill, because goodwill did not feature as a depreciable intangible asset in section 32.
6. The AR pointed out that the issue is now covered by the decision of the CIT vs Securities Ltd. reported in 348 ITR 302 rendered by Hon’ble Supreme Court.
7. We, therefore, allow grounds no.6 & 7.
5. He also submitted that in the ITAT no. 1982/Del/2015 for the A.Y.2010-2011 in the assessee’s own the Co-ordinate Bench relying the above sited decision allow the appeal of the assessee. The relevant findings oof the Tribunal read as under:
32. The issue of depreciation on goodwill stands covered in favour of the assessee in line with the order of the tribunal in assessee’s own case in Assessment Year 2002-03 (supra). Following the same parity of reasoning we allow the claim of depreciation on goodwill.
6.In the case of Viacom 18 Media (P.) Ltd. v. Principal Commissioner of Income Tax [2025]181 taxmann.com 167 (Mumbai-Trib.) the coordinate bench in para no.9.4 and 9.5 held as under;
9.4 In view of the above discussion and applying the binding ratio of the Hon’ble supreme Court in Smifs Securities Ltd. (supra0 as well as the consistent line of authority supporting the allowability of depreciation on good will arising upon amalgamation where no such goodwill existed in the books of the amalgamating company, we hold that the sixth proviso to section 32(1) has no application to the present case. The good will in question is new intangible asset that came into existence only upon amalgamation and qualifies for depreciation under section 32(1)(ii). The Assessing Officer has, in our view correctly appreciated the legal position and allowed depreciation accordingly.
9.5 Further an amendment brought by the Finance Act, 2021 curtailing depreciation of goodwill is prospective and does not apply in the year under consideration. Thus, the assessing Officer has allowed the depreciation of the goodwill consciously and following the settled legal position. We find no infirmity in the order of the Assessing Officer. The action of the PCIT in seeking to substitute his own interpretation for a legally tenable view adopted by the Assessing Officer is unsustainable. The assessee succeeds on this ground.
7. The Ld. DR submitted that this issue has not been decided in the assessee’s own case. In the decision dated 29-10-2014 of the assessee’s case the Hon’ble Tribunal decided the valuation of the goodwill, not the depreciation. He further submitted that the section 32(1)(ii) of the act was amended with effect from 0104-2021 and the goodwill of a business or profession has been excluded from the depreciation. This argument is not tenable because the depreciation on the goodwill was allowed by the Tribunal to the assessee’s own case for the A.Y.2003-03 and 2010-2011. In the above sited case of Viacom 18 Media (P.) Ltd. v. Principal Commissioner of Income Tax [2025]181 taxmann.com 167 (Mumbai-Trib.) the coordinate bench held that the amendment in section 32(1)(ii) is prospective and does not apply for the A.Y. 2019-20.
8. In the case of DCIT Circle-1 Bharuch Vs Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 2022(11) TMI 129 ITAT Surat, the coordinate bench also held that the amendment in the section 32(1)(ii) of the Act is prospective and does not applicable for the A.Y. 2014-15. The view taken by the coordinate bench Surat was confirmed by the Hon’ble Gujarat High Court by dismissing the appeal of the Revenue in the case of The Principal Commissioner of Income Tax-1 Vadodara versus M/s Gujarat Narmada Valley Fertilizers And Chemicals Ltd. 2024(1) TMI 1495 Gujarat High Court.
9. The case is squarely covered from the assessee’s own case. Respectfully following the decisions of the Co-ordinate, Bench we allow the ground no.18 &19 raised by the assessee.
10. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 08.05.2026.
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