Case Law Details
DCIT Vs Global Fairs & Media Pvt Ltd. (ITAT Delhi)
ITAT Delhi held that depreciation on goodwill cannot be rejected merely because performance didn’t match projections. Notably, valuation of goodwill on discounted cash flow method was duly accepted by AO.
Facts- The solitary grievance of the Revenue is that the ld. CIT(A) erred in allowing depreciation on the goodwill when the transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of Section 47(iv) of the Income-tax Act, 1961 [the Act, for short] and the discounted cash flow method to value the goodwill was found by the Assessing Officer to be erroneous.
Conclusion- We find that the main objection of the Assessing Officer is that the assessee has overvalued the valuation of goodwill. In our considered view, the Assessing Officer has completely ignored the commercial prudence of an assessee relating to valuation of an asset. Determination of fair market value has to be as per prescribed methodology and even the Assessing Officer has accepted the discounted cash flow method as appropriate method for valuation of goodwill.
In such a method, valuation is done on the basis of information and material available on the date of valuation and projection of future Revenue. Merely because performance did not match projections, valuation cannot be challenged, as such approach is not only irrational but lacks material foundation since the valuation is intrinsically based on projections which can be affected by various factors.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
