PCIT Vs Esys Information Technologies Ltd (Delhi High Court)
Delhi High Court held that goodwill could be considered as an intangible asset and the same is eligible for depreciation. Assets acquired de-valued, hence balance amount treated as intangible asset and the same is eligible for depreciation.
Facts- The assessee had paid a sum of ₹47,00,000/- to M/s Nebula Technologies Pvt. Ltd. for purchasing certain assets, which were located in different places in India. The said assets were valued at ₹12,37,450/- and there is no dispute regarding this valuation of the said assets. Consequently, the assessee had treated the balance amount of ₹34,63,450/- paid to Nebula as goodwill. The assessee claimed that it had not acquired any benefit against the said amount and had, accordingly, written off the said goodwill in its books of accounts.
AO rejected the said claim and added a sum of ₹34,63,450/- as income chargeable to tax. He reasoned that the same was not wholly and exclusively expended for the purposes of business; therefore, was not allowable u/s. 37(1) of the Income Tax Act, 1961. CIT(A) allowed 25% of the said amount as depreciation.
Conclusion- Held that Supreme Court in Commissioner of Income Tax, Kolkata v. Smifs Securities Ltd. has held that the goodwill could be considered as an intangible asset eligible for depreciation. The Revenue does not dispute the proposition that in a given case, intangible assets may also be eligible for depreciation. Since the assets acquired have been valued at ₹12,37,450/-, there is no infirmity in treating the balance amount as pan intangible asset, and the decision of the CIT(A) to allow deprecation on such intangibles cannot be faulted.
