Dynaspede Integrated Systems Pvt. Ltd Vs DCIT (ITAT Chennai)
ITAT Chennai set aside disallowance of depreciation on goodwill arising from amalgamation for AYs 2013-14 and 2014-15, remanding the matter to the CIT(A) for fresh adjudication. The Tribunal noted that necessary documents like amalgamation order and goodwill calculation were not submitted earlier, and directed the assessee to provide requisite evidence while ensuring due opportunity of hearing.
The appeals filed by Dynaspede Integrated Systems Pvt. Ltd. against the orders of the Commissioner of Income-tax (Appeals), NFAC Delhi, for the assessment years 2013-14 and 2014-15 were heard by the Income Tax Appellate Tribunal (ITAT), Chennai Bench. The core issue in both appeals was the assessee company’s claim for depreciation on goodwill that arose from a corporate amalgamation.
The assessee, an engineering products manufacturer, had claimed depreciation of Rs. 2,74,15,039/- on goodwill in the Assessment Year (AY) 2013-14, which was the central point of contention. The facts of the case were identical for both AY 2013-14 and AY 2014-15, meaning the decision for the former would apply mutatis mutandis (with necessary changes) to the latter.
Background of the Dispute
The assessee’s return of income for AY 2013-14, initially filed declaring Nil income, was subsequently reopened under Section 148 of the Income-tax Act, 1961 (the Act). The reassessment under Section 143(3) read with Section 147 of the Act, completed on December 14, 2018, resulted in the disallowance of the claimed depreciation on goodwill. The Assessing Officer (AO) based the disallowance on an interpretation of the fifth proviso to Section 32(1) of the Act, which governs depreciation, and a decision of the ITAT Bangalore Bench in the case of United Breweries Ltd.
