IQVIA Consulting and Information Services India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Goodwill Calculated as a Balancing Figure Is Still Purchased Goodwill: Mumbai ITAT Allows ₹7.37 Crore Depreciation
When a company buys an existing business for more than the value assigned to its identifiable assets and rights, the balance is commonly recorded as goodwill. Does calculating it as a residual amount make it self-generated goodwill, on which depreciation cannot be claimed? The Mumbai Tribunal answered no in the case of IQVIA Consulting and Information Services India Pvt. Ltd. It directed the deletion of a ₹7,37,27,800 disallowance of depreciation arising from two business acquisitions.
Two acquisitions and one common question
IQVIA, which provided information and technology services to clients in the healthcare industry, acquired businesses or assets from Nielsen (India) Pvt. Ltd. and GCI Healthcare Pvt. Ltd. during the year relevant to assessment year 2018–19. It furnished the acquisition agreements and valuation reports during assessment.
Under the Nielsen asset purchase agreement dated 29 September 2017, IQVIA paid ₹49,90,96,287. It attributed ₹3,83,65,323 to a customer contract and ₹18,98,88,797 to non-compete rights. The remaining ₹27,08,42,167 was recorded as goodwill. At the claimed rate of 25%, the depreciation on this goodwill was ₹6,77,10,542.
Under an agreement dated 23 December 2017, IQVIA acquired GCI Healthcare’s business as a going concern on a slump-sale basis for ₹2,49,46,065. The valuation placed tangible and intangible assets at a combined ₹8,77,432. IQVIA recorded the balance, ₹2,40,68,633, as goodwill and claimed depreciation of ₹60,17,158.
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