ACIT Vs Siyaram Silk Mills Limited (ITAT Mumbai)
ITAT Mumbai Upholds Depreciation on Goodwill Arising from Amalgamation; Revenue Appeal Dismissed
The Mumbai Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal in the case of Siyaram Silk Mills Ltd. for AY 2017–18, thereby affirming the order of the CIT(A) which had allowed depreciation on goodwill under Section 32.
The assessee had claimed depreciation of ₹4.12 crore on goodwill arising from the amalgamation of Balakrishna Synthetics Ltd. with effect from 01.04.2015, pursuant to a scheme approved by the Bombay High Court. The excess consideration of about ₹16.08 crore paid over the net book value of assets was recognised as goodwill in the books, on which depreciation at 25% was claimed. The Assessing Officer disallowed the claim, but the CIT(A) allowed it relying on the Supreme Court judgment in CIT v. Smifs Securities Ltd. (348 ITR 302).
Before the Tribunal, the assessee pointed out that depreciation on the same goodwill had already been allowed in its own case for AY 2016–17 by a coordinate bench, and the impugned year was merely the second year of claim. The Revenue was unable to bring any contrary judicial precedent or distinguish the earlier year’s decision.
The Tribunal held that the issue was squarely covered by the Supreme Court decision in Smifs Securities Ltd. and by the coordinate bench ruling in the assessee’s own case, and found no infirmity in the order of the CIT(A). Since no other issue was raised by the Revenue, the appeal was dismissed in entirety.
Accordingly, the ITAT reaffirmed that goodwill arising on amalgamation is a depreciable intangible asset, and once depreciation is allowed in the first year, it cannot be denied in subsequent years without any change in facts or law.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
