Anshul Speciality Molecules Private Limited Vs DCIT (ITAT Mumbai)
Depreciation on Goodwill from Slump Sale Allowed: ITAT Mumbai Follows Smifs Securities and Grindwell Norton, Distinguishes United Breweries
The Mumbai Bench of the ITAT allowed the assessee’s appeal for AY 2020-21 and deleted the disallowance of depreciation of ₹1.22 crore claimed on goodwill arising from acquisition of a manufacturing unit as a going concern by way of slump sale. The assessee had acquired the unit for a lump-sum consideration of ₹21 crore, and the excess of consideration over the fair value/book value of tangible assets amounting to ₹9.79 crore was recognised as goodwill, on which depreciation under section 32(1)(ii) was claimed.
The Tribunal held that the goodwill so recognised was not a mere accounting entry but represented valuable business and commercial rights embedded in the going concern, including statutory licences, regulatory approvals, and other business advantages transferred along with the unit. Relying on the Supreme Court decision in CIT v. Smifs Securities Ltd. and the jurisdictional Bombay High Court ruling in CIT v. Grindwell Norton Ltd., the ITAT reiterated that goodwill constitutes an intangible asset eligible for depreciation under section 32(1)(ii).
The ITAT rejected the Revenue’s reliance on United Breweries Ltd., holding that the said decision was confined to cases of amalgamation/succession governed by the fifth proviso to section 32(1). Since the present case involved a slump sale between unrelated parties, the statutory restriction under the proviso was not attracted. Accordingly, the disallowance of depreciation on goodwill was held to be unsustainable and was deleted, and the appeal of the assessee was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
