DCIT Vs Glaxosmithkline Consumer Pvt. Ltd. (ITAT Chandigarh)
Auditor’s Note Can’t Override Law ; Slump Sale ≠ Succession; ITAT Allows 100% Depreciation on Goodwill
Assessee is engaged in the business of sales & marketing of OTC pharmaceutical products and also provides R&D and quality analysis services. During AY 2016-17, the Assessee acquired the OTC division of Novartis India Ltd. through slump sale. The excess consideration over the FMV of tangible assets was booked as goodwill & depreciation was claimed @100% on the ground that assets were used for more than 180 days. AO disallowed the depreciation on goodwill and also restricted depreciation on other assets to 50% by applying the second proviso to Sec.32(1), alleging that the Assessee was only a successor and therefore eligible only for half-year depreciation.
CIT(A) examined the slump sale agreement, the Completion Notice dated 30.09.2015 and the tax audit report, and held that the slump sale was completed on 01.10.2015, and assets including goodwill were actually put to use from 01.10.2015 to 31.03.2016 i.e. 183 days. CIT(A) further found that Novartis had not claimed any depreciation on these assets prior to transfer. Therefore, the restrictive second proviso & sixth proviso to Sec.32(1) did not apply. CIT(A) allowed full 100% depreciation on goodwill.
