Case Law Details
Geodis Overseas Pvt. Ltd. Vs DCIT (ITAT Delhi)
We find, the AO, in the instant case, disallowed depreciation on goodwill on the ground that the assessee has not become the sole logistic service provider to IBM India, the value of workforce does not facilitate the smooth carrying on of the business of the assessee and the supplier contracts forming part of the acquisition agreement have expired in the previous year relevant to the assessment year under consideration. According to the AO, the assessee has not acquired any business during the year and, hence, there is no question of making payment over and above for any commercial or business rights as defined under Explanation 3 to section 32(1). Further, the purchase price is not verifiable from any calculation or valuation report. According to the AO, there is decline in the business receipts even after paying so much on account of goodwill and, therefore, there is no justification for the payment of such amount. Further, it is also the case of the AO that as per the provisions of law, no depreciation is allowable on goodwill and the legislature provides that depreciation should be allowed on all other intangible assets other than goodwill.
Hon’ble Delhi High Court in the in the case of Areva T & D India Ltd. vs. DCIT, 345 ITR 421 has held that specified intangible assets, viz., business claims, business information, business records, contracts, employees and know-how acquired by assessee under slump sale agreement are in nature of ‘business or commercial rights of similar nature’ specified in section 32(1)(ii) and are accordingly eligible for depreciation under that section.
We further find the SLP filed by the Revenue against the aforesaid decision was dismissed by the Hon’ble Supreme Court, vide order dated 23rd September, 2013 vide SLP 21227/2012.
The various other decisions relied on by the ld. Counsel for the assessee also support his case to the proposition that depreciation is allowable on goodwill.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
