ACIT 7(1)(1) Vs Horizon Packs Pvt. Ltd. (ITAT Mumbai)
ITAT Upholds Goodwill Depreciation Because Opening Written Down Value Cannot Be Reopened; ITAT Allows Section 80G Deduction for CSR Expenditure Because It Operates Independently of Section 37; ITAT Upholds Goodwill Depreciation and Section 80G CSR Deduction Because Earlier Assessment Was Not Disturbed.
The Income Tax Appellate Tribunal (ITAT), Mumbai dismissed the Revenue’s appeals for Assessment Years 2018-19 and 2020-21, upholding the orders of the CIT(A) on depreciation on goodwill arising from amalgamation and, for AY 2020-21, the allowability of CSR expenditure as a deduction under Section 80G. The Revenue contended that the goodwill was created through the merger of group companies and that depreciation should not have been allowed. The Tribunal noted that three companies were merged with the assessee under a scheme approved by the National Company Law Tribunal (NCLT), with the difference between the purchase consideration and the net asset value being accounted for as goodwill. The Tribunal observed that depreciation on such goodwill had first been claimed and allowed in AY 2017-18 after scrutiny, and the Assessing Officer had accepted the claim without any adverse inference. Relying on the jurisdictional Bombay High Court’s decision, the Tribunal held that once depreciation on the opening written down value of the block of assets had been accepted in an earlier assessment and had not been disturbed through proceedings under the Act, the Assessing Officer could not dispute the opening written down value in subsequent years. Accordingly, the Tribunal found no infirmity in the CIT(A)’s order deleting the disallowance of depreciation on goodwill.
