DCIT VS AACORP Exim India Pvt. Ltd. (ITAT Mumbai)
Mumbai ITAT Upholds Depreciation on Goodwill Arising from NCLT-Approved Amalgamation; Revenue’s Appeal Dismissed
The Mumbai ITAT dismissed the Revenue’s appeal and upheld the allowability of depreciation of ₹5.90 crore on goodwill arising from the amalgamation of J.J. Polyplast Pvt. Ltd. with AAACORP Exim India Pvt. Ltd. The Assessing Officer had disallowed the claim, contending that the goodwill of ₹23.60 crore-being the excess of the purchase consideration of ₹50.95 crore over the net assets acquired of ₹27.35 crore-was merely an accounting adjustment between related parties, lacking any real cost or tangible basis, and therefore hit by the fifth proviso to Section 32(1)(ii).
The Tribunal noted that the amalgamation had been approved by the NCLT, the purchase consideration was determined through an independent valuation report, and the goodwill represented a genuine commercial right arising from the acquisition. It held that such goodwill was acquired goodwill and not self-generated or fictitious. Relying on the Supreme Court’s decision in CIT v. Smifs Securities Ltd., the Gujarat High Court’s ruling in Zydus Wellness Ltd., and the Chennai ITAT’s decision in Arun Excello Urban Infrastructure (P.) Ltd., the Tribunal affirmed that goodwill arising from a court-approved amalgamation constitutes an intangible asset eligible for depreciation under Section 32(1)(ii).
