The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the depreciation is allowable on goodwill under section 32 of the Income Tax Act, 1961.
Theassessee, M/s Maya Entertainment Ltd, is a company engaged in the business of aviation training and hospitality industry. The assessee entered into an agreement with Avalon Aviation Academy and acquired various assets and liabilities for a lump sum consideration of Rs.75,00,000/-. The excess of the consideration over the fair value of these assets on the date of acquisition of Rs.60,85,577/- which was treated by the assessee as goodwill. The assessee claimed the same as depreciation/amortization on the ground that it is a right in the nature of know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature being intangible assets. The AO denied depreciation by holding that the goodwill is not included any specific items and rejected the claim of the assessee and added Rs.10,73,646/- to the income of the assessee.
On first appeal, the Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. The assesseeapproached the Tribunal for relief.
The Tribunal bench comprising Shri Inturi Rama Rao, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member observed that a similar issue in assessee’s own case for A.Y. 2011-12 came up before this Tribunal and the Tribunal by following the earlier order in assessee’sown case allowed depreciation.
Referring the above Tribunal ruling, the bench held allowed relief to the assessee and held that “In the light of above, following the order of this Tribunal in assessee’s own case for A.Y. 2011-12, thus, we hold that the assessee is entitled to claim depreciation on goodwill. The order of CIT(A) is not justified and it is set aside. Thus, the ground raised by the assessee is allowed.”
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