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The Tax Publishers Depreciation on goodwill arising out of slump sale *Facts :* Assessee acquired a business on slump sale basis from Indian Express Limited for INR 19.85 crores by issuing its own equity shares, Difference in acquired asset values less consideration was attributable to Goodwill for Rs. 13 crores on which depreciation was claimed. Alleging that the goodwill which arose out of the Discounted cash flow method computation of future cash flows was a colourable transaction the depreciation on the same was disallowed. CIT(A) allowed the depreciation claim on goodwill. Revenue went in higher appeal to ITAT. Held in favour of the assessee/against the revenue that depreciation was allowable on the goodwill. *Applied :* Smifs Securities Ltd (2012) 348 ITR 302 (SC) : 2012 TaxPub(DT) 2430 (SC) Triune Energy Services Pvt. Ltd. 237 ITR 230 *Ed. Note :* Interestingly, in its ground of appeal, the Revenue has challenged that transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of Section 47(iv) of the Act. But, we find that in the hands of TIEL, while framing the assessment order dated 26.03.2015 under Section 143(3) of the Act for A.Y 2012-13, the assessing officer has accepted income from long term capital gain for slump sale of business, thereby accepting the transfer under Section 47(iv) of the Act. The decision will not be a precedent henceforth due to amendments made in the Act which no longer permits depreciation on goodwill. *Case:* DCIT v. Global Fairs & Media (P) Ltd. 2023 TaxPub(DT) 2274 (Del-Trib)

The Tax Publishers

Depreciation on goodwill arising out of slump sale

Facts :

Assessee acquired a business on slump sale basis from Indian Express Limited for INR 19.85 crores by issuing its own equity shares, Difference in acquired asset values less consideration was attributable to Goodwill for Rs. 13 crores on which depreciation was claimed. Alleging that the goodwill which arose out of the Discounted cash flow method computation of future cash flows was a colourable transaction the depreciation on the same was disallowed. CIT(A) allowed the depreciation claim on goodwill. Revenue went in higher appeal to ITAT.

Held in favour of the assessee/against the revenue that depreciation was allowable on the goodwill.

Applied :

Smifs Securities Ltd (2012) 348 ITR 302 (SC) : 2012 TaxPub(DT) 2430 (SC)

Triune Energy Services Pvt. Ltd. 237 ITR 230

Ed. Note : Interestingly, in its ground of appeal, the Revenue has challenged that transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of Section 47(iv) of the Act. But, we find that in the hands of TIEL, while framing the assessment order dated 26.03.2015 under Section 143(3) of the Act for A.Y 2012-13, the assessing officer has accepted income from long term capital gain for slump sale of business, thereby accepting the transfer under Section 47(iv) of the Act.

The decision will not be a precedent henceforth due to amendments made in the Act which no longer permits depreciation on goodwill.

Case: DCIT v. Global Fairs & Media (P) Ltd. 2023 TaxPub(DT) 2274 (Del-Trib)