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2019 (11) TMI 1139 - ITAT CHENNAIAllowability of depreciation on goodwill generated on acquisition of businesses - HELD THAT:- Merely because tangible business movable assets were included by assessee in its books of accounts at the book value existing in the books of GTS/Arc on effective date will disentitle assessee from claiming depreciation on the excess consideration paid over and above book value of tangible assets acquired of GTS/Arc. The representations and warranties are made by GTS/Arc to the assessee vide these agreements that their books of accounts and records reflect true and correct state of affairs and for making false/wrong representation/warranties by the sellers, the consequences are provided in these agreements. We donot find any reasons to doubt the value of these tangible movable assets acquired by the assessee and the value incorporated in books of accounts by the assessee in our view reflect their fair market value, unless rebutted by Revenue. Revenue has also not done any exercise to valuing these tangible movable assets acquired by the assessee to rebut contention of the assessee that book value of these acquired tangible assets represent fair market value of these assets. AO has proceeded on wrong notion that the assessee acquired companies namely GTS/Arc or acquired their entire assets and liabilities which is not correct .The assessee has discharged its primary onus and now it was for Revenue to have brought on record incriminating material to rebut the contentions of the assessee and in the absence of any cogent incriminating material on record , we reject this contention of the Revenue and hold that book value of these tangible movable assets acquired by assessee was indeed their fair market value. The excess paid by assessee over and above book value of tangible movable assets(net of liabilities) acquired is definitely towards intangibles assets acquired by assessee in the form of business contracts, customer orders, customers, business information, right to continue business as going concerns, non compete by GTS/Arc/key employees etc. Thus consolidated payments made by assessee over and above net assets acquired by it under a composite contract in the present case before us, in our considered view is towards goodwill and non compete agreement by GTS/Arc and its key employees and in our considered view depreciation is allowable both on the aforesaid excess amount paid towards goodwill and non compete agreement. Our aforesaid view is supported by case of Pentasoft Technologies Limited [2013 (11) TMI 1057 - MADRAS HIGH COURT] . We have observed that co-ordinate Bench of Chennai-tribunal in the case of M/s. Rentokil India Private Limited v. DCIT [2017 (11) TMI 1862 - ITAT CHENNAI] has allowed depreciation on the intangible assets viz. goodwill/customer list . The co-ordinate Bench of this tribunal in Rentokil [2017 (11) TMI 1862 - ITAT CHENNAI] referred to Explanation to Section 92B of the 1961 Act to hold that intangible shall include customer list and depreciation shall be allowable u/s 32. We hold that Ld.CIT(A) has rightly allowed depreciation claimed by the assessee. The decision of Hon’ble Supreme Court in the case of Smifs Securities Limited [2012 (8) TMI 713 - SUPREME COURT] also support the contentions of the assessee that goodwill is an asset under explanation 3(b) to Section 32(1) and depreciation shall be allowable on goodwill - Decided in favour of assessee.
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