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2020 (1) TMI 1637 - AT - Income TaxDisallowance of depreciation on the cost of know how and intangibles - goodwill as acquired during business acquisition/amalgamation - Assets acquired by the Appellant from ORG of their division of Adex Business purchased along with all assets and liabilities merely because the amount was shown in the balance sheet under the compendious heading of goodwill - as per CIT-A amount paid by the assessee over and above the value of “net assets” of “Adex Business” was to be treated to have been paid towards “goodwill” HELD THAT:- Claim of depreciation on “goodwill” in the case before us falls within the four corners of the judgement of CIT, Kolkata Vs. Smifs Securities Limited [2012 (8) TMI 713 - SUPREME COURT] - As is discernible from the financial statements of the assessee company before us, the excess consideration paid by the assessee company over and above the value of the “net assets” on acquisition of “Adex Business” had been considered as “goodwill” by the assessee company in its books of account. Be that as it may, the assesses claim of depreciation on the excess payment had been declined by the CIT(A), for the reason, that no depreciation was allowable on “goodwill”. As pursuant to the judgment of Smifs Securities Limited the issue as regards allowability of depreciation on “goodwill” is no more res integra. As such, the claim of depreciation raised by the assessee on the amount of excess payment which was capitalised in its “books of account” as “goodwill”, is found to be in order. We direct the A.O to allow depreciation on the “goodwill” that was capitalised by the assessee in its financial statements. Decided in favour of assessee.
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