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2020 (10) TMI 880 - AT - Income TaxDepreciation u/s 32 claimed on self valued, unsubstantial intangibles declared as ‘customers contract’ & ‘goodwill’ - HELD THAT:- Hon’ble Supreme Court in CIT vs. Smiffs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] held that, ““goodwill” is an asset under Explanation 3B to section 32 of the Act and is eligible for depreciation” Hon’ble Delhi High Court in Areva T&D India Ltd. [2012 (4) TMI 79 - DELHI HIGH COURT] has held that when goodwill in books of account comprises inter alia business claims, business information, business records, contracts, skilled employees & knowhow has been purchased for a consideration to acquire the running business, it is comparable to a licence to carry out the existing transmission and distribution business of the transferor and in the absence of aforesaid intangible assets business, assessee would have to commence business from scratch. Effect of acquiring running business with tangible and intangible assets including goodwill and customer contracts are quite visible as turnover of the assessee has been increased during the year under assessment. Despite the fact that the assessee has given the complete details of agreement vide which tangible and intangible assets of running business of M/s. KPIT Cummins Infosystems Ltd. were purchased as per valuation report, AO has disallowed the depreciation on goodwill and customer contracts by ignoring the settled principle of law that goodwill / customer contracts duly recorded in the audited financials are eligible for depreciation being intangible assets under section 32 (1)(ii) of the Act. CIT (A) has rightly deleted the disallowance made by the AO by following settled proposition of law discussed in the preceding paras. Appeal filed by the Revenue is hereby dismissed.
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