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2023 (5) TMI 1209 - AT - Income TaxDepreciation on goodwill - goodwill as acquired during business acquisition - Company has entered into a business acquisition agreement to acquire the business of four Soft Limited ('Four Soft'), as a going concern on slump sale basis - consideration paid in excess of the book value of the assets acquired inter alia consists of the attributes of goodwill. HELD THAT:- We find merit in the argument of assessee that the purchase consideration was attributed to the business acquired from Four Soft which is a bundle of the components and described in Clause 6.2.2. of the BTA. Details furnished by assessee in the paper book that with the above benefits accrued on transfer of business, the business of the assessee has increased substantially from financial year. As the transfer of IP from Blujay India to Blujay UK cannot question the benefits accrued from the bundle of assets transferred in the course of acquisition as IP was just a part of the assets acquired from Four Soft. Therefore, argument of the Revenue that the underlying asset consisting goodwill is transferred cannot be accepted as IP in entirety did not result in creation of goodwill and the goodwill is a sum paid for acquisition of all the assets and rights i.e. the “Business Commercial Rights” acquired from Four Soft. As find from the details furnished by the assessee that post transfer of IP to Blujay UK, IP platform & licence access was provided back to Blujay India which is in turn providing software development support & distribution services in India to domestic third parties. 50% of such income has also been offered to tax in India. From the details furnished by the assessee, we find it is only the ownership of the IP that is transferred to Blujay UK and Blujay India is still benefitting out of the other assets acquired namely business contracts, employees, business permits, policies, readymade business etc. - Transfer of IP to UK was on back-to-back basis without any capital gains and the assessee has not claimed any depreciation on the IP transferred during the year. We find merit in the argument of assessee that the net balance of purchase consideration paid, and the value of net assets acquired is Goodwill and the transfer of IP to BluJay UK cannot affect the value of goodwill as the Goodwill is rightly attributed to all the assets acquired from Four Soft and benefits accrued to BluJay India. Once the existence of Goodwill is established, Depreciation on such goodwill cannot be questioned further. As following the decision of Avis Hospitals India Ltd [2022 (7) TMI 268 - ITAT HYDERABAD] we are of the considered opinion that the assessee is entitled to claim depreciation on goodwill. Decided against revenue.
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