Goodwill Arising From Amalgamation Eligible For Depreciation In Subsequent Years: ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) held that depreciation on goodwill arising from an amalgamation can be continued in subsequent years, as long as it pertains to the same intangible asset already recognized in the foundational year.

A Bench comprising Judicial Member Sanjay Garg and Accountant Member Narendra Prasad Sinha upheld the deletion of disallowance of depreciation claimed by Unicorn Packers Pvt. Ltd. (now part of the taxpayer LLP) on goodwill arising from its amalgamation with Urmin Marketing Pvt. Ltd.

The Tribunal observed that the issue had already been adjudicated in the foundational year, and the Revenue had not introduced any new facts or change in law to warrant a different conclusion. It noted that “goodwill so arising in the scheme of amalgamation is an 'acquired' intangible asset and that the taxpayer is eligible for depreciation on such goodwill.”

The goodwill originated from the amalgamation of Unicorn Packers into Urmin Marketing, where the excess of purchase consideration over net asset value was recognised as goodwill based on a valuation report by RBSA Capital Advisors LLP, a SEBI-registered merchant banker. Depreciation on this goodwill was first claimed in assessment year 2015-16.

Referring to its earlier ruling in the foundational year, the Tribunal noted that the goodwill continued to be the same asset through subsequent corporate restructuring, from Urmin Marketing Pvt. Ltd. to Urmin Flavoroma Pvt. Ltd., then renamed Unicorn Packaging Pvt. Ltd., and thereafter into the books of the taxpayer LLP following its conversion.

The Tribunal clarified that the depreciation claim for the year under consideration was solely on the brought-forward value of this asset and did not arise from any new transaction.

The Assessing Officer had disallowed the depreciation relying on provisions relating to cost determination and depreciation computation, including those dealing with amalgamation and transfer of assets. The Tribunal, however, found that the issue had already been comprehensively addressed in the earlier order, and no new facts or legal developments were presented by the Revenue.

Accordingly, the Tribunal allowed the depreciation claim, confirming that continuity of depreciation on the same goodwill is permissible across subsequent assessment years.