In a recent ruling, the Income Tax Appellate Tribunal (Mumbai Bench) dismissed the Revenue’s appeal in the case of Siyaram Silk Mills Ltd. for Assessment Year 2017–18, once again affirming that goodwill arising on amalgamation is a depreciable intangible asset under Section 32 of the Income-tax Act, 1961.

Background of the Case

The assessee claimed depreciation of approximately ₹4.12 crore on goodwill that arose pursuant to the amalgamation of Balakrishna Synthetics Ltd. with effect from 1 April 2015, under a scheme approved by the Bombay High Court. The excess consideration paid over the net book value of assets was recognised as goodwill, on which depreciation at the prescribed rate was claimed.

The Assessing Officer disallowed the claim; however, the Commissioner of Income Tax (Appeals) allowed depreciation by relying on the landmark judgment of the Supreme Court of India in CIT v. Smifs Securities Ltd., which held that goodwill qualifies as an intangible asset eligible for depreciation.

Tribunal’s Findings

Before the Tribunal, the assessee highlighted that depreciation on the same goodwill had already been allowed in its own case for the immediately preceding assessment year, and the year under appeal was merely the second year of claim. The Revenue failed to produce any contrary judicial precedent or demonstrate a change in facts or law.

The ITAT held that:

• The issue is squarely covered by the Supreme Court’s ruling in Smifs Securities Ltd.
• Once depreciation on goodwill is allowed in the first year, it cannot be denied in subsequent years without any change in circumstances.
• The order of the CIT(A) was legally sound and required no interference.

Accordingly, the Revenue’s appeal was dismissed in entirety.

Legal Significance

This ruling reinforces the settled legal position that:

• Goodwill arising from a valid amalgamation is a depreciable intangible asset.
• Consistency must be maintained in subsequent years once depreciation is granted.
• Revenue authorities cannot re-agitate concluded issues in the absence of new facts or law.

Conclusion

The decision provides clarity and certainty to taxpayers involved in mergers and amalgamations, reaffirming that depreciation on amalgamation goodwill is firmly supported by judicial precedent and cannot be arbitrarily disallowed.

This article is for informational purposes only and does not constitute legal or tax advice.