Depreciation allowable on Goodwill from Acquisition of Business Unit: ITAT grants relief to DHL Logistics

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench deleted the disallowance of depreciation on goodwill by the Assessing Officer (AO).

The assessee, M/s. DHL Logistics Pvt. Ltd. is a logistics services provider and offers a comprehensive portfolio of international, domestic, and specialized freight handling services.

The Assessing Officer while passing the Draft Assessment Order also disallowed claim for depreciation of Rs. 16.77 Crore, in respect of intangible assets i.e. goodwill, on the basis of earlier year’s orders.

The assessee exercised its option for filing objection before the Dispute Resolution Panel (DRP). The DRP granted partial relief to the assessee with regard to the extent of excluding “recovery of back to back third party charges” from cost base.

The tribunal passed the order in the light of the decision of the Supreme Court in the case of Smifs Securities Ltd. wherein it was held that goodwill is in the nature of any other business or commercial rights as provided under Explanation–3(b) of section 32(i) r/w section 32(1)(ii).

“In view of the same Assessee is eligible for Depreciation On Goodwill Resulting From Acquisition Of Business Unit Of Lee & Muirhead Pvt. Ltd. In A.Y. 2008-09,” the tribunal said.

The tribunal consists of Accountant Member R.C. Sharma and Judicial Member, Pawan Singh deleted the disallowance of depreciation on intangibles i.e goodwill of Rs.22,36,07,813/- made by the AO.