Depreciation on Goodwill Arising from Amalgamation Allowed in Book Profits: ITAT Rules in Favor of SC Johnson Pvt Ltd

The ITAT upheld SC Johnson Pvt Ltd’s accounting treatment allowing depreciation on goodwill arising from amalgamation for calculation of book profits under the Income Tax Act. The Tribunal recognized that since goodwill is an intangible asset, its amortization through depreciation reduces book profits, affecting tax liability under Minimum Alternate Tax (MAT) provisions. This aligns company accounting and tax treatments, thereby providing relief in MAT computations. The ruling is important for corporates in handling deferred tax assets/liabilities and aligns with contemporary accounting standards, offering clarity in corporate tax planning around goodwill arising from mergers and amalgamations.