Purchaser Is Eligible To Claim Depreciation On Excess Amount Paid Over & Above Net Asset Value Of Seller's Business: Bangalore ITAT

The Bangalore ITAT held that once the Department accepts the capital gain reported by the seller in the transfer of business, it cannot question the transaction in the hands of the purchaser. This decision was based on the absence of proof by the AO that the transfer was primarily for tax reduction through additional depreciation claims. Citing the Supreme Court's ruling in CIT Vs. SIMS Securities, the ITAT allowed depreciation on goodwill claimed by the assessee following its acquisition of another entity's business. The AO's disallowance of depreciation was overturned due to valuation using the discounted cash flow method, which justified the excess paid over net asset value as goodwill. The ITAT concluded that goodwill qualifies as an intangible asset, dismissing the AO's assertion of no intangible transfer.