STAHL INDIA P. LTD.,KANCHIPURAM vs. DCIT, CHENNAI

ITA 2102/CHNY/2026Status: DisposedITAT Chennai28 September 2026AY 2018-1915 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the assessee's appeal, upholding the disallowance of depreciation on the distributor network. The Tribunal found that the AO rightly disallowed depreciation on the distributor network because there was no such intangible asset recorded in the financials of M/s. BASF India Ltd. as of March 31, 2018, under fixed assets or intangible assets. The Tribunal noted that the assessee failed to provide primary documentary evidence based on which the valuation report was prepared, and the valuation report itself lacked the signature of the Chartered Accountant and a valid registration number from the ICAI. Therefore, the acquired intangible assets could not be held as valid. The Tribunal concluded that the order of the CIT(A) in confirming the AO's denial of depreciation on the distributor network was justified. The issue of depreciation on goodwill was not expressly decided by the Tribunal in this appeal, as the CIT(A) had already allowed it based on previous ITAT orders.

What were the facts?

The assessee, Stahl India Private Limited, filed an appeal against the order of the CIT(A) for Assessment Year 2018-19. The assessee, engaged in manufacturing and export of leather chemicals, had acquired distributor networks as part of a slump sale transaction with BASF India. The Assessing Officer (AO) disallowed depreciation on these distributor networks, considering them not to be intangible assets and a mere balancing entry disguised as goodwill. The CIT(A) allowed depreciation on goodwill but disallowed it on the distributor network, relying on a previous ITAT decision for AY 2020-21. The assessee challenged this disallowance before the ITAT, arguing that the distributor network is an intangible asset and depreciation is allowable under Section 32. The AO had initially completed the assessment, which was later remanded by the Madras High Court. In the giving effect proceedings, the AO disallowed depreciation on the distributor network.

What were the issues?

1. Whether the distributor networks acquired as part of a slump sale transaction with BASF India constitute an intangible asset for the purpose of claiming depreciation under Section 32 of the Income Tax Act, 1961? Assessee's Contention: The assessee argued that the lower authorities erred in holding that the distributor networks are not intangible assets. They contended that accounting standards do not permit the recognition of self-generated intangible assets in the books of the seller (BASF India), but this does not negate their nature as intangible assets acquired through a slump sale. The assessee also argued that the distributor network was recognized as an intangible asset in subsequent years, and depreciation was allowed, and that the AO and CIT(A) failed to appreciate the settled position of recognizing intangible assets acquired through slump sale and depreciation allowable under Section 32. They relied on the decision of the coordinate bench of the Tribunal in the assessee's own case for AY 2020-21 and the Madras High Court in Mobis India Ltd. Revenue's Contention: The revenue, through the AO and CIT(A), contended that the distributor network was not recognized as an intangible asset in the financial statements of BASF India and that the valuation report did not clearly segregate the distributor network as a distinct intangible asset from goodwill. The CIT(A) noted that the distributor network was not decided by the Hon'ble Chennai ITAT in the assessee's own case for AY 2020-21 and that the assessee failed to explain how the distributor network is part of goodwill or an intangible asset, especially when the Purchase Price Allocation report indicated it was not part of the goodwill consideration.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

Before: SHRI S.S. VISWANETHRA RAVI & SHRI S.R. RAGHUNATHA

Hearing: 02.07.2026Pronounced: 28.09.2026

PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

This appeal filed by the assessee is directed against the order dated 04.02.2026 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2018-19. :-2-: ITA No: 2102/Chny/2026

2.

Ground no. I is general in nature, requires no adjudication.

3.

The order continues below.

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