“goodwill arising on amalgamation”
The decision most relied on for goodwill arising on amalgamation is CIT v. Smifs Securities Ltd. (348 ITR 302), cited in 540 judgments on BharatTax.
Leading authorities on goodwill arising on amalgamation
Goodwill, whether arising from an amalgamation or a slump sale, is an intangible asset eligible for depreciation under Section 32(1) of the Income-tax Act. While the assessee must prove the existence and valuation of such goodwill, it is recognized as a depreciable asset.
Goodwill arising on amalgamation is entitled to depreciation. This principle is established by multiple High Court decisions.
Goodwill arising on amalgamation is an intangible asset qualifying for depreciation under Section 32 of the Income Tax Act.
Depreciation on goodwill arising from amalgamation is not admissible to the amalgamated company if no goodwill was admitted in the hands of the amalgamating company, applying Explanation 7 to Section 43(1) and the Sixth Proviso to Section 32(1)(ii).
Depreciation is allowable on goodwill as an intangible asset under Section 32(1)(ii) when it arises from a scheme of amalgamation or similar corporate restructuring.
Where an expense is incurred for the purpose of acquiring a capital asset, and that asset is subsequently sold, the expenditure must be considered as part of the cost of acquisition of that asset for the purpose of calculating capital gains. This is because the expense forms an integral part of the cost of acquiring the asset, not an expenditure of revenue nature.
Depreciation is not allowed on goodwill if it arises from book entries and has no identifiable cost of acquisition. This applies even when goodwill is acquired as part of a scheme of arrangement or amalgamation.
Consideration paid by an amalgamated company in excess of the net assets of the amalgamating company is to be considered as goodwill arising on amalgamation and is eligible for depreciation.
