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Claim of depreciation on goodwill arising on amalgamation not allowable

Global Tax Update:November 2016/India

The Bangalore Tribunal in India recently held that claim of depreciation on goodwill arising on amalgamation cannot be allowed. The Tribunal relied on fifth proviso to section 32(1) of the Income-tax Act, 1961 (Act) which provides that depreciation on the assets acquired on amalgamation cannot be more than the depreciation as was allowable to the amalgamating company had the amalgamation not taken place. (Global Tax Update: November 2016/India)

1. Claim of depreciation on goodwill arising on amalgamation not allowable

The Bangalore Tribunal in India recently held that claim of depreciation on goodwill arising on amalgamation cannot be allowed. The Tribunal relied on fifth proviso to section 32(1) of the Income-tax Act, 1961 (Act) which provides that depreciation on the assets acquired on amalgamation cannot be more than the depreciation as was allowable to the amalgamating company had the amalgamation not taken place.

2. Mere fact that tax has been withheld does not mean that income is taxable

The Mumbai Tribunal held that mere fact that tax has been withheld on amount received by the taxpayer does not lead to any inference that offshore supply is taxable in India. The case involved offshore supply of goods and in the facts it was held that income from offshore supply is not taxable especially when sale had been concluded outside India on principal to principal basis. The fact that taxes have been withheld on the payment is not conclusive that the payment is taxable in India.

 

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