IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.1951/KOL/2025 (Assessment Year: 2016-17)

Indian Cable NetCo ltd.

DCIT, Circle 1(1)

J-1/15 Block EP, Sector-V, Salt Aaykar Bhawan, Lake Electronics complex, Salt P-7, Chowringhee Square, Vs.

Lake City, Kolkata-700091, Kolkata-700069, West Bengal West Bengal (Appellant) (

Respondent)

PAN No. AABCR4726Q CO No. 86/KOL/2025 (Arising in ITA No. 1951/KOL/2025 for A.Y. 2016-17)

India Cable Net Company Ltd.

DCIT, Circle 1(1)

J-1/15 Block EP, Sector-V, Salt Aaykar Bhawan, Lake Electronics complex, Salt Vs. P-7, Chowringhee Square, Lake City, Kolkata-700091, Kolkata-700069, West Bengal West Bengal (Appellant) (

Respondent)

Assessee by : S/Shri S.M. Surana, Sunil Surana & A.K. Tekriwal, ARs Revenue by : Dr. Anup Biswas, DR Date of hearing: 07.04.2026 Date of pronouncement: 28.04.2026

O R D E R

Per Rajesh Kumar, AM:

The appeal of Revenue and CO by the Assessee filed against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 18.07.2025 for the AY 2016-17.

2. The only issue raised by the Revenue is against the order of ld.

CIT (A) allowing the depreciation of ₹7,89,99,274/- u/s 132(1) of the Act, which has been disallowed by the ld. AO on the basis of 5^th Proviso to Section 32 of the Act as amalgamating company was not claiming depreciation on goodwill before amalgamation.

2.1. The facts in brief are that the assessee filed the return of income on 20.11.2016, declaring total income of ₹3,16,80,608/-. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were issued and served upon the assessee. During the course of assessment proceedings, the AO observed that the assessee has claimed depreciation on goodwill and accordingly, the assessee was given show cause notice as to why the said depreciation should be disallowed. The ld. AO also noted that the goodwill was shown in the books of the assessee as a result of merger/ amalgamation of M/s Pearltree Tradelink Pvt. ltd. The amalgamation of the said company with the assessee was done pursuant to amalgamation u/s 391 to 394 of the Companies Act, 1956, with effect from 31.03.2014 and approved vide order of Hon'ble Kolkata High Court dated 08.05.2014. The assessee submitted before the ld. AO that goodwill on intangible asset created pursuant to the order of the Hon'ble Kolkata High Court and therefore, the assessee is entitled to depreciation thereon. However, according to the ld. AO the depreciation cannot be allowed as per explanation 3 to Section 43(1) of the Act. The ld. AO relied on the decision of DCIT vs Toyo Engineering India Ltd, ITA No. 3279 (MUM) of 2008, wherein it has been held that no depreciation is to be allowed on goodwill created out of amalgamation. Thus, it is clear that the said amount was mere an accounting entry provided to crate goodwill in order to claim bogus depreciation and therefore, the ld. AO by relying on 5^th Proviso to Section 32(1) of the Act, held that the claim of depreciation of ₹7,89,99,274/- was not allowable and accordingly was disallowed.

2.2. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after taking into consideration of contentions raised by the assessee by observing and holding as under:-

“Ground 2 is regarding disallowance of depreciation on an intangible asset i.e. goodwill which has come into existence after amalgamation with M/S PearltreeTradelinkPvt. Ltd.,(amalgamating company) with the company u/s 391 to 394 of the Companies Act,1956 w.e.f . 31.03.2014. It has been noted that this asset “goodwill” was not in existence prior to amalgamation in the books of amalgamating company, it has been created due to amalgamation itself being the difference between the amount of payment to the shareholders of the amalgamating company and value of the assets transferred from amalgamating company to the amalgamated company.