ITAT Rejects Straumann Dental India LLP’s ₹16.16 Crore Goodwill Depreciation Claim, Cites Unsigned Business Transfer Agreement

June 10, 2026 : In a significant ruling on the tax treatment of goodwill and business acquisition transactions, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, has dismissed the appeal filed by Straumann Dental India LLP and upheld the disallowance of ₹16.16 crore claimed as depreciation on goodwill for the Assessment Year 2017-18. The Tribunal held that the goodwill claim was founded on an unregistered and partially unsigned Business Transfer Agreement that lacked legal enforceability, making the depreciation claim unsustainable under the Income Tax Act, 1961.

The dispute arose after Straumann Dental India LLP, which was formed on October 26, 2016 following the conversion of a private limited company into a limited liability partnership, claimed depreciation on goodwill generated through the acquisition of the business of Equinox Sales India (ESI), a sole proprietorship owned by Dr. Shavir S. Nooryezdan. The LLP stated that it had acquired ESI’s business through a Business Transfer Agreement dated August 23, 2016 and paid a total consideration of approximately ₹134.51 crore. According to the assessee, tangible assets accounted for about ₹5.23 crore, while the balance amount of ₹129.28 crore represented business and commercial rights collectively treated as goodwill.

During assessment proceedings under Section 143(3) of the Income Tax Act, the Assessing Officer examined the claim and noted that the goodwill had not existed in the books of the transferor entity. The department concluded that the cost attributable to goodwill in the hands of the predecessor was effectively nil and, therefore, depreciation could not be allowed on the amount created through the acquisition transaction. Relying on Sections 32, 43(1), and 43(6) of the Income Tax Act, the Assessing Officer disallowed depreciation amounting to ₹16.16 crore. The National Faceless Appeal Centre later affirmed the assessment order.

Before the Tribunal, the taxpayer argued that excess consideration paid over the value of net assets constituted goodwill and qualified as an intangible asset eligible for depreciation. The assessee relied on several judicial precedents, including the Supreme Court’s decision in CIT v. Smifs Securities Ltd., which recognized goodwill as an intangible asset eligible for depreciation under Section 32(1)(ii) of the Income Tax Act. The LLP also contended that the transaction represented a genuine slump sale and that the depreciation claim was legally justified.

However, the Tribunal found serious deficiencies in the foundational documents supporting the claim. After examining the Business Transfer Agreement placed on record, the Bench observed that the document was neither registered nor fully executed. The Tribunal specifically noted that the agreement was unsigned on behalf of the buyer and that no validly executed version had been produced despite multiple opportunities. The Bench further observed that the assessee’s submission claiming there was no relationship between the seller and buyer was inconsistent with the record because the proprietor of ESI was also a designated partner of the LLP.

The Tribunal held that an unregistered and unsigned agreement could not create legally enforceable rights capable of generating a valid goodwill asset for depreciation purposes. Referring to the Punjab and Haryana High Court’s judgment in Principal Commissioner of Income Tax v. Prahalad Singh, the Bench emphasized that unsigned documents have no legal credibility and cannot form the basis of quasi-judicial determinations. Quoting the High Court’s observation, the Tribunal noted that an unsigned document is merely an “anonymous piece of paper to which no credence can be given.”

The Bench also relied on the Supreme Court’s ruling in CIT v. Balbir Singh Maini, which held that after the 2001 amendments to registration laws, an unregistered agreement generally lacks legal effect and cannot be enforced in law. Applying this principle, the Tribunal concluded that the Business Transfer Agreement relied upon by the assessee lacked legal sanctity and could not support the creation of goodwill for tax depreciation purposes.

According to the Tribunal, the alleged goodwill arose solely from a transaction documented through an unenforceable agreement. Since the underlying transfer itself could not be legally validated on the material placed before the court, the resulting goodwill had no legally recognizable value. The Bench therefore held that the depreciation claim deserved to be rejected.

The ruling highlights an important principle for taxpayers involved in mergers, acquisitions, business transfers and slump sale transactions. While courts have repeatedly recognized goodwill as a depreciable intangible asset, taxpayers must establish the existence of a legally valid and properly documented transaction. The decision underscores that tax benefits arising from goodwill cannot be claimed merely through accounting entries or valuation reports if the underlying transfer documents fail to satisfy legal requirements.

Dismissing the appeal, the Delhi Bench comprising Judicial Member Madhumita Roy and Accountant Member Amitabh Shukla upheld the disallowance of ₹16.16 crore and ruled in favour of the Income Tax Department. The order was pronounced on June 10, 2026.

Case Reference : M/s Straumann Dental India LLP v. ACIT, Circle-4(1), Gurgaon