ITAT Ahmedabad Rules in Favour of Jio Platforms Limited: Depreciation on Slump Sale Intangibles Sustained, Interest Disallowance Reversed
Overview of the Case
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, adjudicated cross appeals arising from the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, pertaining to Assessment Year 2021-22. The appeals were filed in ITA No. 1770/Ahd/2024, with the assessee — Jio Platforms Limited — challenging the disallowance of interest expenditure, while the Revenue contested the deletion of additions made on account of depreciation on intangible assets and revenue received in advance.
The Tribunal ultimately dismissed the Revenue's appeal in its entirety and allowed the assessee's appeal, delivering significant relief to the assessee on all contested issues.
Background of the Dispute
Acquisition of Intangible Assets Through Slump Sale
During FY 2019-20 (relevant to AY 2020-21), Jio Platforms Limited acquired two business undertakings from group entities through slump sale transactions:
Platform Business Undertaking — comprising a bundle of enterprise and consumer digital applications spanning entertainment, sports, health, communications, and information services — acquired from Reliance Projects and Property Management Services Ltd. (RPPMSL) with effect from 16/03/2020.
FinTech Platform — acquired from Reliance Payment Solutions Limited (RPSL) with effect from 19/03/2020.
The assets transferred under these slump sale agreements included intangible assets worth Rs. 1,29,92,97,04,630/-, which were duly added to the block of intangible assets in AY 2020-21.
| Transferor Entity | Assets Transferred | Liabilities Transferred | Net Consideration Paid |
|---|---|---|---|
| RPPMSL | Rs. 13,076 crores | Rs. 13,031 crores | Rs. 45 crores |
| RPSL | Rs. 1,113 crores | Rs. 1,043 crores | Rs. 70 crores |
For AY 2020-21, a scrutiny assessment was completed under Section 143(3) of the Income-tax Act, 1961, specifically triggered under the Computer Assisted Scrutiny Selection (CASS) criteria for "Introduction/Addition of high value intangible asset during the year" and "Depreciation claimed at significantly higher rates/Large additional depreciation claimed." Following thorough examination of the slump sale agreements and the depreciation claim, the Assessing Officer accepted the assessee's position in full.
Revenue's Appeal — Ground I: Depreciation on Intangible Assets
What Was Claimed
For AY 2021-22 (the year under consideration), the assessee claimed tax depreciation of Rs. 2,761.60 crore on the block of intangible assets. Of this total:
- Rs. 2,757.55 crore represented depreciation on the opening Written Down Value (WDV) as on 01/04/2020, brought forward from AY 2020-21.
- Rs. 4.05 crore was depreciation on fresh additions of Rs. 16.21 crore made during the year.
Depreciation was claimed at 25% in accordance with the rates prescribed under the Income-tax Act, 1961 read with Rule 5 (New Appendix I) of the Income-tax Rules, 1962.
Assessing Officer's Position
The Assessing Officer raised sweeping objections to the depreciation claim, including the following: