“depreciation on goodwill”
The decision most relied on for depreciation on goodwill is CIT v. Smifs Securities Ltd. (348 ITR 302), cited in 540 judgments on BharatTax.
Leading authorities on depreciation on goodwill
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.
Business contracts and commercial rights of similar nature qualify as intangible assets under Section 32(1)(ii) and are eligible for depreciation. The decision also affirms that goodwill is an intangible asset eligible for depreciation.
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 is allowable on goodwill acquired through the slump sale of a business. When an assessee claims depreciation on the enhanced cost of an asset supported by a registered valuer's report, tax authorities must produce countervailing evidence, such as a departmental valuation report, to challenge it, rather than simply disregarding the expert opinion.
Transactions carried out on the purchase of off-the-shelf software prior to the jurisdictional High Court's decision in CIT v. Samsung Electronics Co. Ltd. (October 15, 2011) are not liable for Tax Deducted at Source (TDS).
A deduction for interest expense on borrowed funds used for interest-free advances to group companies is permissible only if the assessee establishes these advances were from surplus funds. The decision further clarifies eligibility for depreciation on intangible assets like non-compete fees, software, goodwill, and commercial rights under section 32(1)(ii), often arising from a slump sale.
When a business is purchased as a going concern, the consideration paid in excess of the value of its tangible assets is classified as goodwill, which is an intangible asset eligible for depreciation without needing a separate valuation.
