Section 32(1) of the Income Tax Act
The decision most relied on for Section 32(1) is CIT v. Smifs Securities Ltd. (348 ITR 302), cited in 540 of the 113 judgments on BharatTax that turn on this section.
Leading authorities on Section 32(1)
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.
Additional depreciation is allowable under section 32(1)(iia) for new machinery or plant even when put to use for less than 180 days, with the unabsorbed balance available for claim in the subsequent year.
The Legislature abolished terminal depreciation under section 32(1)(iii) and the taxing of balancing charge under section 41(2), replacing these provisions with the requirement to reduce sale proceeds of depreciable assets from the block of assets.
Spill over additional depreciation under Section 32(1)(iia) is allowable, with the court considering the third proviso to Section 32(1)(ii) (w.e.f. April 1, 2016) and aligning with rulings from other High Courts.
A non-compete fee paid as part of a business acquisition or transaction constitutes an intangible asset, eligible for depreciation under Section 32(1)(ii) of the Income-tax Act.
No disallowance under Section 14A of the Income Tax Act, 1961 can be made for expenditure related to exempt income if the assessee has not earned any such exempt income.
Section 44AB (tax audit) does not apply where the assessee is not engaged in a business or profession and consequently has no income under the head 'profits and gains from business or profession'.
Depreciation on goodwill arising from amalgamation is not admissible to the amalgamated company if no goodwill was admitted in the hands of the amalgamating company, applying Explanation 7 to Section 43(1) and the Sixth Proviso to Section 32(1)(ii).
Judgments on Section 32(1)
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