Section 32(1)(ii) of the Income Tax Act
Income-tax Act, 2025: s.33
Section 32(1)(ii) falls under section 32 of the Income-tax Act, 1961, which corresponds to section 33 (Deduction for depreciation) of the Income-tax Act, 2025.
Read section 33 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 32(1)(ii) is CIT v. Smifs Securities Ltd. (348 ITR 302), cited in 540 of the 565 judgments on BharatTax that turn on this section.
Leading authorities on Section 32(1)(ii)
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.
The Supreme Court approves the mixed fund theory, holding that no interest disallowance is warranted under section 36(1)(iii) if investments or advances are made from the assessee's own non-interest bearing funds, even when mixed funds are available. This presumption applies when non-interest bearing funds are sufficient to meet the investments.
Membership rights and business contracts, as 'business or commercial rights of similar nature' to a license or franchise, qualify as intangible assets eligible for depreciation under Section 32(1)(ii) of the Income-tax Act.
The claim of depreciation under Section 32 of the Income Tax Act for assets used by charitable trusts is permissible, affirming the Bombay High Court's view that such a claim does not amount to a 'double benefit'.
Income earned during the project construction stage, which has a direct nexus or is inextricably linked to the project's setting up, constitutes a capital receipt not liable to tax and reduces the project cost.
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.
OECD Transfer Pricing Guidelines can be referred to for resolving transfer pricing disputes in India, even though India is not an OECD member, provided they are consistent with Indian statutory regulations. Availability of exemption under Section 10A does not bar the applicability of Section 92C and 92CA.
Rights acquired under a concession agreement for highway construction, which generate revenue through toll collections, constitute an 'intangible asset' under section 32(1)(ii) of the Income-tax Act, 1961, eligible for depreciation, typically at 25%. This includes claiming depreciation on the opening Written Down Value (WDV) for such highway projects.
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.
Where an assessee has mixed funds (borrowed and interest-free) and makes interest-free advances, it is presumed that such advances are made from interest-free funds if sufficient interest-free funds are available. This principle guides the disallowance of interest on borrowed capital under Section 36(1)(iii) if funds are diverted for non-business purposes without business expediency.