Section 32(1) of the Income Tax Act
Income-tax Act, 2025: s.33
Section 32(1) 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) is CIT v. Smifs Securities Ltd. (348 ITR 302), cited in 540 of the 386 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.
An assessee is entitled to claim the balance 10% of additional depreciation in the succeeding assessment year if the new plant and machinery were put to use for less than 180 days in the previous year.
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.
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'.
Where goodwill is recorded pursuant to a merger based on purchase consideration determined by a valuation report, and no goodwill is transferred from the predecessor's books, the fifth proviso to section 32(1) of the Income-tax Act, 1961, is not applicable, and thus depreciation on such goodwill is not allowable.
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).
Securities held by a bank are considered stock-in-trade, and any notional loss arising from their valuation at the year-end is allowable as a deduction.
