2011 (6) TMI 779 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of depreciation on goodwill u/s 32 of the IT Act for assessment year 2006-07.

Summary:
The appeal by the revenue challenged the disallowance of depreciation on goodwill, contending it was not an intangible asset. The assessee acquired business rights and goodwill of a firm, justifying it as an intangible asset covered u/s 32 of the IT Act. The AO disallowed the claim, citing the absence of the term "goodwill" in section 32(1)(ii) of the IT Act.

The assessee argued before the CIT(A) that the payment made for acquiring business rights constituted an intangible asset, similar to the decision in Skyline Caterers Pvt. Ltd. Vs ITO. The CIT(A) allowed the claim, noting the benefits derived from acquiring the business rights and goodwill.

The revenue relied on the AO's order, while the assessee cited the decision of the Kerala High Court in B. Raveendra Pillai Vs CIT, supporting the allowance of depreciation on goodwill. The ITAT found in favor of the assessee, referencing the decisions of the Kerala High Court and Delhi High Court, which recognized goodwill as an intangible asset eligible for depreciation u/s 32 of the IT Act.

In conclusion, the ITAT dismissed the departmental appeal, upholding the allowance of depreciation on goodwill as an intangible asset under section 32 of the IT Act.

Separate Judgement: None.