Case Law Details
Background
• The taxpayer took over a running business in Assessment Year (AY) 2000-01. The consideration payable towards acquiring the assets and liabilities of the business also included amount attributable towards goodwill. The taxpayer claimed depreciation on goodwill at the rate applicable for intangible assets (25%). The claim for depreciation on goodwill was accepted by the Assessing officer (AO) in AY 2000-01 and subsequent years.
• For AY 2003-04, the AO examined the issue of claim for depreciation on goodwill and allowed the claim.
• For the year under consideration (AY 2004-05), the AO continued to follow the precedence for allowing depreciation on goodwill.
• The Commissioner of Income-tax (CIT), exercising his revisionary powers u/s 263, held that the taxpayer is not eligible for claim of depreciation on goodwill since it is not covered under the items specified for allowance of depreciation.
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