Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 2004-05 - Assessee purchased a hospital with its land, building, equipments, staff, name, trademark and goodwill as a going concern - Assessee's claim for depreciation on goodwill was rejected by authorities below - Whether since an amount was paid towards goodwill for ensuring retention and continued business in hospital, it was certainly for acquiring of business and commercial rights and was certainly compar-able with trademark, franchise, copyright, etc., referred to in first part of clause (ii) of section 32(1) - Held, yes - Whether, therefore, assessee's claim for depreciation on value of goodwill was to be allowed - Held, yes FACTS The assessee purchased a hospital with its land, building, equipments, staff, name, trademark and goodwill as a going concern. In the income-tax returns filed subsequent to purchase of the hospital, the assessee claimed depreciation on goodwill on the value shown in the sale deed. In the subsequent years depreciation on goodwill was claimed on the written down value. The returns filed for a few years were accepted and scrutiny assessment was made for the first time only for the assessment year 2004-05. In the return filed for that assessment year, the assessee's claim for depreciation was on a written down value of Rs. 55,37,109 and the depreciation claimed at 25 per cent was Rs. 13,84,277. The Assessing Officer held that 'goodwill' was not covered by section 32(1)(ii) and so much so, the assessee was not entitled to depreciation, even though depreciation claimed on goodwill had been allowed for the earlier years. The appeals filed by the assessee before the Commissioner (Appeals) and before the Tribunal were also unsuccessful. On appeal : HELD First of all, it was to be opined that the claim allowed for the earlier years should not be the basis for granting relief for the relevant year. On this question there could not be any dispute because if the assessee was not entitled to depreciation on an item under the statute, then it could not be granted same merely because for the earlier years depreciation on the same item had been allowed…

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