Law:

Section:

Section 32, read with section 263, of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment years 2001-02 to 2003-04 - Assessee-company was engaged in manufacturing and trading of non-alcoholic beverages - During relevant assessment years, it claimed depreciation on goodwill on account of payment made to bottlers for marketing and trading reputation, trade style and name, marketing and distribution, territorial know-how, including information or consumption patterns and habits of consumers in territory - Assessing Officer, after examining audit report and making queries, accepted assessee's claim - Commissioner, in exercise of his power under section 263, set aside assessment order on ground that allowance of depreciation on goodwill was contrary to Explanation 3 to section 32 - Whether having regard to wider scope of section 32 after amendment by Finance (No. 2) Act, 1998, auditors' report and explanation offered by assessee before Assessing Officer, acceptance of claim of assessee by Assessing Officer would come within compartment of taking a plausible view and, therefore, it was not appropriate on part of Commissioner to exercise his power under section 263 - Held, yes Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment years 2001-02 to 2003-04 - Whether any right obtained for carrying on business with effectiveness is likely to fall or come within sweep of meaning of an intangible asset under section 32 - Held, yes FACTS The assessee-company was engaged in manufacturing and trading of non-alcoholic beverages. During the relevant assessment years, it claimed depreciation on goodwill treating the same as an intangible asset and, hence, depreciable under section 32(1)(ii). The Assessing Officer allowed its claim. Thereafter, the Commissioner noticed that the goodwill on which the depreciation had been allowed by the Assessing Officer was not an asset so as to entitle the assessee to the benefit of depreciation claimed under section 32 and, hence, the order was erroneous and prejudicial to the interest of the revenue which resulted in escapement of income. He, accordingly, issued notice under section 263 to…

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