One of the question was as to Whether goodwill is a depreciate asset or not?
It has been a matter of litigation.
Supreme Court in the case of Smiff securities has ruled that depreciation could be provided on acquired goodwill.
Sec 32(1) does not explicitly say that the term asset excludes goodwill for calculating depreciation.
Now, in this context, Finance Act 2021 has put to rest this controversy by introducing provisions making goodwill a non depreciate asset.
The non availability of depreciation as deduction has been done by Following amendments:
- Sec 2(11) defining block of assets has now excluded goodwill from the same.
2. Sec 32(1)(ii) now provides that goodwill is not an asset for providing depreciation.
3. Sec 50 provides that where goodwill is already a part of block of assets, WDV and capital gains shall be determined as prescribed.
4. Section 55 now provides that in case goodwill has been purchased from a previous owner, the cost of acquisition shall be the purchase price less depreciation already provided, if any.
