The assessee, a private limited company engaged in providing financial information and analytics services, claimed depreciation on goodwill arising out of amalgamation with another company in the previous year relevant to the assessment year under consideration. The Assessing Officer (AO) disallowed the claim on the ground that goodwill is not a depreciable asset under the Income-tax Act, 1961 (the Act). The assessee challenged the disallowance before the DRP, which upheld the AO’s order and also rejected the assessee’s alternative claim for additional depreciation on goodwill.

The assessee appealed to the Tribunal against the DRP’s order. The Tribunal allowed the assessee’s appeal and held that goodwill is an intangible asset eligible for depreciation under section 32 of the Act, following the decision of the Supreme Court in the case of Smifs Securities Ltd. The Tribunal affirmed the principle that goodwill of a business or profession is a depreciable asset under the Act, irrespective of the mode of its acquisition, and rejected the Revenue’s attempt to distinguish the Supreme Court’s ruling in Smifs Securities Ltd. based on the facts of the case. (AY. 2018 -19)