There is a judgement of the Bombay Tribunal I found on itatindia.com which holds that goodwill is not an intangible asset.
ITAT, MUMBAI BENCHES ‘H’, MUMBAI
R. G. KESWANI
v
ACIT
ITA NO. 1463/Mum./2005
February 19, 2008
RELEVANT EXTRACTS:
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12. We heard both sides in detail and considered the matter. The statutory expression of the provision granting depreciation on intangible asset is that -
“ knowhow, patents, copyrights trademarks, licences, franchise or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998.”
(Emphasis provided by us)
13. A reading of the above statutory expression brings home the point that the law has specified items of intangible assets eligible for depreciation in the following categories:-
(i) Knowhow
(ii) Patents
(iii) Copyrights
(iv) Trade marks
(v) Licences
(vi) Franchises
14. As seen above, the law has specified six categories of intangible assets entitled for depreciation. Therefore, it is very obvious that all intangible assets are not eligible for depreciation allowance.
15. In the present case, the amount of Rs.25,00,000 was paid by the assessee towards the acquisition of goodwill. Therefore, the said payment does not come under either knowhow, patents, copyrights, trademarks, licences, franchises. The only remaining category is the residual one "any other business or commercial rights of similar nature". It is to be seen that any other business or commercial rights are not by themselves intangible asses eligible for depreciation. Those rights must be of similar nature; all similar nature to knowhow, patents, copyrights, trademarks, licences, franchises. Any business or commercial rights not similar in nature to the above mentioned six items cannot be treated as intangible assets qualified for depreciation.
16. This is because "any other business or commercial rights of similar nature" provided as a residual category is found in the company of expression like knowhow. patents, copyrights, trademarks, licences, franchise:-, and therefore, in view of the principle of ejusdem generis, the above expression '"any other business or commercial rights"' has to be read in the company of the preceding words. Ejusdem generis rule is the rule of generic words following more specific one. The rule is that when general words follow specific words of same nature, the general words must be confined to the things of the same kind as those specified. This rule of interpretation makes an attempt to reconcile incompatibility between the specific and general words. The first category of words like knowhow, patents, copyrights, etc. form a distinct genesis or category inasmuch as all those items are specific and elucidated rights of business or commercial nature. In such circumstances, the expression "any other business or commercial rights of similar nature" also must be in the same genesis or category with specific and elucidated identity of commercial or business nature. Therefore, in the light of the statutory provisions contained in Sec.32(1)(ii), the goodwill acquired by the assessee does not come under the expression of any other business or commercial rights of the nature similar to knowhow, patents, copyrights, etc.
On the issue as to whether non-compete consideration constitutes an intangible asset, there is an adverse judgement of the Bombay ITAT. I'll try and pull it out soon.
Regards,
Probal.
