Depreciation on acquired goodwill was allowable in a slump sale, and appellate authorities could entertain the claim despite no revised return.

Appellate authorities may entertain a bona fide depreciation claim on goodwill even if it was not raised in the original return, because the restriction in Goetze (India) applies only to the Assessing Officer. Goodwill acquired for consideration in a slump sale is treated as an intangible capital right falling within "any other business or commercial right of a similar nature" under section 32, and is eligible for depreciation for years before the prospective statutory exclusion. Contemporaneous valuation material supporting the acquisition cost was accepted, and the Revenue's valuation objections did not defeat the claim. Depreciation on goodwill was therefore allowable.

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Issues: (i) Whether a claim for depreciation on goodwill, not made in the return of income, could be entertained in appellate proceedings; (ii) Whether goodwill acquired pursuant to slump sale of a business undertaking was eligible for depreciation under section 32 of the Income-tax Act, 1961 for the assessment year in question.

Issue (i): Whether a claim for depreciation on goodwill, not made in the return of income, could be entertained in appellate proceedings.

Analysis: The restriction recognised in Goetze (India) was confined to the Assessing Officer and did not curtail the powers of the appellate authorities. The first appellate authority and the Tribunal were competent to admit and decide a bona fide claim where the relevant facts were already on record and the issue arose from the assessment proceedings.

Conclusion: The claim was validly entertainable in appellate proceedings and the objection based on absence of a revised return was rejected.

Issue (ii): Whether goodwill acquired pursuant to slump sale of a business undertaking was eligible for depreciation under section 32 of the Income-tax Act, 1961 for the assessment year in question.

Analysis: The Tribunal applied the principle laid down in Smifs Securities that goodwill acquired for consideration is a capital right falling within the expression "any other business or commercial right of a similar nature" and is therefore depreciable. It held that the later prospective amendment excluding goodwill from the definition of intangible asset did not govern the assessment year involved. The Tribunal also accepted that the acquisition was supported by contemporaneous valuation material, the consideration formed part of the cost of acquisition, and the Revenue's objections to valuation did not displace the entitlement to depreciation.

Conclusion: Depreciation on the acquired goodwill was allowable and the assessee's claim succeeded.

Final Conclusion: The assessee's grounds were accepted, the depreciation claim on goodwill was directed to be allowed, and the appeal was allowed.

Ratio Decidendi: Goodwill acquired for consideration in a business transfer or slump sale is a depreciable intangible asset under section 32 for the period prior to the prospective statutory exclusion, and such a claim may be entertained by appellate authorities even if not made in the original return.

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