Goodwill qualifies as an intangible asset for depreciation under section 32(1) when acquired in a business transfer.

Goodwill arising from a business transfer or acquisition is treated as an intangible asset within "any other business or commercial rights of similar nature" under Explanation 3(b) to section 32(1) of the Income-tax Act, 1961, and therefore qualifies for depreciation. The Tribunal relied on the Supreme Court's view that excess consideration over net asset value, when recognised as goodwill in a going-concern acquisition, falls within the statutory expression eligible for allowance. The depreciation claim on goodwill was accordingly upheld and the Revenue's challenge failed.

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Issues: Whether depreciation is allowable on goodwill arising from a business transfer agreement and whether the assessee was entitled to relief under section 32(1) of the Income-tax Act, 1961.

Analysis: The assessee had acquired the business as a going concern and the excess of consideration over the net asset value was treated as goodwill. The Assessing Officer disallowed depreciation, but the appellate authority accepted the claim. The Tribunal noted that the Supreme Court had already held that goodwill falls within the expression "any other business or commercial rights of similar nature" in Explanation 3(b) to section 32(1) of the Income-tax Act, 1961, and is therefore an intangible asset eligible for depreciation.

Conclusion: The claim for depreciation on goodwill was correctly allowed, and the Revenue's challenge failed.

Ratio Decidendi: Goodwill arising in a business acquisition or amalgamation is an intangible asset covered by Explanation 3(b) to section 32(1) of the Income-tax Act, 1961 and qualifies for depreciation.

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