The Finance Bill 2021 has proposed that goodwill of a business
or profession will not be considered as a depreciable asset.
Depreciation would therefore, not be allowed on goodwill of a
business or profession in any situation.
Accordingly, goodwill of a business or profession has been excluded
from the meaning of intangible assets under section 32 of the
Income Tax Act, 1961 (IT Act) and corresponding
changes under various other provisions are proposed to be
amended.
Though a subject matter of litigation during assessments, it has
been well settled by various judicial pronouncements, including the
decision of Hon'ble Supreme Court in the case of Smif
Securities Limited [(2012) 348 ITR 302 (SC)], that goodwill is
an asset that arises on account of consideration paid being in
excess of fair value of assets and liabilities being acquired,
irrespective of the fact whether consideration is discharged in
cash or shares. The mode of acquisition of business may be via
