Depreciation: Intangible asset: Goodwill: Section 32(1)(ii) of Income-tax Act: A.Y. 2004-05: Purchase of hospital as going concern along with goodwill: Assessee entitled to depreciation on value of goodwill.

The assessee purchased a hospital as a going concern. The value of the goodwill which included the name of the hospital and its logo and trade mark was Rs.2 crores. For the A.Y. 2004-05, the assessee claimed depreciation on the goodwill. The Assessing Officer and the Tribunal disallowed the claim. On appeal by the assessee, the Kerala High Court reversed the decision of the Tribunal and held as under:

“(i) Without resorting to the residuary entry the assessee was entitled to claim depreciation on the name, trade mark and logo under the specific head provided u/s.32(1)

(ii) which covers trade marks and franchise. (ii) Admittedly the hospital was run in the same building, in the same town, in the same name for several years prior to the purchase by the assessee. By transferring the right to use the name of the hospital itself, the previous owner had transferred the goodwill to the assessee and the benefit derived by the assessee was retention of continued trust of the patients who were patients of the previous owners.

(iii) When the goodwill paid was for ensuring retention and continued business in the hospital, it was for acquiring a business and commercial rights and it was comparable with trade mark, franchise, copyright, etc., referred to in the first part of clause (ii) of section 32(1) and so much so, goodwill was covered by the above provision of the Act entitling the assessee for depreciation.”