GOODWILL IS AN INTANGIBLE ASSET U/S 32(1)(II) OF INCOME TAX ACT, 1961 AND ELIGIBLE FOR DEPRECIATION

On merits, sec. 32(1)(ii) allows depreciation in respect of know-how, patent, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. The term "commercial rights" are such rights which are obtained for effectively carrying on business and commerce. "Commerce" is a wide term which encompasses many a facet. Accordingly, any right obtained for carrying on business with effectiveness comes within the sweep of meaning of "intangible asset". Goodwill, being the positive reputation built by a person over a period of time,
is of "similar nature" as the other items enumerated in the definition of "intangible assets.