We bought a business under a slump sale agreement and booked the excess of price over net tangible assets as 'goodwill'. The Assessing Officer says goodwill is not depreciable. Can we still get depreciation on it?
For the years before AY 2021-22, yes, if the excess in truth represents identified business and commercial rights and not goodwill in the abstract. The Delhi High Court held that know-how, business claims, business information, business records, contracts and skilled employees acquired under a slump sale agreement are 'business or commercial rights of similar nature' under s.32(1)(ii) and are depreciable, whatever the label in the books. Read the amendment note before relying on this today.
Decided by the High Court (The Acting Chief Justice and Siddharth Mridul J (judgment by Siddharth Mridul J)) on 2012-03-30, reported as ITA No.315/2010, ITA No.1151/2010 and ITA No.1152/2010 (Delhi High Court); reserved 21 September 2011, decided 30 March 2012. It bears on section 32(1), section 50B, section 2(42C) of the Income Tax Act 1961, in Deductions & Disallowances, Capital Gains and How Tax Law Is Read matters.
This is the standard route by which a buyer in a business transfer converts a large part of the purchase price into a depreciable intangible, and the Court's method is the important part: apply ejusdem generis, but hold that the right need not answer the description of know-how, patent, trademark, licence or franchise — it need only be of a similar nature, that is intangible, valuable and capable of being transferred. The Court also refused to treat the entry in the books as conclusive, which is what defeats the Assessing Officer's usual point that the assessee itself called it goodwill. The limit is severe and recent: the Finance Act 2021 amended s.2(11), s.32 and s.50 to take goodwill of a business or profession out of the block of assets entirely from AY 2021-22, and inserted Explanation 2(aa) to s.50B taking self-generated goodwill at nil in the seller's net worth. So from AY 2021-22 a claim that rests on goodwill as such fails; a claim that rests on separately identified business or commercial rights still stands on this judgment, and the drafting of the business transfer agreement is now what decides the outcome.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, in the transmission and distribution business of power, had been a subsidiary of ALSTOM Projects India Ltd and became a subsidiary of Areva T & D Holdings SA France with effect from 1 April 2004 pursuant to a slump sale agreement dated 30 June 2004. Under that agreement the business was transferred lock, stock and barrel, the transferor retaining only its trademark, for a total consideration of Rs.44.7 crores. The book value of the net tangible assets transferred was Rs.28.11 crores, recorded in the transferee's books at the same value as in the transferor's. The excess of Rs.16,58,76,000 was allocated to a bundle of business and commercial rights defined in the agreement — business claims, business information, business records, contracts, skilled employees and know-how — and compendiously entered in the books as 'goodwill'. For AY 2005-06 the assessee claimed depreciation on that sum under s.32(1)(ii). The Assessing Officer disallowed it on 28 December 2007 on the twin grounds that goodwill is not eligible and that the assessee had not shown the sum was paid for business and commercial rights; the CIT(Appeals) affirmed on 4 April 2008 and the Tribunal dismissed the appeal on 24 April 2009, holding that the residual clause must be read as limited to assets similar to those enumerated before it. The Assessing Officer had accepted the allocation of the Rs.44.7 crores between tangible and intangible assets. The two companion appeals concerned Jai Parabolic Spring Ltd, where the Tribunal had allowed depreciation on marketing and territorial rights to sell through the seller's dealer and distributor network.
The substantial question of law was decided in the affirmative in favour of the assessee, the Tribunal's order was set aside and ITA No.315/2010 was allowed; the two Revenue appeals in the Jai Parabolic Spring matters were dismissed, with no order as to costs. The specified intangible assets acquired under the slump sale agreement were 'business or commercial rights of similar nature' within s.32(1)(ii) and were eligible for depreciation (para 14). Because the appeal succeeded on that ground the Court expressly declined to decide the alternative submission that goodwill per se is eligible for depreciation under s.32(1)(ii) (para 15).
The Court applied the rule of ejusdem generis to the words 'any other business or commercial rights of similar nature' in s.32(1)(ii), but held that the rights need not answer the description of know-how, patents, trademarks, licences or franchises — they must merely be of a similar nature to those specified assets (para 13). It drew support from the Supreme Court in Techno Shares and Stocks Ltd v. CIT, 327 ITR 323, where a Bombay Stock Exchange membership card was held to be a business or commercial right notwithstanding that it was described as a personal privilege (para 9), and from its own decision in CIT v. Hindustan Coco Cola Beverages (P) Ltd, 331 ITR 192, noting that the scope of s.32 had been widened by the Finance (No. 2) Act 1998 to allow depreciation on intangible assets acquired on or after 1 April 1998 (para 10). On the facts, the running business was acquired as a going concern lock, stock and barrel minus the transferor's trademark for a lump sum of Rs.44.7 crores, the net tangible assets were carried across at Rs.28.11 crores, and the balance of Rs.16,58,76,000 was allocated to a bundle of clearly defined business and commercial rights (para 12). In the companion appeals the Court held that what had been acquired were commercial rights to sell products under the trade name and through the network created by the seller, that the Assessing Officer was wrong to treat book entries as conclusive, and that payment had in fact been made for acquisition of commercial rights on which depreciation is permissible (para 17).
In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section.
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Handle my notice → Ask a CA on WhatsAppFor the years before AY 2021-22, yes, if the excess in truth represents identified business and commercial rights and not goodwill in the abstract. The Delhi High Court held that know-how, business claims, business information, business records, contracts and skilled employees acquired under a slump sale agreement are 'business or commercial rights of similar nature' under s.32(1)(ii) and are depreciable, whatever the label in the books. Read the amendment note before relying on this today. This was decided by the High Court (The Acting Chief Justice and Siddharth Mridul J (judgment by Siddharth Mridul J)) and bears on section 32(1), section 50B, section 2(42C) of the Income Tax Act 1961. It is reported as ITA No.315/2010, ITA No.1151/2010 and ITA No.1152/2010 (Delhi High Court); reserved 21 September 2011, decided 30 March 2012. This is the standard route by which a buyer in a business transfer converts a large part of the purchase price into a depreciable intangible, and the Court's method is the important part: apply ejusdem generis, but hold that the right need not answer the description of know-how, patent, trademark, licence or franchise — it need only be of a similar nature, that is intangible, valuable and capable of being transferred. The Court also refused to treat the entry in the books as conclusive, which is what defeats the Assessing Officer's usual point that the assessee itself called it goodwill. The limit is severe and recent: the Finance Act 2021 amended s.2(11), s.32 and s.50 to take goodwill of a business or profession out of the block of assets entirely from AY 2021-22, and inserted Explanation 2(aa) to s.50B taking self-generated goodwill at nil in the seller's net worth. So from AY 2021-22 a claim that rests on goodwill as such fails; a claim that rests on separately identified business or commercial rights still stands on this judgment, and the drafting of the business transfer agreement is now what decides the outcome. If it applies to you, the first step is this: Go to the transfer agreement and list, item by item, the rights actually acquired — contracts, order book, customer and supplier records, know-how, trained workforce, distribution network — and show each is intangible, valuable and transferable.
The assessee, in the transmission and distribution business of power, had been a subsidiary of ALSTOM Projects India Ltd and became a subsidiary of Areva T & D Holdings SA France with effect from 1 April 2004 pursuant to a slump sale agreement dated 30 June 2004. Under that agreement the business was transferred lock, stock and barrel, the transferor retaining only its trademark, for a total consideration of Rs.44.7 crores. The book value of the net tangible assets transferred was Rs.28.11 crores, recorded in the transferee's books at the same value as in the transferor's. The excess of Rs.16,58,76,000 was allocated to a bundle of business and commercial rights defined in the agreement — business claims, business information, business records, contracts, skilled employees and know-how — and compendiously entered in the books as 'goodwill'. For AY 2005-06 the assessee claimed depreciation on that sum under s.32(1)(ii). The Assessing Officer disallowed it on 28 December 2007 on the twin grounds that goodwill is not eligible and that the assessee had not shown the sum was paid for business and commercial rights; the CIT(Appeals) affirmed on 4 April 2008 and the Tribunal dismissed the appeal on 24 April 2009, holding that the residual clause must be read as limited to assets similar to those enumerated before it. The Assessing Officer had accepted the allocation of the Rs.44.7 crores between tangible and intangible assets. The two companion appeals concerned Jai Parabolic Spring Ltd, where the Tribunal had allowed depreciation on marketing and territorial rights to sell through the seller's dealer and distributor network. The matter was decided on 2012-03-30 by the High Court (The Acting Chief Justice and Siddharth Mridul J (judgment by Siddharth Mridul J)). On those facts the High Court held as follows. The substantial question of law was decided in the affirmative in favour of the assessee, the Tribunal's order was set aside and ITA No.315/2010 was allowed; the two Revenue appeals in the Jai Parabolic Spring matters were dismissed, with no order as to costs. The specified intangible assets acquired under the slump sale agreement were 'business or commercial rights of similar nature' within s.32(1)(ii) and were eligible for depreciation (para 14). Because the appeal succeeded on that ground the Court expressly declined to decide the alternative submission that goodwill per se is eligible for depreciation under s.32(1)(ii) (para 15).
The Court applied the rule of ejusdem generis to the words 'any other business or commercial rights of similar nature' in s.32(1)(ii), but held that the rights need not answer the description of know-how, patents, trademarks, licences or franchises — they must merely be of a similar nature to those specified assets (para 13). It drew support from the Supreme Court in Techno Shares and Stocks Ltd v. CIT, 327 ITR 323, where a Bombay Stock Exchange membership card was held to be a business or commercial right notwithstanding that it was described as a personal privilege (para 9), and from its own decision in CIT v. Hindustan Coco Cola Beverages (P) Ltd, 331 ITR 192, noting that the scope of s.32 had been widened by the Finance (No. 2) Act 1998 to allow depreciation on intangible assets acquired on or after 1 April 1998 (para 10). On the facts, the running business was acquired as a going concern lock, stock and barrel minus the transferor's trademark for a lump sum of Rs.44.7 crores, the net tangible assets were carried across at Rs.28.11 crores, and the balance of Rs.16,58,76,000 was allocated to a bundle of clearly defined business and commercial rights (para 12). In the companion appeals the Court held that what had been acquired were commercial rights to sell products under the trade name and through the network created by the seller, that the Assessing Officer was wrong to treat book entries as conclusive, and that payment had in fact been made for acquisition of commercial rights on which depreciation is permissible (para 17). In the words reproduced by the source cited on this page: "In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section." The decision followed or applied Techno Shares and Stocks Ltd v. CIT, 327 ITR 323 (SC) — relied on; CIT v. Hindustan Coco Cola Beverages (P) Ltd, 331 ITR 192 (Del) — relied on.
It was decided by the High Court on 2012-03-30 and is reported as ITA No.315/2010, ITA No.1151/2010 and ITA No.1152/2010 (Delhi High Court); reserved 21 September 2011, decided 30 March 2012. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 32(1), section 50B, section 2(42C), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The substantial question of law was decided in the affirmative in favour of the assessee, the Tribunal's order was set aside and ITA No.315/2010 was allowed; the two Revenue appeals in the Jai Parabolic Spring matters were dismissed, with no order as to costs. The specified intangible assets acquired under the slump sale agreement were 'business or commercial rights of similar nature' within s.32(1)(ii) and were eligible for depreciation (para 14). Because the appeal succeeded on that ground the Court expressly declined to decide the alternative submission that goodwill per se is eligible for depreciation under s.32(1)(ii) (para 15). It arises in Deductions & Disallowances, Capital Gains and How Tax Law Is Read matters, on section 32(1), section 50B, section 2(42C) of the Income Tax Act 1961, and was decided by The Acting Chief Justice and Siddharth Mridul J (judgment by Siddharth Mridul J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not let the accounting label decide the claim; the Court held entries in books are not conclusive and the true nature of the transaction is determined with reference to law. For AY 2021-22 onwards, never plead the claim as depreciation on goodwill — it is excluded by statute. Plead it as depreciation on identified business or commercial rights under s.32(1)(ii), and be ready to show the valuation allocating the price to them. Get a purchase price allocation done contemporaneously by a valuer, allocating the lump sum between tangible assets and each identified intangible; in this case the Assessing Officer had accepted the allocation between tangible and intangible assets and the fight was only about the character of the intangible. For the seller, check Explanation 2(aa) to s.50B — self-generated goodwill is taken at nil in computing net worth, which raises the gain.
Still good law. The holding on business or commercial rights other than goodwill stands, and nothing doubting it has been found. The search for later treatment was not exhaustive, so a reader should not take this as a check that the judgment has never been distinguished. The surrounding law, however, has changed, and the change is what governs most present-day facts. The Finance Act 2021 amended s.2(11), s.32 and s.50 to take goodwill of a business or profession out of the block of assets and out of depreciable assets altogether with effect from assessment year 2021-22, and inserted Explanation 2(aa) to s.50B, which takes self-generated goodwill at nil in computing the seller's net worth. The text of s.50B as amended up to 2025, on the Department's own statement of the section, carries that Explanation. The Court here expressly left open whether goodwill as such is depreciable (para 15), so the question the judgment declined to answer has since been answered by Parliament against the taxpayer for years from 2021-22. What survives, and what does not. A claim pleaded as depreciation on goodwill fails for assessment year 2021-22 and after, whatever this judgment says. A claim pleaded as depreciation on separately identified business or commercial rights under s.32(1)(ii) — contracts, order book, customer and supplier records, know-how, a trained workforce, a distribution network — still rests on this judgment, because the amendment removed goodwill and did not touch the residuary words the Court construed. For years before 2021-22 the judgment applies on its own terms, including the holding that entries in the books are not conclusive of the character of what was bought. What would displace it: a Supreme Court decision reading 'business or commercial rights of similar nature' more narrowly than the ejusdem generis test applied at para 13; or a decision holding that the 2021 amendment, though framed as an exclusion of goodwill, also cuts down claims on identified intangibles acquired in a business transfer. Neither has been located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A structural caution about the text of the judgment. Two trailing items numbered '19' and '20' appear after the judicial text, and their content is bracketed editorial matter — '[Reserved on... ]', '[Judgment authored by...]' — rather than anything the Court decided. The judgment's own reasoning ends at paragraph 17, which disposes of the companion Jai Parabolic Spring appeals; after that, 'No order as to costs.' is printed on an unnumbered line above the signature block. There is no paragraph 18. Nothing in this entry is taken from the spurious trailing items, and a citation to paragraph 18, 19 or 20 of this judgment is a citation to nothing. The sentence quoted from paragraph 14 — the holding that the specified intangible assets are business or commercial rights of a similar nature within s.32(1)(ii) — has been confirmed word for word against the judgment a second time, independently of the continuous reading, because it is the sentence the whole entry turns on. On the bench: the heading names the second judge only as 'HON'BLE THE ACTING CHIEF JUSTICE', without giving a name. The bench field records it that way rather than guessing, and a reader who needs the name will have to take it from the court's own roster for the date. On the sections field: s.2(42C) is tagged because the transaction is described throughout as a slump sale and the agreement of 30 June 2004 is a slump sale agreement, but the Court does not construe that definition. Nothing in this judgment decides whether the transfer answered s.2(42C); the point was not in dispute, the Assessing Officer having already accepted the allocation of the Rs.44.7 crores between tangible and intangible assets. The fight was about the character of the intangible, not about the character of the transfer. Two limits worth carrying away. The Court expressly declined to decide the alternative submission that goodwill as such is depreciable under s.32(1)(ii) (paragraph 15), so this judgment is not authority either way on that question, and the Finance Act 2021 has since answered it by statute for assessment year 2021-22 onwards. And the reasoning depends on a bundle of rights that the agreement itself defined — business claims, business information, business records, contracts, skilled employees and know-how. Where an agreement says only that the buyer acquires the business and the excess is goodwill, the material on which this judgment operates is simply absent. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The substantial question of law was decided in the affirmative in favour of the assessee, the Tribunal's order was set aside and ITA No.315/2010 was allowed; the two Revenue appeals in the Jai Parabolic Spring matters were dismissed, with no order as to costs. The specified intangible assets acquired under the slump sale agreement were 'business or commercial rights of similar nature' within s.32(1)(ii) and were eligible for depreciation (para 14). Because the appeal succeeded on that ground the Court expressly declined to decide the alternative submission that goodwill per se is eligible for depreciation under s.32(1)(ii) (para 15).
TaxSphere, “Areva T & D India Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/areva-t-and-d-india-intangibles-bought-in-a-slump-sale/ (validity last checked 2026-09-08)
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The Assessing Officer has broken our lump sum into building, plant and paint shop and charged short-term capital gains, relying on the values the buyer later put in its own books. Can he apportion a slump price like that?
I bought a business on slump sale. Can I depreciate the assets at the price I paid?
We took over a business under a business transfer agreement and assumed liabilities far in excess of the assets, paying no cash. The Assessing Officer says we paid nothing, so there is no cost and no depreciation on the intangibles. Is that right?
The Assessing Officer says that because depreciation of a known amount was allowed on the assets over the years, that figure must be the excess over written down value and can be taxed. Nothing in our documents allocates the price. Can he do that?
