Short Overview: Once a particular asset is ceased to exist in the books of account and also, the assessee is not getting any enduring benefit from such assets, then the question of depreciation on such non-existing asset does not arise.

AO disallowed depreciation on goodwill on the ground that the asset was impaired in the books of account as per Accounting Standards and the assessee had not sold the asset but continues to enjoy the goodwill. However, assessee contended that although, it had written off goodwill by impairment of asset but as the WDV of such goodwill continued to remain and, as long as, the block of asset was continued in the books of account, it would be entitled to claim depreciation on WDV of such block of assets.

It is held that since goodwill was not treated as an asset in assessee’s books of accounts and also, the assessee was not getting any enduring benefit out of such goodwill, therefore, the question of allowing depreciation on such non-existing asset did not arise. Hence, AO rightly disallowed the depreciation on goodwill.

Decision: Against the assessee.