Depreciation on goodwill in case of foreign co

Chintan Shah (-) (534 Points)

10 March 2010  

Dear friends,

 

 

Following is the situation in the amalgamation.

 

Plant                50 Lacs

Building          150 lacs

Furniture          10 Lacs

 

Knowhow        15 Lacs

Patents             10 Lacs

 

Goodwill         50 Lacs

 

All assets transferred to a foreign company by an Indian company in a scheme of amalgamation. So Explanation 7 to Section 43(1) is not applicable. This means that the actual cost of the plant, building, furniture, etc. will be actual consideration paid or payable by the foreign company to Indian company. Can we get depreciation on Goodwill? If not can it be adjusted in the other assets proportionately increasing their actual cost? If not whether the goodwill can be claimed as expenditure u/s 37 (1) by way of writing it off over 5 years?

 

Please note that since the foreign company has a business connection in India, its income will be computed which is attributable to such business connection and thereby it is subject to Indian tax jurisdiction and therefore it needs to determine actual cost of assets received in amalgamation for purposes of claiming depreciation.

 

Thanks in advance,

 

Regards

Chintan