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Purchased GOOD WILL

SAI KRISHNA GHANTASALA (JOB) (202 Points)

28 September 2010

HI ALL

can anyone help on how the treatment of the PURCHASED GOOD WILL as per INCOME TAX in case of a COMPANY which is generated on purchase of a line of business.

With regards

KRISHNA.S.GHANTASALA

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10 Replies

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27191 Points)
Replied 28 September 2010

This is Capital Gain.

With Zero Cost of Acquisition.

& Hence Fully Taxable as Capital Gain.

Exception: Under IT Act, Professional Goodwill is Exempted.

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C.A. LINESH PATIL (CA) (910 Points)
Replied 28 September 2010

when you will sale that purchase goodwill capital gain shall be computed as per provision of section 48 and cost of purchase goodwill shall be taken as price paid for it under AS 26 that is valued goodwill.(AS per section 55)

however value for self generated goodwill is taken as NIL under section 55.

1 Like

Sunshine (Helping All) (10575 Points)
Replied 28 September 2010

Originally posted by : linesh
	when you will sale that purchase goodwill capital gain shall be computed as per provision of section 48 and cost of purchase goodwill shall be taken as price paid for it under AS 26 that is valued goodwill.(AS per section 55) however value for self generated goodwill is taken as NIL under section 55.

NITIN BHATIA (CA FINAL) (188 Points)
Replied 28 September 2010

capital gain will arise.

vijay (Accountant) (902 Points)
Replied 28 September 2010

the whole amount received will be capital gain as goodwill being a self genrated assets will have zero cost

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Max Payne (employed) (2574 Points)
Replied 28 September 2010

Dear Friend,

Where goodwill is purchased, it is not self generated. Its cost will be he actual cost of acquisition.

You have to compute the capital gain accordingly.

sachin kakkar (CA) (188 Points)
Replied 28 September 2010

dear frnd,

if goodwill is self generated then its value is nil but in this case it is not selfgenerated so COA will be the cost at which it is purchased + appropirate indexation at the time of sale( if applicable ie. in case of LTCG)

ravi tej (ca final) (392 Points)
Replied 29 September 2010

I AGREE WITH AYUSH

Mahesh (M.Com) (23 Points)
Replied 29 September 2010

Originally posted by : ravi tej
	I AGREE WITH AYUSH

Thanks for Sharing

Santosh (Student ( Final Year - New )) (348 Points)
Replied 29 September 2010

Originally posted by : AYUSH AGRAWAL
	This is Capital Gain. With Zero Cost of Acquisition. & Hence Fully Taxable as Capital Gain. Exception: Under IT Act, Professional Goodwill is Exempted.