There were 3 Companies in existence. Company A, Company B and Company C. Company A and B were merged/amalgamated with Company C. All these companies were having businesses in trading and distribution (not involving in any software or allied business)
The scheme of amalgamation was Assets and Liabilities of A & B were taken over by C at their book values.
Over and above this Shareholders of A and B got certain shares in C in the specified proportion and value.
Company C created Goodwill Account equal to difference of New Value of shares in C less Old value of share capital in A and B put together.
There were no transactions in cash or by cheque towards Goodwill creation. Consideration was only by way of issuance of shares in C.
Opinion required on:
1. Does this Goodwill attract any Sales Tax in the year 2001-02. If yes at what rate? 2. Company C’s Sales Tax assessment completed and order was passed for the accounting year 2001-02. 3. Under Amnesty scheme 2004 Company C paid the differential amount (aspects other than the aforesaid Goodwill) on certain other discrepancies pertaining to year 2001-02. 4. Considering aspects/developments 2 and 3 above even if ST is payable on Goodwill, whether the same can be claimed by the department now.
12 November 2007
I don't think sales tax can be levied on the amount of Goodwill created by a company. Sales tax is a levy by the State on the consideration received/paid for sale or purchase of goods by a person of some movable goods.
Creation of goodwill is a mere book entry and i don't think there is any sale involved therein. Neither is the goodwill created as a result of transfer of any movable assets.
You may however, have to verify the taxability aspect from the point of view of 'sale of business undertaking' as provided in the sales tax law of your state.
CAclubindia
