Shares issued for consideration other than cash
This query is : Resolved
19 January 2013
Dear sir,
please clarify the following,
when the shares have been issued for consideration other than cash(i.e to promotors at free of cost)
Entry : G.W a/c dr 140 crores
To Equity share capital 100000
To sec.premium a/c 1399900000
can the above G.W be written off as per sec.32 of income tax act,
if yes,please provide the relavent case laws or any circulars or notifications.
please clarify the following,
when the shares have been issued for consideration other than cash(i.e to promotors at free of cost)
Entry : G.W a/c dr 140 crores
To Equity share capital 100000
To sec.premium a/c 1399900000
can the above G.W be written off as per sec.32 of income tax act,
if yes,please provide the relavent case laws or any circulars or notifications.
20 January 2013
Goodwill may be written off in accordance with the Accounting Standards, however, since no amount is being paid by the company for the purchase or acquiring of the Goodwill , Depreciation is not allowed U/s 32 (1) (ii).
20 January 2013
sir thanks for reply,
but here is the consideration i.e shares.
i think consideration need not be in cash(consideration may be any asset also which includes) here is one obligation has been created on the company i.e by issue of equity shares.
is my view correct or not sir,
but here is the consideration i.e shares.
i think consideration need not be in cash(consideration may be any asset also which includes) here is one obligation has been created on the company i.e by issue of equity shares.
is my view correct or not sir,
20 January 2013
For allowing depreciation -the nomenclature given to entries in the books of accounts is not relevant.
.
The transaction must be a real one for claiming the depreciation and assessee must be in a position to substantiate the position.
.
In your case, the book entries reflect that goodwill has been acquired by issuing shares at a premium- but how its valuation could be justified. Unless the premium and goodwill can be justified or quantified properly, the value of Intangible Asset can not be said to be ascertained.
.
.
The transaction must be a real one for claiming the depreciation and assessee must be in a position to substantiate the position.
.
In your case, the book entries reflect that goodwill has been acquired by issuing shares at a premium- but how its valuation could be justified. Unless the premium and goodwill can be justified or quantified properly, the value of Intangible Asset can not be said to be ascertained.
.
26 July 2013
How you have valued the goodwill depends on the number of years the company is in existence. The shares can be allowed to be issued for consideration other than cash only if the directors have incurred some expenses or the directors are giving some assets to the company. You cannot give shares without any consideration and at the same time you cannot value the goodwill at your own and transfer it to reserve just to claim depreciation.
Since you have not mentioned how you have created goodwill it is not possible to reply properly
Since you have not mentioned how you have created goodwill it is not possible to reply properly
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CAPITAL GAIN REDEVELOPED FLAT
- CLOSING STOCK QUERY
- Requirement under FEMA &RBI
- REGARDING ITR FILING QUESTION
- ITC BENEFIT ON BROKRAGE PAID
- TDS refund Indemnity Bond
- DUE DATE FOR ITR FILING
- Query regarding TDS on EPFO Higher Pension Arrears- under wrong section
- GST ISD Query on various AMCs
- Technical Glitch in ITR-4 Online Form (AY 2026-27): Sec 44AE Partner Remuneration not mapping to E8
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
- Query regarding reporting of exempt foreign remuneration in ITR (AY 2026-27)
- FEMA/RBI treatment — Amazon.ca arbitrage (US buy, Canada sell, goods never enter India)
- Goods return by customer
- INWARD REMITTANCE FOREIGN
- CPC and SAC
- Account freezed for Ineligible ITC Scrutiny for GST Annual Return
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
