takeover

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CA Abhiram Bharat. (Querist)

13 July 2011 hello experts,
a company has taken over a proprietary concern.
is this the case of amalgamation?/
and if it is not, then why..

in that case what will be the treatment of the GOODWILL arising as a result of excess PC paid.
AS-14 deals with the Amalagamatin Godwill
while AS-26 specically excludes the GOODWILL..from its scope.
so what will be the treatment. & please explain its TAX IMPLICATIONS>.
tell me at the earlist..
kind regards--
abhiram

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

13 July 2011
Q- A company has taken over a proprietary concern. is this the case of amalgamation?

Ans.

This is not amalgamation as the term is used for the mergers of companies only.

You may refer section 47(xiv), in which
the succession of a sole prop. concern by a company under certain conditions will not treated as transfer.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

13 July 2011 in that case what will be the treatment of the GOODWILL arising as a result of excess PC paid. AS-14 deals with the Amalagamation Goodwill.
while AS-26 specifically excludes the GOODWILL..from its scope.
so what will be the treatment. & please explain its TAX IMPLICATIONS>.
tell me at the earlist.

In a case where conditions as referred in Section 47(xiv) has been followed, no capital gain will arise to the sole proprietor.

In other cases , the excess if any received will be considered for capital gain as the transaction of takeover will be treated as transfer.

As far as Goodwill is concerned, the same will be disclosed in the Balance Sheet and as per guidance emerges from AS-14, the said goodwill has to be amortized within a period of 5 years.

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