Self generated goodwill

Hi nikhil.. Let me say, its really a briliant Q...

Luk, as per my view, following things should be considered :

A. Self - generated goodwill is never recorded in books.

B. As such amount is not recorded, ammortisation thereafter (depreciation) too is not charged.

C. Its when the sale of goodwill arises, then only amount is ascertained and hence recorded in books, that to sale entry only.

D. And it is not taxable (reason given below in 4th reply).

Now, let us say, when it can be considered as STCG..

A. When it is purchased.

B. It is amortised periodically.

C. There is a balance in books of accounts, while selling the same....

I Will Agree With Dheeraj

Hi Friendz,

Nikhil - As Dhiraj said - good question....!

100% Agree with Dhiraj on Logic part......

One thing is the way nature of Gain is calculated in case of Slump Sale - i:e "If undertaking is more than 36 months than entire gain is treated as Long Term otherwise short term"

The above provision should also be applied to "Goodwill" but IT WILL NOT since it is nowhere provided...

One thing is certain - "Where computation provision fails, the carging provision also becomes irrelevant"

I would like to conclude - Sale of Self generated Goodwill cannot be taxed since its period of holding is indeterminate.....

Can someone prove the above conclusion wrong......................

Amir... u r correct...

Actually, these days, running out of time, so dont know what m i typing even......

A self-generated goodwill is not taxable, it is exempt...

Reason is very simple, as tax is always on "gain/loss" on sale and not on the asset itself...

In self-generated goodwill, there's no cost, so question of gain/loss doesn't arise, so it is exempted...

Dear All you provided the great info yo us

agree with dhiraj sir

but it is taxable as per the judgement given by Supreme court in CIT vs B.C. Srinivasa Shetty - 128 ITR 294 in 1987-88. so please conlude on above issue by keeping this case in mind

Can anyone of you please explain the taxability of Goodwill at the time of Admission of a Partner

I record the entries as follows:

The new partner does not bring Good will in cash but it is recorded as

First Treatment

Good will Dr.

To Capital of existing partner "A"

To Capital of existing partner "B"

(Not withdrawn in Cash)

Second Treatment

Goodwill Dr.

To Capital Reserve (Distributable to existing partners only)

Third Treatment (When the new partner brings Goodwill in Cash)

Goodwill Dr.

To Capital of Partner "A"

To Capital of Partner "B"

Capital of Partner "A" Dr.

Capital of Partner "B" Dr.

To Bank (Goodwill Withdrawn)

Please suggest the time Taxability in hands of Firm, Partners. And the Date of Aquisition, Cost of Acquistion.

Dear all you,

1.One business organisation get an advance in cash aginest self genarated goodwill settled in oral before transfer. WHAT IS THE ENTRY?

2 Then passing the entry in different ways HOW CAN TREAT THE PURCHAGERIN THE BOOKS OF AGREED SELLER? AND AGREED PURCHAGER? 

3 After that the purchager of self genarated good will transfered the same to Thired party at higher value.THEN WHAT IS TAX IMPLICATION ON SECOND PARTY?

4 Basing on the entry CAN COST OF GOODWILL CAN ARRISE OR NOT?

5 Consedering the above the net transaction will be between first and third parties.SO TAXBILITY MAY CONFORM. PLEASE SUGGEST.

BALU

Lerner

Dear all you,

1.One business organisation get an advance in cash aginest self genarated goodwill settled in oral before transfer. WHAT IS THE ENTRY?

2 Then passing the entry in different ways HOW CAN TREAT THE PURCHAGERIN THE BOOKS OF AGREED SELLER? AND AGREED PURCHAGER? 

3 After that the purchager of self genarated good will transfered the same to Thired party at higher value.THEN WHAT IS TAX IMPLICATION ON SECOND PARTY?

4 Basing on the entry CAN COST OF GOODWILL CAN ARRISE OR NOT?

5 Consedering the above the net transaction will be between first and third parties.SO TAXBILITY MAY CONFORM. PLEASE SUGGEST.

BALU

Lerner

Dear Friends

I need your opinion on the taxability of self generated good will of a firm (of over thirty years' standing which is creditted to the account of existing Partners, as revenue or capital receipt in the hands of the Partners. 

To expand it a bit, if I pass the following entry in my books
Debit Business Goodwill              500000

Credit Partner A                                                300000

Credit Partner B                                                 100000

Credit Partner C                                               100000

Are the above credits taxable in the hands of Partners A B and C ? Any case laws decided by Supreme Court ?

Pl advice

Sivasailam D

FCS

In a start up if promoters are issued some shares

Then is it a correct entry?

Goodwill a/c Dr

To share capital a/c

They are issued shares but no money will be received .. Is there any tax implication.. And it is called as self generating asset so no amortization.. PLZ clarify 

Depreciation u/s 32  on self generated goodwill can be available or not