Rule-8AC of Income Tax Rules, 1962- Computation of STCG And WDV U/S 50 Where Depreciation On Goodwill Has Been Claimed
Section-50 of Income tax Act deals with computation of capital gain in case of depreciable assets. By introducing Notification No. 77/2021 dated 07.07.2021, CBDT inserted the rule no-8AC after rule 8AB by further amending the Income tax rules, 1962.
Let’s see in detail what does this notification talks about.
THIS RULE DEALS WITH-
> COMPUTATION OF SHORT TERM CAPITAL GAIN
> COMPUTATION OF WRITTEN DOWN VALUE
> WHERE DEPRECIATION OF GOODWILL HAS BEEN CLAIMED
> FOR PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR STARTING FROM 01.04.2021.
APPLICABILITY
♦ GOODWILL OF BUSINESS OR PROFESSION——IS THE ONLY ASSET OR ONE OF THE ASSET IN THE BLOCK OF ASSET-INTANGIBLE ASSETS
♦ ON WHICH DEPRECIATION HAS BEEN CLAIMED BY ASSESSEE STARTING FROM 01.04.2020
♦ WRITTEN DOWN VALUE FOR ASSESSMENT YEAR COMMENCING FROM 01.04.2021 SHALL BE———–According to the provisions of item (ii) of sub-clause (c) of clause (6) of section 43.
√ Section 43 clause (6) sub clause (c) item (ii) says that—–
in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i).
♦ If the reduction under sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43 >
Aggregate of the following——-
- WDV at the beginning of previous year starting from 01.04.2020 without giving effect to reduction under sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43 and
- Actual cost of any asset purchased during P.Y. commencing from 01.04.2020 under the block- Intangible assets other than goodwill
This excess will be deemed to be the CAPITAL GAIN ON TRANSFER OF SHORT TERM CAPITAL ASSET.
♦ Without prejudice to the provisions of sub-rule (3) and section 55——————-
-IF GOODWILL IS THE ONLY ASSET IN THE BLOCK-INTANGIBLE ASSETS
-DEPRECIATION WAS CLAIMED ON SUCH ASSET
-AND BLOCK OF ASSET CEASES TO EXIST ON ACCOUNT OF THERE IS NO OTHER ASSETS PURCHASED IN THAT BLOCK
-NO CAPITAL GAIN/LOSS ON BLOCK OF ASSET CEASES TO EXIST
♦ CAPITAL GAIN/LOSS ON TRANSFER OF GOODWILL FOR A.Y. 2021-22 & SUBSEQUENT
- Shall be determined in accordance with the provisions of section 48- Mode of computation, section 49- Cost with reference to certain modes of acquisition and clause (a) of sub-section (2) of section 55- Meaning of “adjusted”, “cost of improvement” and “cost of acquisition.
Source- www.incometaxindia.gov.in & other relevant notifications/circulars.
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