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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

Under section 77 of the Income-tax Act, 2025, an undertaking has these items in its books: a depreciable block with a WDV of Rs 80 lakh under section 41(1)(c), self-generated goodwill carried at Rs 15 lakh, other assets at book value Rs 50 lakh, and liabilities of Rs 40 lakh. Ignoring revaluation, what is the net worth?

Net worth is Rs 90 lakh. Self-generated goodwill is taken at nil, so assets are 80 lakh plus 50 lakh, which is 130 lakh. Deducting liabilities of 40 lakh gives 90 lakh. Counting goodwill at Rs 15 lakh would wrongly give 105 lakh.

  1. ARs 90 lakhCorrect
  2. BRs 105 lakh
  3. CRs 130 lakh
  4. DRs 75 lakh

Explanation

Self-generated goodwill not acquired by purchase is nil. Total assets = 80 + 0 + 50 = 130 lakh. Net worth = 130 - 40 = 90 lakh. Rs 105 lakh wrongly counts goodwill at Rs 15 lakh, since the goodwill was not purchased and is valued at nil.

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