CS Executive · Tax Laws and Practice · Capital Gains
Under the Income-tax Act, 2025, in computing the net worth of an undertaking transferred by slump sale, what is the value of goodwill of the business that was not acquired by the assessee by purchase from a previous owner?
Self-generated goodwill is valued at nil. For net worth in a slump sale, goodwill not acquired by purchase from a previous owner is taken as nil in the aggregate value of total assets, rather than at book value or fair market value.
- AIts book value
- BIts fair market value on the date of transfer
- CNilCorrect
- DIts cost of internal generation
Explanation
Section 77(5)(b)(ii) states that goodwill not acquired by purchase from a previous owner is valued at nil in the aggregate value of total assets. Book value applies only to other assets not covered by specific rules. Fair market value is used for the full value of consideration, not for net worth.
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