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The Central Board of Direct Taxes amends the Income-tax Rules, 1962 to add rule 8AC for computing short-term capital gains and written down value under section 50 where depreciation on goodwill has been obtained. The rules apply for the assessment year starting on the 1st day of April, 2021. Assessees determine the written down value and short-term capital gains in accordance with the specified formulas when goodwill was an asset in the block of asset intangible. The regulation details the calculation method when the reduction exceeds the aggregate of the written down value and actual cost of other acquired intangible assets. It also provides that no capital gains or loss arise under certain conditions when the block of asset ceases to exist.
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[भाग II—खण्ड 3(i)] भारत का राजपत्र : असाधारण 3 MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 7th July, 2021 INCOME-TAX
G.S.R. 472(E).— In exercise of the powers conferred by proviso to section 50 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─
Short title: - These rules may be called the Income tax Amendment (19th Amendment), Rules, 2021.
In the Income-tax Rules, 1962, after rule 8AB, the following rules shall be inserted, namely:—
“8AC. Computation of short term capital gains and written down value under section 50 where depreciation on goodwill has been obtained. (1) For the purposes of proviso to section 50, the written down value of the block of the asset and short term capital gains, if any, for the previous year relevant to the assessment year commencing on the 1st day of April, 2021 shall be determined in accordance with this rule. (2) Where the goodwill of the business or profession was the only asset or one of the assets in the block of asset “intangible” for which depreciation was obtained by the assessee in the assessment year beginning on the 1st day of April, 2020, the written down value of this block of asset for the previous year relevant to the assessment year commencing on the 1st day of April, 2021 shall be determined in accordance with the provisions of item (ii) of sub-clause (c) of clause (6) of section 43. (3) Where the reduction under sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43, for the previous year relevant to the assessment year commencing on the 1st day of April, 2021, exceeds the aggregate of the following amounts, namely:-
such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets. (4) Without prejudice to the provisions of sub-rule (3) and section 55, where the goodwill of the business or profession was the only asset in the block of asset “intangible” for which depreciation was obtained by the assessee in the assessment year beginning on the 1st day of April, 2020, and the block of asset ceases to exist on account of there being no further asset acquired during the previous year relevant to the assessment year commencing on the 1st day of April, 2021 in that block, there will not be any capital gains or loss on account of the block of asset having ceased to exist. (5) The capital gains or loss on transfer of goodwill, during the previous years relevant to the assessment year 2021-22 or subsequent assessment years, shall be determined in accordance with the provisions of section 48, section 49 and clause (a) of sub-section (2) of section 55.” [Notification No. 77/2021/ F. No. 370142/23/2021-TPL] ANKIT JAIN, Under Secy. (Tax Policy and Legislation Division)
Note. –The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and was last amended vide notification number G.S.R. 470 (E) dated the 2nd July, 2021.
