Ascertainment of Income

[SUDHAKAR SIVARAMAN]

Dear friends,

My client was doing Tanishq franchise showroom. In the month of June 2022, Tanishq company tookover the francise business and paid the following amount.

1. For assets (furniture, computer, interior etc) 1 crore

2. For business loss made by franchise from beginning- Rs.1.5 crore

3. Other service charges paid-Rs.1 crore

Now my question is point no.1- the differance between wdv at the beginning of the year 01.04.2022 and Rs.1 crore, can be treated as either profit/ loss. Is it correct?

For point no.2- How to account in books, whether i have to pay income tax for entire amount of this Rs.1.5 crore.

For point no.3- Whether i can treat it as goodwill and for this also whether i have to pay income tax full?

Kindly clarify

AI Summary

Slump sale treatment may convert asset consideration into capital gains while other payments treated as business income.
If the lump-sum consideration is not allocated to individual assets, the transfer qualifies as a slump sale and the consideration for the business transfer is taxable as capital gains under the capital-gains computation regime; slump sales are outside GST (exempt). Separate amounts labeled as compensation for business losses or as service charges should be treated as business income and may be set off against carry-forward losses, while service charges can attract GST with input tax credit implications for the purchaser.