Amendment of section 50.
15. In section 50 of the Income-tax Act, after the proviso, the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2021, namely:––
“Explanation.––For the purposes of this section, reduction of the amount of goodwill of a business or profession, from the block of asset in accordance with subitem (B) of item (ii) of sub-clause (c) of clause (6) of section 43 shall be deemed to be transfer.”.
Notes on Clauses:
Clause 15 seeks to amend section 50 of the Income-tax Act relating to special provision for computation of capital gains in case of depreciable assets.
The said section provides for certain modification in the applicability of the provisions of sections 48 and 49 for computation of capital gains in case of depreciable assets where the capital asset is an asset forming part of a block of asset in respect of which depreciation has been allowed under this Act.
Proviso to the said section provides that in a case where goodwill of a business or profession forms part of a block of assets for the assessment year beginning of the 1st day of April, 2020 and depreciation thereon has been obtained by the assessee under the Incometax Act, the written down value of that block of asset and short term capital gain if any, shall be determined in such manner as may be provided by rules.
It is proposed to amend section 50 to insert an Explanation to clarify that for the purposes of the said section 50, reduction of the amount of goodwill of a business or profession, from the block of asset in accordance with sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43 shall be deemed to be transfer.
This amendment will take effect retrospectively from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
