01-24-2009, 06:56 PM
Dear,
You have asked a good question though you did not mention the details of the business combination.
However, getting specific to your query, I refer you to study section 24 of the Income Tax Ordinance, 2001 which deals with Intangibles. It provides for amortizing the "COST" of intangibles equally over the useful years of their lives unless such life is beyond 10 years in which case it will be amortized during the first 10 years equally.
Having explained this, I also wish to point out what this very section of ITO 2001 includes in the meaning of Intangibles. This is extremely important to know and ponder on. Section 24 states
âintangibleâ means any patent, invention, design or model, secret formula or process, copyright, trade mark, scientific or technical knowledge, computer software, motion picture film, export quotas, franchise, licence, intellectual property, or other like property or right, contractual rights and any expenditure that provides an advantage or benefit for a period of more than one year (other than expenditure incurred to acquire a depreciable asset or unimproved land)."
Goodwill has not specifically been included in this list. This creates doubts over the deductability of good-will. However, the last item in above list i.e. "any expenditure that provides an advantage or benefit for a period of more than one year" renders the good-will a qulified item for deduction against business income.
I advise you to study this section in detail along with other relevant portion of law (from section 18 to 31 more specifically) and treat the good-will as deductible/amortizable under section 24 of ITO 2001.
Regards,
KAMRAN.
You have asked a good question though you did not mention the details of the business combination.
However, getting specific to your query, I refer you to study section 24 of the Income Tax Ordinance, 2001 which deals with Intangibles. It provides for amortizing the "COST" of intangibles equally over the useful years of their lives unless such life is beyond 10 years in which case it will be amortized during the first 10 years equally.
Having explained this, I also wish to point out what this very section of ITO 2001 includes in the meaning of Intangibles. This is extremely important to know and ponder on. Section 24 states
âintangibleâ means any patent, invention, design or model, secret formula or process, copyright, trade mark, scientific or technical knowledge, computer software, motion picture film, export quotas, franchise, licence, intellectual property, or other like property or right, contractual rights and any expenditure that provides an advantage or benefit for a period of more than one year (other than expenditure incurred to acquire a depreciable asset or unimproved land)."
Goodwill has not specifically been included in this list. This creates doubts over the deductability of good-will. However, the last item in above list i.e. "any expenditure that provides an advantage or benefit for a period of more than one year" renders the good-will a qulified item for deduction against business income.
I advise you to study this section in detail along with other relevant portion of law (from section 18 to 31 more specifically) and treat the good-will as deductible/amortizable under section 24 of ITO 2001.
Regards,
KAMRAN.
