TaxTMI 
TaxTMI 
1974 (7) TMI 1
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....nsisting of three partners constituted under an instrument of partnership executed on July 28, 1954. The said partnership was dissolved on December 1, 1965, and its business was taken over by another partnership constituted under an instrument dated December 2, 1965. At the time of the dissolution of the assessee-firm its goodwill was valued at Rs. 1,50,000 and the account of each partner was credited with an amount of Rs. 50,000. The said amount of Rs. 1,50,000 was realised by the assessee from the new partnership firm as consideration for the transfer of its business. In computing the assessment of the assessee-firm for the assessment year 1966-67, the Income-tax Officer had not taken into account the sum of Rs. 1,50,000 realised as consi....
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....o transfer of goodwill. In support of that contention, the assessee relied on the decision of the Madras High Court in Commissioner of Income-tax v. K. Rathnam Nadar. The Tribunal was of the opinion that although the decision was rendered in the context of section 12B of the Income-tax Act of 1922, the ratio of the decision would clearly apply to a case arising under the Act also, as the relevant provisions of the Act are in pari materia with the relevant provisions of the 1922 Act. The Tribunal also noticed that the High Court of Calcutta in Commissioner of Income-tax v. Chunilal Prabhudas & Co. had taken the view that no capital gains arise under the Act on the transfer of goodwill. Following the said decisions, the Tribunal held that the....
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....e to capital gains tax. The decision of the Calcutta High Court in Chunilal Prabhudas's case arose under the 1922 Act and it proceeded on the view that goodwill is not a capital asset within the meaning of section 12B. The decision of the High Court of Madras in Rathnam Nadar's case raised a substantial question of law of general importance. Against the said judgment the department preferred an appeal to the Supreme Court in C.A. No. 1504/70. It was submitted by Sri Ramamani, learned counsel for the assessee, that the said appeal was heard before a Tax Bench of the Supreme Court on March 5, 1973, and March 6, 1963, and was dismissed as not pressed. The correctness of that statement was not disputed by Sri Rajasekhara Murthy, learned counse....
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.... When two views are possible on a question concerning the interpretation of a tax law, the one which is fair both to the assessee and the department should be followed. The view that capital gains tax is not attracted to transfer of goodwill is a fair and just interpretation. If the view of the Gujarat High Court in Mohanbhai Pamabhai's case is correct, the cost of acquisition of a goodwill being nil, the full value of the consideration for its transfer has to be brought to charge to capital gains tax. Such a levy will not be a tax on profits or gains but, in substance, a tax on the capital value of the asset. The capital value of goodwill is charged to tax under the Wealth-tax Act, 1957. Wealth-tax is an annual recurring tax. When there is....
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....uncertainty is left in the administration of the tax law. The decision in Rathnam Nadar's case was rendered in the year 1969. We asked Sri Rajasekhara Murthy as to whether the department had preferred appeals against the judgments of the High Courts of Calcutta, Delhi and Kerala. He took time for making his submissions after contracting the departmental authorities. He stated that no appeals were preferred by the department against the judgment of the High Courts of Calcutta and Kerala and that he has no information whether an appeal has been filed against the judgment of the High Court of Delhi. Sri Rajasekhara Murthy submitted that though the appeal against the judgment in Rathnam Nadar's case was dismissed as not pressed, the department ....