COMMISSIONER OF INCOME TAX BOMBAY Vs. KAIKABAD

JUDGEMENT

(1.) In view of the decision in COMMISSIONER OF INCOME TAX V/s. B. C. Srinivasa Setty [1981) 128 ITR 294 (SC), the answer given by the tribunal to the question referred to us is correct and it is upheld. The matter is disposed of accordingly, No costs.

(2.) The assessee -firm was newly constituted in terms of a partnership deed dated 7.08.1970. The accounting period relevant to the assessment year 1972-73 was the year ending 30.09.1971. The assessee firm carried on during this year a business as sole selling agents of Bennett Coleman and Co. for selling their dailies and periodicals. Though the firm came into existence with effect from 1.09.1970, the business of the firm commenced on 1.01.1971, and the business of the partnership was carried on up to 30.09.1971. Thereafter, the business of the assessee-firm was transferred to a limited company called Kaikobad by ramji and Sons (Agency) P. Ltd. No goodwill amount was paid by the transferee to the transferor of the business in the present case, as noted by the Appellate Assistant Commissioner. The Income-tax Officer, however, invoked the provisions of sec. 52 of the Income-tax Act, 1961, and estimated the fair market value of the goodwill transferred by the assessee- firm to the limited company at Rs. 2,96,420.00 on the basis of one years purchase of five years' average profits. The Income-tax Officer treated the said amount of Rs. 2,96,420.00 as the capital gains arising to the assessee-firm on the transfer of the goodwill of the business and deducting therefrom a sum of Rs. 1,50,710.00 in terms of sec. 80T of the Act, computed the taxable capital gains at Rs.1,45,710.00.

(3.) The Appellate Assistant Commissioner held, relying on the decisions in CIT V/s. K. Rathnam Nadar [1969] 71 ITR 433 (Mad), COMMISSIONER OF INCOME TAX V/s. Chunilal Prabhudas and Co. [1970) 76 ITR 566 (Cal), Jagdev Singh Mumick v. CIT [1971] 81 ITR 500 (Delhi), COMMISSIONER OF INCOME TAX V/s. E. C. Jacob [1973] 89 ITR 88 (Ker) [FB] and COMMISSIONER OF INCOME TAX V/s. B. C. Srinivasa Setty [1974] 96 ITR 667 (Kar), that no capital gains tax could be levied on the transfer of the goodwill.