COMMISSIONER OF INCOME TAX Vs. LAL CHAND JAIN

JUDGEMENT

(1.) JUDGMENT In this reference under S. 66(1) of the IT Act, 1922 (to be hereinafter reference to as "the Act"), the Tribunal, (Delhi Bench) "C", has submitted to this Court, for its opinion, the following question of law :

(2.) SHRI Lal Chand Jain is the assessee in this case. Till March 12, 1951, he carried on the business of manufacture and sale of bidis under the trade makes and trade names of "Pan Ka Ekka, Seth Biri No. 311" and "Divi". Those trade marks were his exclusive properties. On March 12, 1951, by means of a registered deed of agreement, he transferred his interest in the business in question along with the goodwill as well as the stock -in -trade to one Seth Chunna Mal. As the question of law, arising for decision in this case, depends upon the true interpretation of the sale deed dated March 12, 1951, it is necessary to set out the same in full. It reads :

(3.) AS per the deed, the vendor agreed to sell to the purchaser all his interests and shares in his trade and business and goodwill and stock -in -trade, and the right to carry on and continue the business and also the ownership rights of the property in all the trade marks belonging to him. As a consideration thereof, the purchaser agreed to pay a sum of Rs 18,500 to the vendor within two year next after the registration of the sale -deed and he further agreed to pay to the vendor Rs. 1,500 per month during his lifetime. The deed specifically mentions : "The payment of the monthly instalment of Rs. 1,500 each, above referred, is in consideration of the vendor now selling all his rights of ownership in the property trade marks Pan Ka Ekka, Seth Biri No. 311 and Divi to the purchaser provided that this payment shall not in any case exceed beyond the lifetime of the vendor and all taxes, etc., levied by the income - tax on this amount will be payable by the vendor himself." From this clause, it is clear that a sum of Rs. 1,500 per month was agreed to be b paid as consideration for the transfer of the trade marks, mentioned above. Under the sale -deed the vendor agreed that he will not, at any time, after the sale "either by himself or in partnership with any other person or persons carry on the trade and business of manufacturing or sale of biris within the Union of India or Pakistan in any name whatsoever and shall not be entitled to receive or claim the amount standing to his credit in the account books of Seth Lal Chand Jain & Co. under the name of the vendor Lal Chand of the trade marks hereto belonging to the firm Seth Lal Chand Jain & Co. and in the refunds that may now be received by the purchaser from income -tax or excess profits tax or in the claim that may be realised from the railways, with respect to which all the purchaser alone henceforth shall be the sole, exclusive and absolute owner." In the concluding portion of that document it is recited :