(1.) The following two questions have been, at the instance of the assessee, referred to us by the Income Tax Appellate Tribunal, Cochin Bench:
(2.) Question No. 1 relates to the sale of goodwill arising from the transfer of assets effected by the assessee in the accounting year previous to the assessment year 1976-77. The assessee's books of account disclosed that the assets of its business included the goodwill purchased by the assessee in 1971, and the value of the goodwill in relation to the business at Changanacherry and Kottayam was specifically shown as Rs. 90,000/-. The cost of acquisition of the goodwill relating to the Changanacherry business, which alone is in question here, was determined by the Tribunal to be the proportionate part of Rs. 90,000/- which was directed to be computed by the concerned officer. The books of account for the year relevant to the assessment year in question disclosed that the assessee transferred assets of the Changanacherry business to a certain firm and the goodwill of that business was valued at Rs. l,00,000/-.
(3.) The Income Tax Officer, however, found that the goodwill was sold for Rs. 2,00,000/. This finding was without regard to the case of the assesses that Rs. 2,00,000/- represented the goodwill of the transferred business at Changanacherry and Ernakulam, and that only Rs. l,00,000/- represented the consideration of the goodwill of the Changanacherry business. On the basis of this assumption, the Income Tax Officer held that the difference between the sale price at Rs. 2,00,000/- and the cost of acquisition at Rs. 90,000/-, that is, Rs. 1,10,000/-, was liable to be included as the capital gains of the assessee arising from the transfer of the Changanacherry business (see Annexure A).