COMMISSIONER OF INCOME TAX Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) THE following question has been referred to this court for its opinion by the Tribunal at the instance of the Revenue :

(2.) THE assessee in this case is the official liquidator representing M/s. Shanmugar Mills (in liquidation). THE said Shanmugar Mills was under liquidation and it was actually wound up by an order of the company court dated April 30, 1959, in O.P. No. 297 of 1957. THE winding-up order was the subject-matter of an appeal before this court in O. S. A. No. 68 of 1959. THE said order of winding up was affirmed by the appellate court. With the approval of the appellate court, the official liquidator sold the said company as a going concern to one M/s. Jayajothi and Company, who were then working the mills as lessee. THE total consideration paid by the purchaser, viz., M/s. Jayajothi and Company was Rs. 6,76,000. THE official liquidator apportioned the said consideration of Rs. 6,76,000 as under : <FRM>JUDGEMENT_781_ITR151_1985Html1.htm</FRM>

(3.) IN this case, the ITO has proceeded to hold that no part of the sale consideration can be taken to relate to goodwill, since the seller has not demanded and the High Court has not approved any amount as the value of the goodwill and, therefore, the entire consideration should be taken to relate only to the tangible assets of the company. However, we are not in a position to accept that reasoning. If the parties bargained for a lump sum consideration without valuing each of the assets, that cannot be a ground to say that the entire consideration was paid only towards tangible assets and not in respect of any intangible assets, such as goodwill. The payment of Rs. 6,76,000 is for the entire undertaking known as Shanmugar Mills and the assets of the undertaking should be taken to include both tangible and intangible assets, such as goodwill. We cannot, therefore, hold that merely because the parties have not contemplated a separate payment towards goodwill and this court, while approving the sale of the assessee's concern as a going concern, did not specify the amount to be paid for goodwill, there cannot be any goodwill at all. These facts cannot be taken to be conclusive.