COMMISSIONER OF INCOME TAX Vs. NELSON AND COMPANY

JUDGEMENT

(1.) THE assessee in this case are manufacturers of printing types from 1947. During the year of account, the business of the firm was acquired by a private limited company, namely, M/s. Nelson Type Foundry Private Ltd., on April 15, 1973, as per the agreement entered into by the firm and the company on March 21, 1973. In the return of income filed by the firm, the firm has included business income of Rs. 2,09,589, which included s. 41(2) profit of Rs. 1,47,341. Besides, the firm showed capital gains amounting to Rs. 83,733 arising out of transfer of the land and building to the said company. Acquisition proceedings under Chap. XX-A of the I.T. Act, 1961, were initiated on the transfer of land and building to the said company. At that stage, the firm agreed for a fair value being fixed by the Acquisition Range at Rs. 4,25,294 as against Rs. 4,00,000 shown in the deed of transfer. THEreafter, the firm filed a revised return showing capital gains at Rs. 1,01,701. THE assessing authority, at the stage of assessment, fixed the value of the goodwill at Rs. 3,31,700. Aggrieved against the said valuation of the goodwill, the assessee took the matter in appeal before the AAC. That appeal having succeeded, the Revenue took the matter in appeal before the Tribunal. Before the Tribunal, the Revenue relied on a decision of the Gujarat High Court in CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393, as against the decision in CIT v. Rathnam Nadar [1969] 71 ITR 433, referred to and followed by the AAC. THE Tribunal confirmed the decision of the AAC that a sum of Rs. 3,31,700 should be deleted from the head "Capital gains".

(2.) AGGRIEVED by the order of the Tribunal, the Revenue has sought a reference on the following question for the opinion of this court :