DASAPRAKASH BOTTLING CO Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The assessee entered into an agreement of sale on February 2, 1971, with Chennai Bottling Company under which the assessee sold the running concern by the name of Dasaprakash Bottling Company for a sum of Rs. 32,70,898. The actual money received by the vendor was Rs. 8,25,000 and the purchaser took over liabilities of the value of Rs. 24,45,898. Admittedly, the value of tangible assets was as under :

(2.) Out of the above said amount, the Income-tax Officer worked out the profit under section 41(2)of the Income-tax Act, 1961, at Rs. 2,01,841. In respect of the balance amount of Rs. 8,67,505, the assessee's case was that this was relatable to the transfer of goodwill and, therefore, not taxable as capital gains in view of the decision of this court in CIT v. Ratnam Nadar [1969] 71 ITR 433. The Income-tax Officer, however, proceeded to tax this surplus amount on the authority of the decision of the Gujarat High Court in CIT v. Mohanbhai Pamabhai, [1973] 91 ITR 393. Thus, a sum of Rs. 8,67,505 was brought to tax under the head "Capital gains".

(3.) On appeal by the assessee, the Appellate Assistant Commissioner held that the sum of Rs. 8,67,505 was not assessable. He also set aside the finding in respect of the profit computed under section 41(2) of the Income-tax Act, 1961. An appeal by the Revenue came to be filed against this order of the Appellate Assistant Commissioner that the sums of Rs. 8,67,505 and Rs. 2,01,841 could not be brought to tax. However, the claim for addition of the amount of Rs. 2,01,841 was not pressed before the Tribunal. The Tribunal was, therefore, concerned only with the nature of the receipt of Rs. 8,67,505.