COMMISSIONER OF INCOME TAX Vs. MICHEL POSTEL

JUDGEMENT

(1.) THIS matter lies in a very narrow compass and having regard to the settled position in law can be disposed of by a very short order.

(2.) MICHEL Postel, the assessee, was carrying on business since about 1949 as an individual in the name and style of France Indian United Laboratories. The business consisted of importing or purchasing and selling drugs and patent medicines. On May 1, 1959, at private limited company was incorporated entitled France Indian Pharmaceuticals (P) Ltd. with a capital of Rs. 6 lakhs divided into 5,000 shares of Rs. 100 each. On July 4, 1959, the limited company entered into an agreement with the assessee for taking over the business till then run in the name of France Indian United Laboratories for a sum of Rs. 6 lakhs of which Rs. 1,99,151 is said to be for goodwill. The question arose whether any capital gains tax was payable in respect of the sale of goodwill to the limited company.

(3.) MR . Joshi on behalf of the Revenue submitted that the decisions of the Bombay High Court in the case of CIT vs. Sir Homi Mehta's Executors (1955) 28 ITR 928 (Bom) and in the case of Rogers & Co. vs. CIT (1958) 34 ITR 336 (Bom) have been overruled by the decision of the Supreme Court in CIT vs. B. M. Kharwar (1969) 72 ITR 603 (SC) and he submitted that since this was the basis on which the finding of the Tribunal was given the question referred to us may be answered in favour of the Revenue. Mr. Joshi submitted that he is conscious that if a contention of law is raised that goodwill being a self generated or self created asset it does not attract capital gain, it should be left to the assessee to argue when the case is remanded back to the Tribunal. On the other hand, Mr. Kolah did not dispute the position that the decisions of the Bombay High Court in Sir Homi Mehta's Executors'case (supra) and Rogers & Co.'s case (1958) 34 ITR 336 had been overruled by the decision of the Supreme Court in B. M. Kharwar's case (1969) 72 ITR 603 (SC). However, he urged that, on the facts stated in the statement of case, it is quite evident that the goodwill in the present case was a self generated asset and there is a clear decision of this Court in the case of CIT vs. Home Indutstries & Co. 1977 CTR (Bom) 238 : (1977) 107 ITR 609 (Bom). He, therefore, submitted that even though the basis on which the Tribunal decided in favour of the assessee could not be sustained in view of a later decision of the Supreme Court, still there is no possibility of capital gain being attracted in the present case as there is no transfer.