COMMISSIONER OF INCOME TAX Vs. PITAMBER DHARSEY

JUDGEMENT

(1.) THE only question of law in this reference is :

(2.) ACCORDING to Dr. Balasubramanian, learned counsel for the Department, the question is not covered by the Supreme Court decision in the case of CIT vs. B. C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 as the assessee in this case had got the goodwill on dissolution of the firm in which he was a partner and the goodwill was valued at Rs. 3,000 in the deed of dissolution. The assessee's brother, the other partner, it was pointed out, was given one shop and the trade name, while the assessee was given another shop. Though the ITO took the value of the goodwill at nil, he did so by applying the provisions of S. 49(1)(iii)(b) of the IT Act, 1961. The assessee, thus, got the shop which in itself had an element of goodwill and for which there was a cost of acquisition. Referring then to the fact that the assessee admittedly sold the goodwill of his business on January 21, 1971, for Rs. 61,000, Dr. Balasubramanian contended that the surplus arising on the sale of the goodwill was taxable as income under the head "Capital gains".

(3.) IT is evident that on the dissolution of the partnership firm with effect from October 21, 1965, the goodwill of the partnership firm was allotted to the assessee's brother and not to the assessee. And it is the assessee's brother who was made accountable in respect thereof to the extent of Rs. 3,000. Under the circumstances, it is not possible to accept Dr. Balasubramanian's submission that the shop that remained with the assessee on the dissolution of the partnership firm cost him something. In the absence of necessary material; it is also not possible to accept Dr. Balasubramanian's submission that the ITO had taken the value of the goodwill at nil not because it had cost nothing to the assessee, being self generated, but that the same was taken at nil for the reason that the provisions of S. 49(1)(iii)(b) were applicable. The facts, on the other hand, clearly show that the assessee and his brother were carrying on business since 1943 in partnership. The firm was dissolved in the year 1965. There is no whisper that the partnership bad purchased the goodwill. The deed of dissolution clearly provided that the goodwill of the partnership remained with the assessee's brother the value of which was taken at Rs. 3,000 for the purpose of stamp duty. The assessee, thus, did not receive the goodwill of the firm. The goodwill was self generated in his case. Assuming the shop itself had goodwill in the Sense that a place of business where business was carried on for over 20 years would have, the assessee having paid no cost for it, in our judgment, the Supreme Court decision in Srinivasa's case (supra), is squarely applicable.