COMMISSIONER OF INCOME TAX Vs. DHARAMCHAND AND CO

JUDGEMENT

(1.) THE question of law referred to us by the Tribunal at the instance of the Department in this reference is "Whether, on the facts and in the circumstances of the case, the sum of Rs. 3,66,048, as determined by the IT authorities, is liable to be assessed in the hands of the assessee firm under the first proviso to S. 12B(2) ?"

(2.) IT is common ground that the assessee, a registered firm, converted itself into a private limited company under a sale deed dated July 11, 1960. The proceedings relate to the asst. year 1961 62. Under the sale agreement, all the assessee's assets and liabilities including goodwill were transferred to the private limited company at book value. The goodwill did not appear as an asset in the assessee's books and no value was charged therefor from the limited company.

(3.) ORDINARILY , we would have immediately answered the question against the Department following the Supreme Court decision in the case of CIT vs. B. C. Srinivasa Setty (1981) 128 ITR 294. Dr. Balasubramanian, however, argued that though the contention of the Department before the Tribunal was that the sum of Rs. 3,66,048 was assessable to tax as capital gains on transfer of the assessee's goodwill to the private limited company without any consideration, the Tribunal had reframed the question in general terms so that all aspects of the matters which were urged before it could be canvassed before the High Court. He pointed out that though the Tribunal had decided the issue only on one ground and had rejected the assessee's miscellaneous application by order dated July 31, 1975, the assessee's contention that it had raised several contentions and the appeal was decided considering only one of the contentions, was noted by the Tribunal in its order. The Tribunal, of course, stated that it was not necessary for it to consider the other contentions in the view it took on one contention.