COMMISSIONER OF WEALTH TAX Vs. PARMANAND BHAI PATEL

JUDGEMENT

(1.) THIS is a reference under the Wealth-tax Act, 1957, at the instance of the Revenue. The following two questions of law have been referred for disposal by this court :

(2.) THE assessee, Shri Parmanand Bhai Patel, was a partner in the firm, Mohanlal Hargovinddas, and had a 50 per cent. share therein. He retired therefrom on October 24, 1963, and the remaining partners were Shri Shravan Kumar Patel and Smt. Ujjambai. An agreement was entered into between the assessee on the one hand and the remaining two partners on the other, providing, inter alia, that notwithstanding the retirement of the assessee from the partnership, he would continue to hold a 50 per cent. share in the goodwill of the firm and for the user of his share of goodwill by the firm, he would be entitled to receive a sum of Rs. 50,000 per annum. THE agreement also provided that if the assessee subsequently rejoined the firm, he would not be required to pay any price for the goodwill. THE question of valuation of the goodwill, which the assessee had in the firm was in issue in the appeals. When the matter went in appeal before the Commissioner of Wealth-tax (Appeals) for the assessment years 1964-65 to 1974-75, the Commissioner of Wealth-tax (Appeals) by his order dated September 14, 1979, remanded all the 11 appeals and directed to work out the value of goodwill of Mohanlal Hargovinddas for all the eleven years separately and then to include 50 per cent. of that in the net wealth of the appellant from year to year.

(3.) THE matter was taken up before the Tribunal and the Tribunal held that the value of the goodwill owned by the assessee for which he was getting Rs. 50,000 per annum should be taken at Rs. 3,33,333 for each of the assessment years involved. THE assessee filed cross-objections on the issue that the reassessment dated January 21, 1987, was barred by limitation. THE Tribunal referring to the provisions of Section 17A(3) held that the assessment orders passed by the Assessing Officer were barred by limitation. Accordingly, the Tribunal cancelled the assessments for the assessment years 1964-65 to 1974-75 and directed that the valuation of the asset of the goodwill for the assessment year 1977-78 should be taken at Rs. 3,33,333.