DAS AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following judgment of the court was delivered

(2.) IN this case the assessee is a Hindu undivided family carrying on business in radios and musical instruments at Moradpur, Patna, in the name of Das & Company. We are concerned in this case with the assessment year 1951-52, for which the relevant accounting year is Bengali Sambat year 1357. On 2nd April, 1951, the assessee sold certain goods and assets worth Rs. 1,00,470 to an incorporated company, named Electricity and Sound Limited, which is hereinafter referred to as "the company". The Muzaffarpur branch of the assessee also sold goods to the company to the extent of Rs. 18,669. The aggregate value of the goods sold to the company, therefore, amounted to Rs. 1,19,138. It appears that the assessee also sold to the company the goodwill of the business for a sum of Rs. 50,000. The INcome-tax Officer held that the stock-in-trade should not have been sold by the assessee to the company at cost price, and on the statement of gross profits disclosed by the assessee the INcome-tax Officer found that the assessee was earning a gross profit on an average of 35 per cent. per year, and the finding of the INcome-tax Officer was that on this basis the sale value of the stock-in-trade should be over Rs. 1,50,000 and profit of Rs. 50,000 should have accrued to the assessee in respect of the stock-in-trade sold to the company. The view taken by the INcome-tax Officer apparently was that the sum of Rs. 50,000 paid to the assessee for the sale of goodwill did not really represent the price of the goodwill but represented the profits made by the assessee on the transaction of the sale of the stock-in-trade. Accordingly, the INcome-tax Officer added a sum of Rs. 50,000 to the gross profit of the assessee for the accounting year in question. The assessee took the matter in appeal to the Appellate Assistant Commissioner, who took the view that the value of the goodwill should be placed at Rs. 25,000 and the profits made by the assessee on the sale of the stock-in-trade should be Rs. 25,000 and accordingly the profits of the assessee should be increased by a sum of Rs. 25,000. The assessee preferred an appeal to the INcome-tax Appellate Tribunal, but the appeal was dismissed.

(3.) APPLYING the principle of these authorities to the present case we hold that there was no material before the income-tax authorities to suggest that the transaction between the company and the assessee was not bona fide and that the price actually paid for the stock-in-trade was in any way different from the amount of Rs. 1,19,138 which was the contractual price agreed upon between the parties for the transfer of the stock-in-trade.