32/74.
Appeal by Special Leave from the Judgment and order dated 4 7 1974 of the Karnataka High Court in I.T.R. No.
The assessee, a registered firm, manufactured and sold agarbattis.
1146/75.
The Judgment of the Court was delivered by PATHAK, J. The question in these appeals is whether the transfer of the goodwill of a newly companymenced business can give rise to a capital gain taxable under s. 45, Income Tax Act, 1961.
Clause 13 of the Instrument of Partnership executed on 28th July, 1954 showed that the goodwill of the firm had number been valued, and the valuation would be made on dissolution of the partnership.
The period of the partnership was extended by an instrument dated 31st March, 1964, and it companytained a similar clause 13 .
1,50,000/ .
Subsequently, the assessee firm was dissolved by a deed dated 1st December, 1965.
A. No.
1146 of 1975 is directed against that judgment.
At the time of dissolution, it seems, the goodwill of the firm was valued at Rs.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
1378 of 1976.
Vineet Kumar and A. K. Srivastava for the Respondent.
The Income Tax Officer made an assessment on the dissolved firm for the assessment year 1966 67 but did number include any amount on account of the gain arising on transfer of the goodwill.
From the Judgment and Order dated 2 11 1972 of the Kerala High Court in Income Tax Reference No.
926/73.
A new partnership by the same name was companystituted under an instrument dated 2nd December, 1965 and it took overall the assets, including the goodwill, and liabilities of the dissolved firm.
A. No.
Soli J. Sorabjee, Addl.
S. Desai, K. C. Dua and Miss A. Subhashini for the Appellant S. Nambiar and P. P. Namboodiri for the Respondent.
A. Ramachandran, B. Partha Sarathi and Miss R. Vaigai for the Respondent.
At the instance of the Commissioner of Income Tax it referred a question of law to the High Court of Karnataka which, as reformed by the High Court, leads as follows Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that numbercapital gains can arise under s. 45 of the Income Tax Act, 1961 on the transfer by the assessee firm of its goodwill to the newly companystituted firm?
General, B. B. Ahuja and Miss A. Subhashini for the Appellant.
K. Goswami, S. P. Mehta, Dinesh Vyas, P. H. Parekh, B. Singh, Miss Vineeta Caprihan and B. L. Verma for the intervener.
Civil Appeal No.
CONNECTED WITH Civil Appeal No.
926 of 1973.
Soli J. Sorabjee, Addl.
General, B. B. Ahuja and Miss A. Subhashini for the Appellant.
Accepting the companytention, the Tribunal allowed the appeal.
In appeal before the Income Tax Appellate Tribunal, the assessee maintained that the sale did number attract tax on capital gains under s. 45 of the Income Tax Act, 1961.
The Commissioner, being of the view that the assessment order was prejudicial to the Revenue, decided to invoke his revisional jurisdiction and setting aside the assessment order directed the Income Tax Officer to make a fresh assessment after taking into account the capital gain arising on the sale of the goodwill.
1146 of 1975.
1378/76.
Civil Appeal No.
120/70.
Appeal by Special Leave from the Judgment and Order dated 1 12 1975 of the Karnataka High Court in I.T.R.C. No.
38/72.
AND Civil Appeal No.
