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Capital gains liability on transfer of goodwill and tangible assets to a new company. Analysis: The judgment pertains to an assessment where the assessee transferred its inward foreign Tourist activities to a new company, receiving fully paid-up shares in return. The Income Tax Officer treated the amount received as capital gains, which was later reduced by the Appellate Authority. The Tribunal found that only intangible property, namely goodwill, was transferred, except for the benefit of pending contracts, engagements, orders, etc. The Tribunal dissected the amount received into goodwill and tangible assets, without specifying the tangible assets transferred. Regarding the first issue, the court relied on a previous decision to conclude that goodwill is a self-created asset and not subject to capital gains tax. Therefore, no capital gains liability arose from the transfer of goodwill. For the second issue, the court found the Tribunal's valuation of goodwill and tangible assets to be unsupported by evidence. The lack of identification of the tangible assets transferred led the court to reject the Tribunal's valuation. Consequently, the court answered the second and third questions in the negative, in favor of the assessee, as no tangible assets were proven to have been transferred. In conclusion, the court ruled in favor of the assessee, stating that no capital gains liability arose from the transfer of goodwill and tangible assets due to the lack of evidence supporting the valuation provided by the Tribunal. The revenue was directed to pay the costs of the reference.
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