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Issues Involved:
1. Whether the Tribunal's finding that no goodwill of the assessee remained on the relevant valuation date was based on no evidence or was otherwise perverse and vitiated by misdirection in law. 2. Whether the Tribunal was justified in holding that the writing off by the assessee of its goodwill was merely to avoid tax and not to evade tax, and in directing exclusion of the value of goodwill from the net wealth of the assessee. Detailed Analysis: Issue 1: Tribunal's Finding on Goodwill The primary issue in this case revolves around the valuation of goodwill for the assessment years 1957-58, 1958-59, and 1959-60 under the Wealth-tax Act, 1957. The Wealth-tax Officer (WTO) had determined the net wealth of the assessee-company by including the goodwill valued at Rs. 5,44,999, which the company had written off to Re. 1. The WTO argued that the write-off was an attempt to reduce the reserve and pay lesser wealth-tax, asserting that goodwill, despite being intangible, is a valuable asset. The Appellate Assistant Commissioner (AAC) accepted the assessee's contention that goodwill is an intangible and fictitious asset, and its value cannot be determined. The AAC noted that due to prohibition policies, trading restrictions, and the separation of the Pakistan branch, the goodwill had practically ceased to exist. The Tribunal upheld the AAC's decision, concluding that the company's decision to write off the goodwill was a natural conduct under the changed circumstances. The Tribunal emphasized that the company was conscious of the fact that no such goodwill remained, and retaining it would mean paying wealth-tax without actually having such an asset. The High Court examined whether the Tribunal had materials to support its conclusion. It was noted that goodwill, while intangible, can be a valuable asset, as defined by Lord Macnaughten in Inland Revenue Commissioners v. Muller & Co.'s Margarine Ltd. and further elaborated by the Supreme Court in S. C. Cambatta & Co. Pvt. Ltd. v. Commissioner of Excess Profits Tax. The High Court found that the Tribunal's conclusion was based on the factual changes in the company's business environment, including prohibition, trade restrictions, and the establishment of a similar company in Pakistan. The High Court determined that the Tribunal's finding was not perverse or based on no evidence. The company's decision to write off the goodwill was aligned with the reality of its business circumstances, and the Tribunal's conclusion was a possible finding. Issue 2: Justification of Writing Off Goodwill The second issue was contingent on the first. Since the High Court found that the Tribunal's conclusion on the non-existence of goodwill was supported by evidence, the question of whether the writing off was to avoid tax and not evade tax became moot. The Tribunal had noted that the company's decision to write off the goodwill was to avoid tax, not evade it. The High Court emphasized that the valuation of goodwill should be based on materials justifying the valuation. The Tribunal had correctly identified that the company's valuation of goodwill at Re. 1 was a reflection of its true value under the changed circumstances. Conclusion The High Court answered the first question in the negative, in favor of the assessee, indicating that the Tribunal's finding was not perverse and was based on sufficient evidence. Consequently, the second question did not arise. Each party was ordered to bear its own costs.
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