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TMI Blog2009 (3) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of running of a petrol pump allotted to it by Bharat Petroleum Corporation Ltd. It has filed its return of income on 24th Feb., 2007 declaring an income of Rs. 17,90,578. The firm was originally constituted vide a partnership deed dt. 8th July, 1963 comprising Shri Manohar Lal Juneja, Smt. Pushpawati Juneja and Shri Mahender Juneja, partners having shares in the ratios of 20 per cent, 20 per cent and 60 per cent respectively. Smt. Pushpawati Juneja retired on 31st March, 1968. On 1st of April, 1968, a fresh firm was constituted in between Shri Manohar Lal Juneja and Shri Mahender Juneja having shares of 25 per cent and 75 per cent. In June, 1995, Shri Manohar Lal Juneja, expressed his desire to retire from the firm and as such the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,00,000 Less: Expenses 20,000 --------- 49,80,000 Gain 17,85,000 4. The AO did not accept the computation made by the assessee. In his opinion, the computation of capital gain in the case of assessee is to be made after taking the cost of acquisition of the goodwill at nil and assessee is not entitled to the benefit of indexation while the capital gain arisen to it on sale of goodwill. The contention of the assessee was that on its case s. 55(2)(b) of the Act is applicable whereas according to the AO, being goodwill it falls within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, it was right to run the business only and cl. 55(2)(b) is applicable in the case of assessee. It is entitled for the benefit of indexation. The view point of assessee did not meet the approval of the AO who took it as a goodwill as disclosed by the assessee without ascertaining the actual nature of the business of the assessee and the transaction. This difference of opinion between the assessee and the AO leads to the addition but those very basis cannot be considered sufficient even to visit the assessee with penalty. He drew our attention towards Board's Circular bearing No. 495, dt. 22nd Sept., 1989 where Board has explained the amended provisions of s. 55 which contemplates the method of computation, the cost of acquisition as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the ambit of s. 55(2)(a) of the Act where cost of acquisition of the goodwill is to be taken at nil. The Board while explaining the amendment carried out in s. 55 inconsequent to the decision of Hon'ble Supreme Court in the case of CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC) has explained the provisions in the circular bearing No. 495, para Nos. 28.2 and 28.3 of this circular read as under: "28.2 The Finance Act, 1987, by amending s. 55 has provided for the method of computing the cost of acquisition as well as the cost of improvement, where goodwill is transferred. Where goodwill is purchased by the transferor the cost of acquisition will be taken to the purchase price and in all other cases it shal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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