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TMI Blog1998 (9) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... lly perused the orders of the authorities below and the documents placed on record. 3. The facts relating to the issue are that the assessee was having a dealership of kerosene of Indian Oil Corporation in Bhanpura, Garoth and Mandsaur districts in the name of M/s. Ramnarayan Ramdayal (R.R. Agrawal). After the partition of the H.U.F. on 21-10-1979 the business of kerosene dealership of Indian Oil Corporation was received by the assessee as his share. The dealership of two places was sold on 6-1-1991 for a sum of Rs. 4 lacs and since the cost of dealership to the assessee was zero, no income from capital gains on the sale of dealership of Indian Oil Corporation was shown in the return of income. The Assessing Officer has not accepted the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the name of M/s. R.R. Agrawal. He further invited our attention to clause 13 of kerosene dealership agreement and argued that the dealership can never be transferred in the name of any other person without the consent in writing of the Corporation. Since the dealership of kerosene could not be sold without the prior consent of Indian Oil Corporation, the assessee has sold the beneficial interest in the dealership in favour of Shri Sureshkumar against a consideration of Rs. 4 lacs. This beneficial interest is nothing but goodwill of the firm which was sold and as per section 55 of the Act, the cost of acquisition should be adopted at nil and the entire amount of Rs. 4 lacs is chargeable to tax under the head,capital gains'. He further inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, we have to examine the literal meaning of goodwill with the help of other legal dictionaries. In Law of Lexicon with regard to goodwill it is stated that it is a thing very easy to describe but very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business. The goodwill is nothing more than the probability that the old customers will resort to the old place. In State of Rajasthan v. Bundi Electric Supply Co. Ltd. AIR 1970 Raj. 36, it was held that the Indian Contract Act does not define the word 'goodwill' but in its legal sense the word 'goodwill' means every affirmative advantage as contrasted with negative advantage that has been acquired in carrying on the business, whether con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of the various definitions of goodwill in the aforesaid legal dictionaries, it has become abundantly clear that the goodwill is an intangible benefit attached to the business which can be subject to transfer from one person to another. In a transfer of goodwill, certain benefits and advantages to attached to the business are being transferred through a covenant and the purchaser can enforce the covenant for the protection of his business. If we examine transfer of a kerosene dealership in the instant case in the light of the definitions of goodwill illustrated in the legal dictionaries, we will find that by transfer of dealership of kerosene oil, the assessee has transferred certain benefits and advantages attached to the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, though the parties have executed the agreement of compensation and relinquishment deeds for transferring a kerosene dealership, but from a careful perusal of these documents, we are of the view that the assessee was intended to transfer the goodwill in favour of Shri Sureshkumar for a consideration of Rs. 4 lacs. 9. Once it has been held that it is a transfer of goodwill, the next question arises as to what would be the cost of acquisition of the same. The assessee has relied on various judgments in support of his contention that since the cost of acquisition is zero, there would not be any capital gains. The judgment relied on by the assessee were not considered by the Assessing Officer for the reason that these judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovement is also to be taken at nil as per section 55(1)(b), the cost of acquisition of the goodwill on partition of HUF assets would also be nil by virtue of section 49 in the hands of the assessee. As such, the capital gains should be computed in the light of the provisions of sections 49 and 55 of the Act. 10. From a careful perusal of the order of the CIT (Appeals) we find that the CIT (Appeals) has decided this appeal after relying upon the judgments of the Apex Court and various High Courts which were rendered prior to the amendment brought on the Statute whereby the goodwill was brought within the purview of capital assets after ignoring the relevant legal position of law. We do not find any rationale in the observations of the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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