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TMI Blog1978 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... l vest in the Government on the date specified therein. In exercise of that power, the Government of Madras passed an order declaring that the appellant's undertaking would vest in the Government on December 31, 1956, which date was later advanced to October 15, 1956. The appellant's undertaking was accordingly acquired by the Government and its properties were taken over on the date of vesting. Mangalore was then a part of the State of Madras. Section 5 of the Acquisition Act, 1954, provided for payment of compensation to a licensee whose undertaking was taken over by the Government. Three modes of fixation of compensation were provided for by that section, called Basis A, Basis B and Basis C. Section 6 gave to the undertaking concerned the option to choose any one of these three modes. According to Basis A, the licensee was entitled by way of compensation to the payment of an amount equal to 20 times the average net annual profits of the undertaking during the period of five consecutive accounting years immediately preceding the date of vesting. The appellant opted for compensation on Basis A, one of the consequences of which, as provided by the Act, was that the entire propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court. Before the High Court the appellant limited its argument to the following two questions: "(i) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the Madras Electricity Supply Undertakings (Acquisition) Act, 1954, the Tribunal was justified in law in holding that no part of the compensation was attributable to the goodwill of the company ? (ii) Whether the Tribunal was justified in law in not determining the amount of compensation attributable to the goodwill and in further not determining the capital gains, if any, arising out of such acquisition ?" By its judgment dated November 19, 1971, the High Court answered both the questions against the appellant but granted to it a certificate of fitness to appeal to this court, which has given rise to Civil Appeal No. 2006 of 1972. We will take up Civil Appeal No. 2160 of 1972 first for our consideration. It involves for consideration the decision of the question whether the compulsory acquisition of property falls within the scope of section 12B of the Indian Income-tax Act, 1922, so as to render any surplus arising from such acquisition liable to tax under that section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first place, if it was intended that voluntary transfers alone should fall within the meaning of the section, it was unnecessary for the legislature to use the expression "transfer", an expression acknowledged in law as having a wide, connotation and amplitude. Earl Jowitt, in The Dictionary of English Law, says: "In the law of property, a transfer is where a right passes from one person to another, either (1) by virtue of an act done by the transferor with that intention, as in the case of a conveyance or assignment by way of sale or gift, etc., or (2) by operation of law, as in the case of forfeiture, bankruptcy, descent, or intestacy." Roland Burrows on Words and Phrases, volume V, contains a statement under the caption "Transfer on Sale" at page 331, that even a transfer of land under compulsory powers is a transfer "on sale". It is unnecessary for us to consider the question whether a compulsory acquisition of property is a "sale" within the meaning of section 12B(1) and indeed, it is needless, for the present purpose to go that far. We are concerned with the narrower question whether a compulsory acquisition of property can amount to a "transfer" within the meaning of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntary transfers by the application of the ejusdem generis rule. The legislative history of section 12B(1) furnishes an important clue to the question raised by the appellant's counsel. Prior to its amendment by the Finance (No. 3) Act, 1956, which came into force on April 1, 1957, section 12(B)(1) of the Act of 1922 read thus: " 12B. Capital gains.--(1) The tax shall be payable by an assessee under the head 'Capital gains' in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March, 1946, and before the 1st day of April, 1948; and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place ...... Provided further that any transfer of capital assets by reason of the compulsory acquisition thereof under any law for the time being in force relating to the compulsory acquisition of property for public purposes or any distribution of capital assets on the total or partial partition of a Hindu undivided family, or on the dissolution of a firm or other association of persons, or on the liquidation of a company, or under a deed of gift, bequest, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and involuntary transfers. The judgment of the High Court dated August 25, 1971, leading to Civil Appeal No. 2160 of 1972 must, therefore, be affirmed and the appeal dismissed. In regard to Civil Appeal No. 2006 of 1972, the case of the appellant before the Income-tax Officer was only this that the compulsory acquisition of its undertaking did not amount to a "transfer" within the meaning of section 12B(1) of the Act of 1922. No case was made out that, alternatively, goodwill is not a capital asset. The appellant did not contend before the Appellate Assistant Commissioner also that goodwill is not a capital asset and, therefore, at least to the extent to which compensation was attributable to the goodwill the capital gains tax was not attracted. The appellant did contend before the Tribunal that, apart from its tangible assets, the State Government had taken over the goodwill attaching to the business and the appellant's right to the management of that business and the amount referable to these items had to be deducted in computing the capital gains. The Tribunal answered this contention by holding that-- (a) goodwill as understood in law had no real significance in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l dated October 9, 1968, by which it refused to refer for the opinion of the High Court the question regarding the evaluation of the goodwill. The Tribunal observes in its order that during the hearing of the appeal it had not expressed any view of the kind attributed to it by the appellant and that no assurance was held forth to the appellant that the question as regards goodwill would be left for determination to the Income-tax Officer. Since the question as to whether a part of the compensation is attributable to the goodwill of the appellant's business is a mixed question of law and fact and since not only was the question not raised by the appellant before the Income-tax Officer or the Appellate Assistant Commissioner but, having raised it before the Tribunal, the appellant placed no material before it on the basis of which goodwill could be evaluated and a part of the compensation properly apportioned to the goodwill of the business, we cannot allow the appellant to raise the contention involved in the two questions. On those questions, therefore, the judgment of the High Court, for the reasons mentioned by us, has to be affirmed. Civil Appeal No. 2006 is also, therefore, d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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