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TMI Blog1998 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... wer the common question of law in the negative and in favour of the assessee - - - - - Dated:- 24-3-1998 - Judge(s) : N. V. BALASUBRAMANIAN., P. THANGAVEL. JUDGMENT The judgment of the court was delivered by N.V. BALASUBRAMANIAN J.-The following common question of law, at the instance of the assessee relating to his assessment years 1974-75 to 1978-79, has been referred to this court by the Income-tax Appellate Tribunal, Madras, for our opinion: "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that goodwill, not purchased for a price but built up over a period of years, was liable to be taken into consideration in determining the net value of the assets of the business as a whole on a globa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd share in the partnership firm, the Wealth-tax Officer computed the full value of the goodwill at Rs. 2,76,000 and the assessee's half share at Rs. 1,38,000 and by deducting therefrom Rs. 46,000 being the half share of the goodwill amounting to Rs. 92,000 payable to N. Srinivasan, the retiring partner, the Wealth-tax Officer treated the balance of the amount of Rs. 92,000 as the assessee's share of goodwill in the firm which he added to the net wealth of the assessee as the net wealth returned by the assessee did not include any amount on account of the assessee's share of goodwill in the firm for all the three assessment years in question. The assessee preferred appeals against the orders of assessment before the Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 2 of the Wealth-tax Rules, it is necessary to include the value of the goodwill. The Tribunal therefore held that it is necessary to include the value of the goodwill also. The Tribunal considered rule 2C of the Wealth-tax Rules and held that where the goodwill does not fall within clauses (a), (b) and (c) of rule 2C, then the provisions of rule 2C(d) of the Wealth-tax Rules would apply. The Tribunal also held that the goodwill cannot be sold separately apart from the business, but, however, in valuing the business on a global basis as a going concern and determining the market value of the business of the firm in which the assessee is a partner and in arriving at the net wealth, addition has to be made to the book value of the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, submitted that rule 2C(d) of the Wealth-tax Rules is a residuary clause and if the case of the assessee should not fall within the clauses (a), (b) and (c) of rule 2C of the said Rules, then it would fall under rule 2C(d) of the Wealth-tax Rules. Learned counsel for the Revenue submitted that since the goodwill was not purchased, the Wealth-tax Officer was right in taking into account the market value of the goodwill on the valuation date and adding the same to the share of the assessee in the firm. We have considered the rival submissions of learned counsel for the parties. We have also considered the decision of the Gujarat High Court in Harshadkumar Natverlal Dalal v. CWT [1996] 219 ITR 592. The Gujarat High Court held that accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 4, 1965. Rule 2C of the Wealth-tax Rules, 1957, deals with adjustments which are required to be made in the global value in respect of the asset not disclosed in the balance-sheet. Clause (b) states that in the case of goodwill purchased by the assessee for a price, its market value or the price actually paid by him, whichever is less shall be taken into account and clause (d) provides that in the case of any other asset, it will be its market value on the valuation date. Since the goodwill has specifically been dealt with, under sub-clause (b) to rule 2C by necessary implication, it is excluded from sub-clause (d). It is abundantly clear that as on the date the rules came into force or immediately before the rules came into force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Gujarat High Court that where the goodwill was not purchased by the assessee, the goodwill is not covered by clause (d) of rule 2C of the Wealth-tax Rules. There is no difficulty in holding that rule 2C(d) is not applicable in the case of self-generated goodwill. We therefore hold that where one of the High Courts in the country has taken a view that self-generated goodwill cannot be taken into account and it is not covered by rule 2C(d), there are no compelling and justifiable reasons to take a different view from the one taken by the Gujarat High Court. Therefore we hold that in the case of goodwill which was not purchased for a price, it is not covered by clause (d) of rule 2C of the Wealth-tax Rules. In this view of the matter, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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