9911796707
TMI Blog1982 (4) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with the goodwill of the company. On the basis of the import licences so transferred, the new firm imported yarn. On account of these imports the firm made a profit of Rs. 86,119. For the assessment year 1964-65, the ITO came to the conclusion that if the import licences had not been transferred to the new firm, the assessees could have made a Profit of Rs. 86,119. He brought to tax the sum of Rs. 86,119 in the hands of the assessee-company as short-term capital gains. He also taxed the value of the goodwill, which he fixed at Rs. 20,000, as long-term capital gains on the sale of the goodwill. The AAC upheld the addition of these amounts in principle. He, however, reduced the amount of short-term capital gains by Rs. 17,673 and also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Tribunal was justified in holding that no capital gains relatable to the goodwill of the business can arise where the business along with its goodwill is sold or transferred for value ? " The first question relates to the transfer of import licence. The Supreme Court in its decision in the case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294, has held that for the purpose of computing capital gains, s. 45, which is the charging section, must be read together with the computation provisions under s. 48. Before any capital gains tax can be levied, the asset sold must be such as is capable of having a cost of acquisition as contemplated under s. 48. An asset to which s. 48 cannot be applied cannot be brought to tax under s. 45, sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Srinivasa Setty [1981] 128 ITR 294, referred to earlier, has held, applying the same principle, that since the goodwill is a self-generating asset and its cost of acquisition cannot be ordinarily computed in terms of money, it cannot be brought to tax under the provisions of s. 45. The sale of goodwill, therefore, also cannot give rise to any capital gains. Under the circumstances, the questions are answered as follows : Question No. 1 : In the negative, that is to say, in favour of the assessee and against the Department. Question No. 2 : In the negative, that is to say, in favour of the assessee and against the Department. Question No. 3: In the affirmative, that is to say, in favour of the assessee and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
