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TMI Blog1988 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... rther erred in not referring to the sale instances submitted to her to the effect that the sale price of the shop cannot be more than Rs. 2,50,000. Your appellant, therefore, submits the sale value of the shop be taken at Rs. 2,50,000 after considering the valuation report from the approved valuer Shri Madhukar Thaker filed before the ITO and other evidences and that the capital gain be worked out accordingly. 4. That the CIT(A)-I further erred in observing that the cost price of the alleged goodwill be embedded in and forms part and parcel of the original cost price of the shop taken at Rs. 55,820. It is submitted that the shop when purchased was newly purchased for Rs. 55,820 and it only represented the cost price of the shop and no part of it included any value of goodwill. Your appellant, therefore, submits that it be held that the cost price of the shop did not include any value of goodwill. 5. The CIT(A)-I further erred in not referring to various instances of sale cited before her to show that the sale of shop of your appellant's case included the value of goodwill. Your appellant, therefore, submits that the sale price of the shop included goodwill received o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Smt. Sushiladevi S. Agarwal at 8, Harsidhkrupa Coop. Housing Soc., Naranpura, Ahmedabad and at Shop No. 183, New Cloth Market, Ahmedabad on 26th June, 1981. During the course of search document viz. Sanakhat (Sale Agreement) dt. 18th Dec., 1980 in respect of sale of Shop No. 183, New Cloth Market, Ahmedabad for a sum of Rs. 11,51,000 was found from her residential premises. While another agreement of sale dt. 19th Dec., 1980 in respect of this very said shop viz. 183, New Cloth Market, Ahmedabad for a sum of Rs. 2,50,000 was found from the shop premises. The assessee has worked the capital gain in respect of sale of the aforesaid shop adopting the sale price at Rs. 2,50,000 only and has claimed the balance of the amount of Rs. 9,01,000 as goodwill of the shop. It is contended that the value of the goodwill amounting to Rs. 5,01,000 is not liable to tax as there is no cost. There is no dispute regarding the fact that the aforesaid shop was sold by the assessee firm to Smt. Sushiladevi S. Agarwal for a sum of Rs. 11,51,000. In fact, the partner Shri Prabodhchandra Panachand, in his statement on oath recorded by the ADI (Investigation) on 20th July, 1981 and in the statement reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p and the balance of the amount of Rs. 9 lakhs approx. as goodwill of the shop. This statement, however, is more general in nature and without any reference to the shop in question. Besides it is not supported by any documentary evidence. Therefore, these affidavits have no evidential value. So far as the affidavit of Shri Mangaldas Dahyabhai Patel is concerned, he has stated that the agreement of the sale of shop was done in his presence for sum of Rs. 11,51,000. He has further stated that it was agreed between the two parties, viz., the assessee and Shri shivbhagvan F. Agarwal, husband of Smt. Sushiladevi S. Agarwal, that the physical value of the premises of shop No. 183, N.C.M. be taken at Rs. 2,50,000 and the balance of Rs. 9,01,000 be treated as the value of goodwill. This latter part of the statement viz. the physical value of the amount of Rs. 9,01,000 as goodwill of the shop, is not, however, supported by any documentary evidence. It is also not borne out from the facts of the assessee 's case. the agreements of sale dt. 18th Dec., 1980 19th Dec., 1980 are also silent on this point. There is no mention about the goodwill of the shop in any of these two agreements. Had bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal approached the assessee firm on the next day (i.e. on 19th Dec., 80) they might have conceived the idea that the value of the shop should be adopted at Rs. 2,50,000 and the goodwill at Rs. 9,01,000 as obviously it was advantageous to both the parties from taxation point of view. The story of goodwill is therefore clearly an after-thought. Besides, no goodwill for the shop was ever created by the assessee in its books of accounts prior to the date of execution of the agreement of sale dt. 18th Dec., 1980. It may also be pointed out that the assessee firm has not transferred the name of the shop, assets and liabilities etc. There is, therefore, no question of transferring the goodwill of the shop to Sm. Sushiladevi S. Agarwal. What the assessee firm has transferred is the right, title and interest in the shop premises bearing No. 183, N.C.M., Ahmedabad for a consideration of Rs. 11,51,000. Thus, the sum of Rs.11,51,000 represents the real price of the shop premises and it has nothing to do with the alleged goodwill of the shop. In view of these facts, I adopt the sale price of the aforesaid shop at Rs. 11,51,000 exclusive of any goodwill. I further hold that there was no goodwill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 18th Dec., 1980 and there would have been no need at all to make another agreement on the next day for a sum of Rs.2,50,000. It is also admitted by the appellant firm that there was no other separate agreement in respect of the sum of Rs. 9,01,000 showing it to be the goodwill of the shop premises in question. Therefore, the appellant's contention that the aforesaid shop had goodwill of Rs. 9,01,000 is clearly an after thought and merely a self serving statement, and hence requires to be rejected. The appellant has relied on the affidavits made by (1) Shri Mafatlal Chunilal shah and (2) Shri Parasmal Chunilal Shah. These affidavits also do no held the appellant, in any way, because they are more general in nature and without any specific reference to the shop premises in question. Besides, their affidavits are not supported by any documentary evidence to show that the shops surrounding the shop of the appellant firm bear goodwill of Rs. 9,00,000 approximately. These affidavits have, therefore, no evidential value and require to be rejected. Without prejudice to the above, even presuming without admitting that there was a good will attached to the shop premises for the sake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These were also referred to by him with a view to reiterate the question of goodwill as distinct from the sale consideration of the property in question. 8. The learned counsel also referred to the fact that one of the witnesses to the agreement for sale dated 19th Dec., 1980, namely, Shri Mangaldas Dahyabhai Patel had sworn an affidavit before the ITO wherein he had stated that Rs.2,50,000 was the figure relating to the shop and Rs. 9,01,000 was the figure pertaining to goodwill. According to him the ITO had not cared to examine the said Shri Dahyabhai Patel and this meant that what was stated in the affidavit had to be accepted as correct. In support of this proposition the learned counsel placed reliance on the decision of the Supreme Court in the case of Mehta Parikh and Co. vs. CIT (1934) 30 ITR 181(SC) and a decision of the Bombay High Court in the case of Dilip Kumar Roy vs. CIT (1974) 94 ITR 1 (SC). 9. The learned counsel also placed reliance on the affidavits filed by Shri Mafatlal Chinulal Shah and Shri Prarasmal Chinulal in support of treating the sum of Rs. 9,01,000 as pertaining to goodwill rather than the sale price of the property. It was submitted that the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses for the last number of years. For this proposition he relied on a decision of the Madras High Court in the case of Dasaprakash Bottling Co. vs. CIT (1986) 54 CTR (Mad) 357 : (1986) 159 ITR 690 (Mad). 12. The learned departmental representative, on the other hand, strongly supported the orders of the ITO and the CIT(A). In the course of his detailed submissions he reiterated the arguments as had weighed with the ITO in rejecting the assessee's claim and the CIT(A) in confirming the rejection. He, however, laid stress on the following points: (1) It was only the shop which was transferred/sold but not the entire business: (2)There was no goodwill attached to the sale of the shop since the same was relevant only on the sale/transfer of a 'business'; (3) There was no element of goodwill involved in any of the other sales on which reliance had been placed on behalf of the assessee; (4) The assessee firm was regularly incurring losses from year to year and there was no question of any goodwill being attached to such a business; (5) The sum of Rs. 9,01,000 was not the goodwill but the 'premium' attached to the shop and such premium was to be considered as a part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempted from levy of capital gains tax, then a suitable modification could be made in the figures pertaining to the sale price and the goodwill. 14. We have examined the rival submissions and have also perused the orders of the ITO and the CIT(A). The relevant material on record to which our attention was drawn by the parties as also the authorities cited at the bar have also been duly considered. 15. It is an admitted fact that two Sale Agreements for the same property viz. shop No. 183, New Cloth Market, were found in search operations at the residential premises of Smt. Sushiladevi S. Agarwal (hereinafter referred to as the "Purchaser")and at the shop itself. The agreement for Rs. 11,51,000 (Dt. 18th Dec., 1980) was found at the residence whereas the agreement for Rs. 2,50,000 (Dt. 19th Dec., 1980) was found at the shop. A perusal of both these agreements brings out the uncontroverted fact that the amounts of Rs. 11,51,000 and Rs. 2,50,000 are mentioned as the sale consideration and there is no whisper of any "goodwill" in the documents. 16. At this stage it would be relevant to refer to the statements recorded on three different occasions of Shri Prabodhbhai Panachand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of shop. Did you agree that there is goodwill of Rs. 9,01,000? How did you treat the amount in your books? Ans.— I have treated in my books of accounts Rs. 9,01,000 as goodwill and balance of Rs. 2,50,000 as sale proceeds of shop No. 183 NCM. Q.20—How do you say that your shop had goodwill of Rs. 9 lacs? What is the way of calculation of that amount? Ans.—The goodwill is the situation of the shop. The valuation of the shop is roughly Rs. 2,50,000 and hence balance amount was treated as goodwill. Statement of 26th Sept., 1983 Q.19—During the course of search and seizure operation at the premises of Shiv Bhagwan one document for the sale of shop No. 183,N.C.M., Ahmedabad for Rs.11,51,000 was found. There was one more document found at the premises of Bansal textiles of the same shop was found for Rs. 2,50,000. Why two documents for the same shop were executed? Ans.—The document for Rs. 2,50,000 was for sale price of the physical premises i.e. shop only. The document for Rs. 11,51,000 was for sale price of shop and goodwill of Rs. 9,00,000, which makes the total of Rs. 11,51,000. Q.21.—When both the documents were executed simultaneously what was the necessity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... — Have you sold this shop No. 183 to any one? If so when and to whom? Ans. — The shop No. 183 is sold by the firm to one Smt. Sushiladevi Shivbhagwan Agarwal of Ahmedabad. The said shop was transferred in her name on 6th June, 1981 by the society alongwith the share certificate. Q.5.—What was the consideration for which this shop No. 183 was sold to Smt. Sushiladevi? Ans.—The firm sold the shop for a total consideration of Rs. 11,51,000 (Eleven lakhs fifty one thousand only) by virtue of Banakhat dt. 18th Dec., 1980. Q.6—Have you received the entire sale proceeds in respect of this shop? If so, what was the nature of payment i.e. either by cash or by cheque? Ans.—We have received the entire sale proceeds of Rs. 11,51,000 partly by cheque and partly by cash and the same are credited in the books of A/c of the firm (as below): Date Amount Particulars 18-12-80 25,000 By cheque of Manekchowk Coop. Bank 29-12-80 5,00,000 By cash 5-3-81 1,00,000 By cash 24-4-81 3,26,000 By cash 25-4-81 1,50,000 By cheque of Manekchowk Coop. Bank 27-4-81 37,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be considered at Rs. 2,50,000 and the balance of Rs. 9,01,000 should be treated as goodwill and hence according to his suggestion another banakhat was executed on 19th Dec., 1980 show in the sale of the premises at shop No. 182, New Cloth Market at Rs. 2,50,000. W. 17—On going through both the documents viz. Banakhat dt., 18th Dec., 1980 19th Dec., 1980 it will be seen that there is no mention about the goodwill of the shop or the firm. What do you want to say in this connection? Ans.—Both these documents were executed as laymen without any legal advice. However, the price of the shop with goodwill was agreed for Rs. 11,51,000. Q.18.—What do you mean by goodwill? Ans. — The goodwill is the value of the situation of the shop and the reputation of the firm, the clientage and the business of the firm. Q.19.—Whether did you transfer the firm's name, business, clientage etc. Along with the shop premises to Smt., Sushiladevi Agarwal? Ans.—Firm's name is not transferred. Business assets and liabilities are not transferred. However, the advantages including the clientage which normally goes with the situation of the shop has gone to her. Q.22. — You said that you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese are merely self-serving documents and need not be given much credence. The persons who have sworn these affidavits have not certified any fact but have stated in an identical fashion that the element of "goodwill" is around Rs. 9 lakhs. It passes our comprehension as to on what basis and authority they make such a statement since it is not for them to say that a particular receipt is on account of "goodwill". This is a matter best left to the Revenue authorities, the Tribunal and the Superior Courts. It is for them to decide such an issue and that also by taking into account relevant facts and circumstances. If affidavits such as the ones filed in the present case are to be considered as binding documents then nothing need be left to any further discussion or decision at the hands of any authority. It would be the assessee who would lay down the terms and have the final say. The decisions relied upon by the assessee's counsel do not assist him since the facts of those cases were quite different. The affidavits in those cases certified certain facts and in the absence of any cross-examination it was held that the statements made had to be accepted as correct. This is not the pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of "premium" attached to the shop. There cannot be any goodwill of a shop as isolated from the trade name of the predecessor and the running business both of which admittedly have not been transferred to the "purchaser". The assessee firm continues to carry on the same business in the same market and there is no question of any of its existing customers going to the "purchaser" who in any case has not been shown to us to be engaged in the same business as the assessee. 22. In the view that we have taken it would not be necessary to decide on the issue whether the original price of shop No. 183 included the element of "goodwill" as well. 23. It would also be necessary before parting with this appeal to decide the alternative contention of the learned counsel to the effect that if considered fit a suitable figure be treated as "goodwill" in substitution of the figure of Rs. 9,01,000. This argument according to us does not survive since we have already held that the receipt in question in the "premium" on the shop and exigible to tax as "capital gains". This view of ours is further supported by the decision of the Supreme Court in the case of R.K. Palshikar (HUF). We accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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