Transfer of goodwill with a reserved trade-name right remained a capital transaction, not taxable income.

Transfer of business assets and goodwill to newly formed companies did not make the consideration assessable as income where the transferor merely retained a personal right to use the trade name in his own continuing business. The reserved use of the name was a limited personal right and did not reduce the transaction to a licence fee arrangement. Goodwill remained a capital asset on transfer, and in the relevant year goodwill was not taxable as such. The amount received was therefore not assessable as income, and the reference was answered in favour of the assessee.

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Issues: Whether the amount received on transfer of business assets and goodwill, while the transferor retained a personal right to use the trade name in his own business, was assessable as income in the hands of the assessee.

Analysis: The business was transferred with its assets and goodwill to newly formed companies. The reserved right to use the name in the transferor's continuing proprietary business was a personal right and did not negate the transfer of goodwill. Retention of a limited right by the transferor did not convert the transaction into a mere licence fee arrangement. The goodwill transferred to the companies remained a capital asset, and in the relevant year goodwill was not taxable as such.

Conclusion: The sum of Rs. 20,000 was not assessable as income and the answer to the reference was against the Revenue and in favour of the assessee.

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