Goodwill as a self-generating asset cannot be taxed as capital gains when no cost of acquisition is ascertainable.

Goodwill transferred in a business acquisition was treated as a self-generating asset with no ascertainable cost of acquisition. The High Court and Supreme Court authorities relied on in the text support the principle that, where no cost can be attributed to goodwill, it does not enter the computation of capital gains under the statutory scheme. On that basis, the amount brought to tax as capital gains was deleted and the issue was decided in favour of the assessee and against the Revenue.

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Issues: Whether goodwill transferred in the course of business acquisition could be brought to tax as capital gains.

Analysis: The earlier view that goodwill is not an asset costing anything in terms of money to the assessee was reaffirmed. The binding authority of the High Court and the Supreme Court recognised goodwill as a self-generating asset and held that, where no cost of acquisition can be attributed to it, it cannot form part of capital gains under the statutory scheme.

Conclusion: The deletion of the sum brought to tax as capital gains was ; the issue was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Goodwill, being a self-generating asset with no ascertainable cost of acquisition, cannot be subjected to capital gains tax.

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