Goodwill valuation must reflect all relevant business factors and be determined separately for each accounting period.

Goodwill must be valued on a broad assessment of all material business circumstances, including location, service, standing, management, competition and other relevant factors; a valuation based on an unduly narrow approach is not a lawful determination. The value of goodwill is also variable and cannot be treated as fixed across successive chargeable accounting periods, so it must be determined separately with reference to each relevant valuation date. The earlier Tribunal valuation was therefore unsustainable, and separate valuation for each accounting period was required for assessment purposes.

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Issues: (i) Whether the goodwill of the transferred business was calculated according to law. (ii) Whether the goodwill had to be valued separately as on the relevant dates for the three chargeable accounting periods.

Issue (i): Whether the goodwill of the transferred business was calculated according to law.

Analysis: The valuation made by the Tribunal was based on too narrow a consideration of goodwill. Goodwill is not confined to any one factor and must be assessed on the basis of all material circumstances affecting the business, including its location, service, standing, management, competition, and other relevant factors. Since the Tribunal did not consider the valuation in that broader manner, the earlier assessment could not stand as a lawful determination of goodwill.

Conclusion: The question was answered in the negative and against the Revenue.

Issue (ii): Whether the goodwill had to be valued separately as on the relevant dates for the three chargeable accounting periods.

Analysis: The value of goodwill is variable and may fluctuate with time and changing business circumstances. For assessment purposes, the valuation must correspond to the first day of the relevant accounting period, so the value as on one date cannot be mechanically treated as constant for later years. The Tribunal was therefore required to ascertain the value separately with reference to each relevant valuation date.

Conclusion: The question was answered in the affirmative and in favour of the Assessee.

Final Conclusion: The reference was disposed of by holding that the earlier goodwill valuation was legally unsustainable, while directing separate valuation of goodwill on each relevant date for assessment purposes.

Ratio Decidendi: Goodwill must be valued on a broad consideration of all relevant business circumstances, and where valuation is required for successive accounting periods it must be determined separately with reference to each relevant date.

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