TaxTMI 
TaxTMI 
2015 (4) TMI 946
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....ible to tax ?" 2. The facts are that the assessee was taken over by a new company (M/s Motherson Sumi Systems Pvt. Ltd) in terms of a collaboration agreement dated 03-12-1986. The new company was promoted by the assessee and two Japanese companies. Clause 7 (1) of the Collaboration Agreement provided that the consideration of the unit as a going concern could be adjusted against the goodwill of the assessee. The valuation of the goodwill was to be based on "assumptions and projections" approved by the investing/purchasing Japanese Companies, and evaluated by a chartered accountant nominated with the concurrence of the Japanese companies. This agreement was approved by the Central Government. The total consideration (including the goodwill)....
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.... the assessee's appeal. 5. Mr. Harkauli, learned counsel for the revenue argued that the ITAT fell into error in setting aside the findings of the AO and the CIT (A). Both those authorities had furnished good and valid reasons for rejecting the valuation of goodwill put forth by the assessee. The revenue contended that to say that the goodwill could be valued at such high rate as was done in the present case, the assessee had to furnish a scientific basis. Counsel emphasized that the mere existence of a huge or substantial order could not have meant that such orders would have necessarily resulted in a profit and the basis for ITAT's order was unsustainable. 6. In S. C. Cambatta and Co. Private Limited v. Commissioner of Excess Profits Ta....
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.... same time, locality is not everything. The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill. From the above, it is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal had done. A question of law did arise in the case, and in our opinion, the High Court should have directed the Tribunal to state a case upon it." 7. A reading of the ITAT's order would reveal that the basis for valuation of goodwill in this case was three fold: (a) the assessee, though established in 1984 in a sense was continually engaged in business since....
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....hn 174 to encompass every positive advantage 'that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was previously carried on or with the name of the old firm, or with any other matter carrying with it the benefit of the business'. In Trego v. Hunt [1896] AC 7 (HL) Lord Herschell described goodwill as a connection which tended to become permanent because of habit or otherwise. The benefit to the business varies with the nature of the business and also from one business to another. No business commenced for the first time possesses goodwill from the start. It is generated as the business is carried on and may be augmented with the passage of time. " Likewise, in....