TaxTMI 
TaxTMI 
1977 (7) TMI 33
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....es. On May 1, 1959, at private limited company was incorporated entitled France Indian Pharmaceuticals Private Ltd. with a capital of Rs. 6 lakhs divided into 5,000 shares of Rs. 100 each. On July 4, 1959, the limited company entered into an agreement with the assessee for taking over the business till then run in the name of France Indian United Laboratories for a sum of Rs. 6 lakhs of which Rs. 1,99,151 is said to be for goodwill. The question arose whether any capital gains tax was payable in respect of the sale of goodwill to the limited company. According to the Income-tax Officer, a sum of Rs. 2,35,572 was capital gains in respect of the said sale of goodwill. In an appeal by the assessee, the Appellate Assistant Commissioner held ....
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.... the object of earning a profit and was not really a sale but merely a procedure adopted for readjustment of their position as holders of the shares ; the assessee did not make any profit or gain in a commercial sense by transferring the shares to the company and the income-tax authorities were not entitled to levy income-tax on the difference between the market price and cost price of the shares merely because the market price of the shares at the time of transfer was higher than the cost price. The same principle was applied in the latter case of father and son and this court took the view that the transfer of the assets of the firm to the company was substantially and really merely a readjustment made by the members to enable them to car....
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....the case is remanded back to the Tribunal. On the other hand, Mr. Kolah did not dispute the position that the decisions of the Bombay High Court in Sir Homi Mehta's Executors' case [1955] 28 ITR 928 and Rogers & Co.'s case [1958] 34 ITR 336 had been overruled by the decision of the Supreme Court in B. M. Kharwar's case [1969] 72 ITR 603. However, he urged that, on the facts stated in the statement of case, it is quite evident that the goodwill in the present case was a self-generated asset and there is a clear decision of this court in the case of Commissioner of Income-tax v. Home Indutstries and Co. [1977] 107 ITR 609 (Bom). He, therefore, submitted that even though the basis on which the Tribunal decided in favour of the assessee could n....
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....what the Income-tax Officer has stated in his order. If that was so, then it is quite clear that the business which ultimately was sold by the assessee to the limited company under the agreement dated July 4, 1959, was started by the assessee himself on January 1, 1949. This court in the case of Commissioner of Income-tax v. Home Industries and Co. [1977] 107 ITR 609 (Bom) has clearly held that having regard to the provisions of section 12B(1) of the Indian Income-tax Act, 1922, and section 45 of the Income-tax Act, 1961, the incidence of tax is on profits or gains arising from the transfer or sale of a capital asset. The concept of " profit or gain " arising from the transfer or sale necessarily implies that there is something received in ....