TaxTMI 
TaxTMI 
1960 (11) TMI 24
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....bay, have filed these appeals, and the Commissioner of Excess Profits Tax, Bombay, is the respondent. We are concerned in these appeals with three chargeable accounting periods, each ending respectively on December 31, beginning with the year 1943 and ending with the year 1945. The appellants carry on various businesses, and one such business was the running of a theatre and restaurant, called the Eros Theatre and Restaurant. In October, 1943, a subsidiary company called the Eros Theatre and Restaurant Ltd. was formed. The paid-up capital of the subsidiary company was Rs. 7,90,100 divided into 7,911 shares of Rs. 100 each. 7,901 shares were allotted to the appellant company as consideration for assets, goodwill, stock-in-trade and book ....
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....tation of the capital employed in the business of the assessee, the Tribunal erred in not including the value of the goodwill or any portion thereof ? " The High Court by its judgment and order answered the first question in the negative and the second, in the affirmative. It held that sub-section (5) and not sub-section (3) of section 8 of the Excess Profits Tax Act was applicable. It, therefore, held that " the Tribunal should have allowed for the value of the goodwill whatever it thought was reasonable at the date of the transfer. " When the matter went before the Tribunal again, three affidavits and a valuation report by a firm of architects were filed. The goodwill, according to the report of the architects, amounted to Rs. 25 lakh....
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....tion of law did arise in the case whether the goodwill of the Eros Theatre and Restaurant Ltd. was calculated in accordance with law. The Tribunal seems to have taken into account only the value of the leasehold of the site to the subsidiary company, and rejected other considerations which go to make up the goodwill of a business. No doubt, in Cruttwell v. Lye, Lord Eldon, L. C., observed that goodwill was " nothing more than the probability that the old customers would resort to the old place. " The description given by Lord Eldon has been considered always to be exceedingly narrow. The matter has to be considered from the nature of the business, because the goodwill of a public inn and the goodwill of a huge departmental stores cannot be ....
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....ecessarily inseparable from the premises or to have no separate value, prima facie at any rate it may be treated as attached to the premises and whatever its value may be, should be treated as an enhancement of the value of the premises. " In the second case reported in Federal Commissioner of Taxation v. Williamson Rich, J., observed at page 564 as follows : " Hence to determine the nature of the goodwill in any given case, it is necessary to consider the type of business and the type of customer which such a business is inherently likely to attract as well as the surrounding circumstances . . . . . The goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the per....