AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1959 (3) TMI 9
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....September 14, 1945. The facts leading up to these appeals are that two brothers E. C. Agabeg and A. A. Agabeg were lessees of a coal mine situate in village Jogta in the Jharia coal field area which belonged to the Raja of Jharia. The two brothers installed on the land leased to them plant and machinery and erected buildings and inclines and started working the coal mine. On April 10, 1935, the two brothers constituted themselves into a private limited company called Agabeg Brothers Ltd. On July 19, 1945, Agabeg Brothers Ltd. agreed to transfer to S. K. Bajpai all its right, title and interest in the leasehold property with other mokarari pottahs (perpetual leases) and a decree, which was passed in its favour, together with all appurtenances including houses, huts and other erections belonging to the vendor, all machinery, plant, stores, furniture etc. and "the benefit of the uncompleted balance of all orders and contracts for the supply of coal existing at the date of the completion of the sale". To this agreement were attached two schedules giving the list of the properties which were to be sold. Rs. 1,00,000 were paid as earnest money and the balance was to be paid at the time....
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.... Rs. 80,000 ... Rs. 10,00,000 Buildings ... 2,00,000 Plant and machinery ... 3,50,000 ----------------------- 15,50,000 ----------------------- The appellant went in appeal to the Appellate Assistant Commissioner who also accepted the estimate made by the Income-tax Officer and dismissed the appeal. The matter was taken to the Appellate Tribunal and in a short order the Tribunal held that the consideration paid was Rs. 23,00,000 but it put its own estimated value on the different kinds of assets which were purchased. It held : "The cost price of the various assets, in the circumstances, has necessarily to be estimated with reference to the prevailing market conditions : (1) Land and buildings ... 9,20,000-0-0 (2) Shafts and inclines ... 80,000-0-0 (3) Buildings ... 3,00,000-0-0 (4) Plant and machinery ... 6,00,000-0-0 (5) Goodwill ... 4,00,000-0-0" Against this order the appellant applied for a reference to be made to the High Court under section 66(1) of the Income-tax Act but the Tribunal was of the opinion that no question of law arose and dismissed the application. The appellant then applied to the High Court under section 66(2) and raised seven questi....
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.... liability or exposure to litigation under the doctrine of 'holding out' and to represent himself to former customers as the successor to that business." There is no doubt that there is no specific mention of the sale of goodwill in the sale deed but counsel for the respondent submitted that in the resolution for liquidation which was passed by Agabeg Brothers Ltd. on October 15, 1945, the sale of Jogta Colliery was mentioned. The resolution was : "That the sale of Jogta Colliery for Rs. 23 lakhs be and the same is hereby approved" and therefore what was sold to the appellant was amongst other things the goodwill. Goodwill is a commercial term and is well understood in business and is an asset which is capable of valuation. In the sale deed it is not mentioned as such. This raises two questions : (i) Was the amount of Rs. 10 lakhs paid by the appellant only for the asset which he purports to have purchased or was it for something else also ? (ii) Is it open to the Tribunal to disregard the price which the appellant actually paid for the assets he purchased as evidenced by the sale deed and hold that this price although paid was not for those assets only but also included another ....
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....lant referred to Craddock v. Zevo Finance Co. Ltd. where it was held that in determining the profits made by the company the correct figure of costs of investments made by the company is not the market value of the goods but the actual price paid by the company. This matter was taken to the House of Lords by the Revenue but the appeal was dismissed. It does not appear from the report as to the reasons for it : See Craddock v. Zevo Finance Co. Ltd. In Konstam's Income-tax, 12th Edition, paragraph 126, the law is stated thus : "If a finance company acquires securities by purchase, the initial figure at which these should be entered for the calculation of profits is not their estimated market value at any given date, but their cost. " Counsel for the Commissioner relied on the judgment of the Lahore High Court in Pindi Kashmir Transport Co. Ltd. v. Commissioner of Income-tax. In that case certain business concerns carrying on business of road transport were amalgamated and formed into a private limited company which took over from their predecessor vehicles and route permits in consideration of allotting to them fully paid up shares. The company sold some of the vehicles and claim....