Law:

Section:

Section 8, read with section 9 and rule 1 of Schedule II of the Excess Profits Tax Act, 1940 - Successions and amalgamations - Assessee-company owned a business of theatre and restaurant, among its other businesses - It transferred one of its business to its subsidiary company - Said subsidiary paid certain amount for goodwill of business purchased and claimed that said amount should be taken into consideration in computing its capital during chargeable accounting period - Tribunal disallowed assessee's claim - Whether by reason of original business acquiring a goodwill, under provisions of section 8(5) transferee company was entitled to benefit of that acquisition of capital - Held, yes - Whether it was for taxing authorities to determine whether any goodwill was acquired at all by business and if acquired what was value of that goodwill and for above determination, amount paid by subsidiary company for purchase of goodwill was entirely irrelevant - Held, yes - Whether, therefore, Tribunal should have allowed for value of goodwill whatever it thought was reasonable at date of transfer - Held, yes facts The assessee-company owned a business, among other businesses of theatre and restaurant. The said business of theatre and restaurant was subsequently transferred by the assessee to its subsidiary company. The subsidiary company paid certain amount for the goodwill of the businesses which it had purchased, and claimed that the said amount should be taken into consideration in computing its capital during the chargeable accounting period. The Tribunal held that inasmuch as this was a capital acquired by the subsidiary company by purchase, the amount paid by the subsidiary company for the purpose of the goodwill could not be taken into consideration. On reference: HELD Whereas sub-section (3) of section 8 deals with the transfer of the whole of the business of the transferor, sub-section (5) of section 8 deals with the transfer of a part of the business of the transferor, and the effect of such a partial transfer is that each part shall be deemed to be a continuation of the original business. Therefore, in this case when the assessee-company, which was the…

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