Law:

Section:

Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Under an indenture assessee was entitled to certain amount as goodwill upto 31-3-1967 - Said amount, however, could be received by him either on his retirement or on his death as provided in indenture – Whether, on facts, it could be said that assessee had no right to receive a single penny out of sum of goodwill during accounting year in question and thus, no capital gains accrued to assessee and, as such, no capital gains tax was leviable on assessee - Held, yes FACTS Under the terms of an indenture, the assessee, as a first party, was entitled to certain amount as goodwill of the firm up to 31-3-1967 and thereafter other parties were entitled. Under the terms of indenture, it was inter alia, clearly agreed that on retirement of the first party he would be entitled to above amount and that the same shall be paid on such terms and conditions as the parties may agree upon. On the death of the party of the first part the above amount would be paid to the legal heirs or such persons as may be nominated by the party of the first part in ten equal annual instalments. The revenue held that having regard to indenture, the capital gains had accrued to the assessee and tax was leviable. On appeal, the Tribunal held that tax on the capital gains was not attracted on the transfer of goodwill. On writ : HELD Having regard to the provisions of the indenture, it was quite clear that the party of the first part had no right to receive any portion of the value of goodwill during the accounting year. Even though it was declared and agreed between the parties that the assessee was entitled to the goodwill only up to 31-3-1967, he was entitled to receive the amount either on retirement or on death as provided in the indenture. During the accounting year he had no right to receive a single penny out of the sum of goodwill. If that was so, there was no capital gain made and the question of imposing a tax on capital gain could not arise. Note: The case has been decided in favour of the assessee. CASE REFERRED TO T.V. Sundaram Iyengar and Sons Ltd. v. CIT [1959] 37 ITR 26 (Mad.). JUDGMENT Kantawala, CJ.—The…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492