Law:

Section:

Section 254, read with section 154 of the Income-tax Act, 1961 - Appellate Tribunal - Power of - Assessment year 1965-66 - Whether where there is a divergence of judicial opinion on a question of law or two conceivable views are possible on it, proceedings for rectification under section 154 or under section 254, cannot be taken at all - Held, yes Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1965-66 - Whether goodwill of business is capital asset, even if no cost is incurred in building up goodwill, and cost of acquisition being 'nil' amount, its entire sale proceeds are liable to tax under head 'capital gains' - Held, yes FACTS The Tribunal held that the goodwill of the business was taxable under the head 'capital gains'. The assessee then made an application under section 254(2) without asking for setting aside of the appellate order of the Tribunal. In the said application the assessee contended that the goodwill of a business was not a capital asset as held by a Division Bench of the jurisdictional High Court and the Tribunal should, therefore, rectify its mistake. The departmental representative, on the other hand, cited several decisions including that of the Supreme Court's in support of the contention that goodwill of a business was a capital asset. The Tribunal rejected the contention of the assessee and dismissed the application for rectification. On reference : HELD If there is a divergence of judicial opinion on a question of law or two conceivable views are possible on it, proceedings under section 154 or under section 254(2), cannot be taken at all. It is also not the law that the ITO or the appellate authorities under the Act for the purposes of a rectification application should only look at the decisions of a particular High Court under whose advisory jurisdiction it acts in order to find out whether that High Court has taken different views on the question of law involved before it. They must consider the decisions of all the High Courts and if there is a divergence of judicial opinion on the question of law or two conceivable opinions are possible on it, they must hold that the mistake is not…

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