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Section 45 of the income-tax act, 1961-Capital gains-Chargeability-Assessee-company transferred its inward foreign tourist activities in India to another company and received equity shares worth Rs. 58,300-ITO and AAC taxed this amount as capital gains-Tribunal determined taxable capital gains at Rs. 10,000 representing transfer of tangible assets and treated balance as value of goodwill-Whether tribunal right in apportioning capital gains and upholding taxability of Rs. 10,000-Held, on facts, no Facts By joining hands with other travel agents, the assessee-company, which was carrying on business as travel agents, formed a new company styled as TC Ltd. By an agreement, dated 12-9-1961, it transferred its inward foreign tourist activities in India to TC Ltd. which issued to it fully paid-up equity shares worth Rs. 58,300. In the assessment year 1962-63, the ITO treated this sum of Rs. 58,300 as capital gains which was reduced by the AAC to Rs. 48,300, holding that there was an exchange or relinquishment by the assessee of an asset whose value, as on 1-1-1954, was estimated at Rs. 10,000. On appeal, the Tribunal dissected the total amount into two parts (i) Rs. 48,000 representing the value of goodwill, i.e.,intangible property, namely, the right to carry on the inward foreign tourist activities in India; and (ii ) Rs. 10,300 representing the value of tangible assets. The Tribunal, therefore, held that no capital gains liability was attracted to an amount of Rs. 48,000 and determined the taxable capital gains at Rs. 10,000 by estimating the value of tangible assets transferred, as on 1-1-1954, at Rs. 300. On reference: Held Goodwill is a self created and self-generated asset and cannot be acquired at any particular point of time or for any cost in terms of money and, in such a case, liability to capital gains tax on the transfer of goodwill is not attracted. The Tribunal had not specified the tangible assets transferred for which it fixed the value at Rs. 10,300. There was, therefore, no justification in breaking up the amount of Rs. 58,300 into Rs. 10,300 and Rs. 48,000. Thus, the impugned amount of Rs. 58,300 was not liable to capital gains tax. Case review CIT…

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