Law:

Section:

Section 4 of the Gift-Tax Act, 1958 - Deemed gift - Assessee company transferred its business to firm as going concern along with all assets and liabilities - There was no separate mention of goodwill in balance-Sheet of company as an asset with any value - GTO held that assessee had transferred to firm not only its liabilities and assets but also its good will and treating same as gift valued at three years, average profits - GTO also treated difference between value of stock-in-trade shown in balance sheet and actual realised value of stock-in-trade as gift - Whether since goodwill was transferred without consideration, section 4(1)(a) could not be applied to tax transfer of goodwill - Held, yes - Whether there was no information on record to show that when assessee transferred its business, goods shown in books commanded a higher market value and merely because, subsequently, prices realised were higher, it did not follow that on date when transaction took place there was a higher price for them, and that it should be taken in to account as adequate consideration - Held, yes - Whether, therefore, assessment made was not valid - Held, yes FACTS In 1948, the assessee company acquired as a going concern the whole of the business of a partnership with all the assets including the goodwill and liabilities of the said business. In the balance-sheet of the firm, one of the assets was "goodwill" valued at Rs. 3,000. The company carried on business for several years. In 1964, the company transferred its business as going concern to a firm. The amount of excess of assets over liabilities was paid by the firm to the assessee-company. There was no separate mention of good will in the balance-sheet of the assessee-company as an asset with any value. The GTO viewed that the assessee had transferred to the firm not only its assets liabilities and but also its goodwill. He, therefore, valued the goodwill at three year's average profit and treated the same as gift by the company in favour of the firm. The GTO also treated the difference between the value of stock-in-trade shown in the balance-sheet and the actual realised value of the stock-in-trade as a gift. The AAC…

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