Law:

Section:

Section 48 of the Income-tax Act, 1961-Capital gains-Computation of-Assessee-company went into liquidation and was sold as going concern for lumpsum consideration determined by court-ITO did not accept assessee's allocation of portion of consideration as towards goodwill, since it was incurring losses-Whether, in the absence of any finding by tribunal on relevant factors like nature, character, name, reputation, location, etc., of assessee's business, question whether assessee had acquired goodwill so that its value was excludible in computation of capital gains, could be answered-Held, on facts, no [matter remanded to tribunal] Facts The assessee-company went into liquidation and under orders of appellate Court, the official liquidator sold the company as a going concern for a lump sum consideration determined by the Court, to another company. For purposes of computing capital gains, a portion of the sale consideration was allocated by the official liquidator towards goodwill and excluded from computation. The ITO did not accept this allocation on the primary ground that the company could not have had any goodwill at the time of sale as it had only made losses since its inception and that even if goodwill existed prior to liquidation, such goodwill would have lost its value during the long period the mills were worked by the lessee before sale. He further held that since neither the appellate Court nor the parties concerned had specified any value for goodwill, the lumpsum consideration did not include value of goodwill. On appeal, the AAC sustained the assessee's allocation to goodwill and this was confirmed by the Tribunal, though with a reduced quantum, on the basis of profits earned by the purchaser subsequently. On reference : Held Merely because the parties have not contemplated a separate payment towards goodwill and the Court while approving the sale of the assessee's concern as a going concern did not specify the amount to be paid for goodwill, it cannot be held that there was no goodwill. However, the findings of the Tribunal that the assessee had goodwill, could not be sustained straightaway, since (i) the Tribunal had not taken into account…

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