N.A Mody v. Commissioner Of Income-Tax

Bharucha, J.:— Three questions arise for consideration in this reference at the instance of the assessee under section 256(1) of the Income”tax Act, 1961. They read thus;

“(1) Whether, on the facts and in the circumstances of the case, the receipt of the entire sum of Rs. 1,12,500 by the assessee under the consent terms dated October 17, 1961, was of casual and non-recurring nature and not taxable under section 10(3) of the Income-tax Act, 1961?

(2) If the answer to question No. (1) is in the negative, whether, on the facts and in the circumstances of the case, the receipt of Rs. 71,900 by the assessee under clause 8 of the consent terms dated October 17, 1961, filed in Suit No. 228 of 1961, in the High Court of Judicature at Bombay was a ‘capital receipt’ and the sum of Rs. 31,200 or any part thereof was chargeable to capital gains tax in the assessment year 1962–63?

(3) If the answer to question No. (1) is in the negative, whether, on the facts and in the circumstances of the case, the sum of Rs. 40,600 payable to the assessee under clause 12 of the consent terms referred to in question No. (2) above was a revenue receipt?”

2. The assessment year concerned is 1962–63, the previous year having ended on March 31, 1962. The assessee is an advocate and solicitor of this court. Under the terms of a partnership deed dated January 3, 1957, he was made a partner of the solicitor firm of Little and Co. For acquiring an interest in the assets, goodwill and profits of the firm, he paid an aggregate sum of Rs. 40,680. Disputes having arisen between the partners of the said firm, a suit was instituted in this court against the assessee by the other partners for dissolution and accounts. (This was O.O.C.J Suit No. 228 of 1961— N.J Anthorpe Webb v. N.A Modi).

3. Consent terms were arrived at on October 17, 1961. Clauses 1, 2, 3, 7, 8, 12 and 15 thereof need to be set out in full. They are as follows:

“1. Agreed and declared that the firm of Messrs. Little & Co., Solicitors, stands dissolved by mutual consent of all the partners as from the close of the day on September 30, 1961.

2. Agreed that notice of such dissolution be given in the Maharashtra Government Gazette and the Free Press Journal by the plaintiffs at their own cost.

3. Agreed that from and after October 1, 1961, the plaintiffs alone are entitled to continue and have continued the business of Messrs. Little & Co. in the same manner as if there had been no dissolution of the firm of Messrs. Little & Co. and as if the defendant had merely retired from the firm of Messrs. Little & Co. and the share and interest of the defendant in the profit and loss of the partnership and in all its assets, including goodwill and outstandings, but excluding the premises of the firm had been taken over by the plaintiffs in proportion to their respective shares in the partnership.

7. The parties agree that the registration of the firm of Messrs. Little & Co. under section 26A of the Indian Income-tax Act, 1922, should be renewed. The parties have executed the necessary form of application for such renewal and the same has been given to the plaintiffs for the purpose of securing the renewal of the registration of the firm of Messrs. Little & Co. If so found necessary, the defendant will sign or join in any further or other application or act for the purpose of getting the registration duly effected.

8. Agreed that the total amount to be paid by the plaintiffs to the defendant in full satisfaction of the defendant's share, right, title, interest, claim and demand of whatsoever nature in and against the partnership firm of Messrs. Little & Co. and its assets, including goodwill but excluding (a) the premises, and (b) the defendant's share in profits from April, 1, 1961, to September 30, 1961, and (c) the outstanding is fixed at Rs. 71,900 becoming due and payable by the amounts at the dates mentioned below, namely:

Rupees 17,975 on or before October 18, 1961, Rs. 17,975 on or before October 11, 1962, Rs. 17,975 on or before October 11, 1963, Rs. 17,975 on or before October 11, 1964.

12. Agreed that the total amount to be paid by the plaintiffs to the defendant payable to him in full satisfaction of his share, right, title interest, claim and demand of whatsoever nature in respect of the outstandings and dues of the firm of Messrs. Little & Co. for the earnings of the firm received by the firm after such dissolution as aforesaid but earned before such dissolution on account of the work done by the defendant before such dissolution is fixed at Rs. 40,600 becoming due and payable by the amounts at the dates mentioned below, namely:

Rupees 10,150 on or before October 18, 1961, Rs. 10,150 on or before October 11, 1962, Rs. 10,150 on or before October 11, 1963, Rs. 10,150 on or before October 11, 1964.

15. Order that the decree do operate as assignment of the share, right, title, interest, claim and demand of the defendant in the firm of Messrs. Little & Co. and all its assets, including goodwill and outstandings but excluding the premises and the defendant's share in the profits from April 1, 1961, to September 30, 1961, in favour of the plaintiffs in proportion to their respective shares and interest in the partnership of Messrs. Little & Co. and that save as herein provided, the defendant do have no claim or demand of any nature whatsoever against the partnership firm of Messrs. Little & Co. or any of its partners.”

4. In the return filed by the assessee for the assessment year concerned, the assessee stated that the amounts of Rs. 17,975 and Rs. 10,150 received by him under clauses 8 and 12 of the consent terms were not liable to tax. The Income-tax Officer rejected the assessee's submission and held that the sum of Rs. 37,820 under clause 8 was chargeable to capital gains tax and the sum of Rs. 40,600 under clause 12 was liable to tax as a revenue receipt. On appeal, the Appellate Assistant Commissioner held that the amount taxable under clause 8 as capital gains was Rs. 31,220, that is, Rs. 71,900 minus Rs. 40,680, and that the amount of Rs. 40,600 under clause 12 of the consent terms should be taxed, but spread out between the assessment years 1962–63 and 1965–66, as a revenue receipt. The assessee appealed to the Income-tax Appellate Tribunal which upheld the Appellate Assistant Commissioner's order. The questions posed to us arise out of the Tribunal's order.

5. The argument on the first question, we must note, has not proceeded on the basis that the receipt of the total sum of Rs. 1,12,500 under the consent terms was of casual and non-recurring nature and, therefore, not taxable. It has proceeded upon the basis that the assessee had received only his share in the partnership, that no transfer had taken place, and that, therefore, no tax was attracted.

6. To appreciate the arguments, it is necessary to set out the provisions of section 45 and section 2(47) of the Income-tax Act, 1961. They are as follows:

“45. Capital gains.— (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall……be chargeable to income-tax under the head ‘Capital gains and shall be deemed to be the income of the previous year in which the transfer took place.

2. (47) ‘transfer’ in relation to a capital asset, includes the sale exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law”

7. It is proper to consider at the outset a preliminary objection raised on behalf of the assessee, namely, that it was not open to the Revenue to urge that the consent terms, in fact and in substance, made provision not for dissolution of the firm but for the retirement of the assessee therefrom. Now, it is necessary to construe the consent terms to enable us to answer questions Nos. (1) and (2). The construction of a document is a question of law, not of fact. It is open to either party to urge any aspect of a question that has been referred, though that aspect may not have been raised before the Tribunal. We may note, in this connection, the decision of this court in Evans Fraser & Co. Ltd. (In liquidation) v. CIT, [1982] 137 ITR 493, for it cites the decisions of the Supreme Court in CIT v. Ogale Glass Works Ltd., [1954] 25 ITR 529 and CIT v. Scindia Steam Navigation Co. Ltd., [1961] 42 ITR 589. The decisions of the Supreme Court and the decision of this court make it clear that where a question is in issue, there is no limitation imposed upon the aspects of that question which may be urged at the hearing of the reference regardless of whether those aspects had been raised before the Tribunal. Accordingly, we find no merit in the preliminary objection raised on behalf of the assessee.

8. We turn to consider the consent terms. They are dated October 17, 1961. Clause 1 states that the parties are agreed and it is declared that the firm of M/s. Little & Co. stands dissolved by mutual consent of all the partners as from the close of the day on September 30, 1961. Clause 2 provides for notice of such dissolution to be given. Clause 3 is of vital importance. It states that from and after October 1, 1961, the plaintiffs, that is, all the partners other than the assessee, were entitled to continue and had continued the business of M/s. Little & Co., as if there had been no dissolution and as if the assessee had merely retired and his share and interest had been taken over by the other partners in proportion to their respective shares. This clause, then, provides for the continuation of the firm. It provides that such continuation shall take place as if there had been no dissolution and as if the assessee had merely retired and his share had been taken over by the continuing partners. The continuation of the firm indicates that there was to be no dissolution of the firm. The words “as if” indicate the real intention. That intention clearly was that the partners other than the assessee would continue the firm and that the assessee would retire. Clause 7 is also important inasmuch as it provides that the registration of the firm under the Income-tax Act would be renewed. Had there been a dissolution and the constitution of another firm, the existing registration would not be renewed; fresh registration ‘would have been applied for. Clauses 8 and 12 of the consent terms are important in that they show that it was only the assessee's share in the firm and its assets and in the outstandings which was quantified and was to be paid off. There is no provision in the consent terms for the computation or payment of the shares of partners other than the assessee. This too is consistent with the view that there was to be no dissolution of the firm under the consent terms. Clause 15 is again of great importance. It provides that the consent decree would operate as an assignment of the share of the assessee in the firm and its assets in favour of the other partners in proportion to their respective shares.

9. Mr. Dwarkadas, learned counsel for the assessee, submitted that clause 15 should not be taken to mean that there was a transfer by the assessee of any asset to the other partners and that clause 15 had been put into the consent terms only to determine how the assessee's share would be distributed among the other partners. To so hold would be to do violence to the language of clause 15. Clause 15 in terms talks of an assignment of the assessee's share in the firm in favour of the other partners in proportion to their respective shares. The effect of this language cannot be wished away. Such assignment indicates that the assessee was retiring from the firm which would be continued by the remaining partners.

10. Mr. Dwarkadas referred to certain clauses of the partnership deed which provided for retirement and submitted that a partner could retire only in terms of those clauses; since the consent terms did not accord with those clauses, they could not be construed as providing for the assessee's retirement. A partner's retirement, if unilateral, might have had to be in conformity with those clauses. The consent terms were arrived at with the consent of all the partners and were not required to so conform.

11. Collecting the general intention of the consent terms, read as a whole, we have no doubt that they provide not for dissolution of the firm but for the retirement of the assessee therefrom.

12. Mr. Dwarkadas submitted, on the basis of the decisions of the Supreme Court in Cit, Up v. Sh. Bankey Lal Vaidya (Dead) By Lawyers† , [1971] 79 ITR 594 and Malabar Fisheries Co., Calicut v. Commissioner Of Income Tax, Kerala, [1979] 120 ITR 49, that the consequence of the distribution of the firm's assets upon dissolution was a mutual adjustment of rights between the partners and that there was no transfer of assets within the meaning of section 2(47) of the Income-tax Act, 1961. That is undoubtedly the position in so far as dissolution is concerned. We may only point out that the Supreme Court has in the latter decision made clear what was contemplated by dissolution by stating thus (at page 60):

“Upon dissolution the firm ceases to exist, then follows the making up of accounts, then the discharge of debts and liabilities and thereupon distribution, division or allotment of assets takes place inter se between the erstwhile partners by way of mutual adjustment of rights between them.”

13. Mr. Dwarkadas submitted that the same position in law obtained upon the retirement of a partner; in other words, that there was only a mutual adjustment of rights between the partners and no transfer of assets. He argued that the Supreme Court had equated the position in law as on dis-; solution with that as on retirement. He placed reliance, in this behalf, upon an unreported judgment of the Supreme Court dated September 27, 1985, in Civil Appeal No. 1841 of 1981—Sunil Sunil Siddharthbhai v. Commissioner Of Income Tax, Ahmedabad, Gujarat., [1985] 156 ITR 509 (since reported). The question before the Supreme Court was whether a transfer took place within the meaning of section 2(47) of the Income-tax Act, 1961, of an asset contributed by a partner as capital to the firm in which he was a partner. It was submitted that there was an analogy between the position obtaining when a personal asset was brought by a partner into a partnership as his contribution to its capital and that which arose when on dissolution or retirement, a share in the partnership assets passed to the erstwhile partner. The Supreme Court noted that it had been held by itself and the Punjab and Haryana, Kerala and Gujarat High Courts that when a partner retired or the partnership was dissolved, what the partner received was his share in the partnership. The position was different, the Supreme Court said, when a partner brought hispersonal assets into the partnership as his contribution to its capital. An exclusive interest in an asset before it entered the partnership was reduced on such entry into a shared interest. The Supreme Court did say that what the partner got upon dissolution or retirement was the realisation of a pre-existing interest, but it said so in considering the aforementioned argument. The judgment cannot be read as a finding that the position in law as on dissolution and as on retirement was the same.

14. Great emphasis was placed by Mr. Dwarkadas on the decision of the Gujarat High Court in CIT v. Mohanbhai Pamabhai, [1973] 91 ITR 393. This was a case in which the assessee had retired from a firm leaving continuing partners. The terms and conditions of retirement were contained in the minutes. It was argued on behalf the Revenue that when the asses-sees retired, the interest of each of the assessees in the partnetship was extinguished and there was, accordingly, a transfer of interest within the meaning of section 2(47) of the Income-tax Act, 1961. Relying upon the observations of the Supreme Court in the context of dissolution of the partnership, which the Gujarat High Court found to be equally applicable when a partner retired from a partnership, it was held that when a partner retired from a partnership and the amount of his share in the net partnership assets, after deduction of liabilities and prior charges, was determined on taking accounts on the footing of a notional sale of the partnership assets and was given to him, what he received was his share in the partnership and not any consideration for the transfer of his interest in the partnership to the continuing partners. His share in the partnership was worked out by taking accounts in the manner prescribed by the relevant provisions and it was this and this only, namely, his share in the partnership which he received in terms of money. Even in the artificially extended sense in which the word “transfer” was defined in section 2(47), there was no transfer of interest in the partnership assets involved when a partner retired from the partnership. It was not possible to contend that when a partner retired, there was a relinquishment or extinguishment of his interest in the partnership assets.

15. This decision of the Gujarat High Court was considered by a Division Bench of this court in CIT v. Tribhuvandas G. Patel, [1978] 115 ITR 95. The facts of that case need to be briefly set out. The assessee had been a partner in a firm prior to his retirement therefrom. He had served notice of his intention to dissolve the firm. This was opposed. He then filed a suit for dissolution and accounts. The suit was settled out of court under a deed. Thereunder, the assessee retired from the firm and the remaining partners continued its business. It was contended that the retirement of the assessee as a partner, the quantification of his share therein and the payment thereof to him did not result in the transfer of a capital asset inasmuch as, upon retirement, there was merely an adjustment of his rights. Reliance was placed upon the decision of the Gujarat High Court in Mohanbhai Pamabhai's case, [1973] 91 ITR 393. This court observed that this was the only decision directly on the point at issue; but the question was whether, for capital gains tax purposes, the position of a retiring partner could be equated with that of a partner upon general dissolution. A clear distinction existed between the two concepts inasmuch as the consequences flowing from each were entirely different. In the case of retirement of a partner, it was only that the partner who went out of the firm and the remaining partners continued to carry on the business of the partnership as a firm in the latter case, the firm as such no more existed and the dissolution was between all the partners of the firm. A retiring partner while going out and receiving what was due to him in respect of his share might assign his interest by a deed or he might, instead of assigning his interest, take the amount due to him from the firm and give a receipt for the money and acknowledge that he had no claims on his co-partners. The former type of transaction would be regarded as a sale or release or assignment of his interest by a deed while the latter type of transaction would not. In other words, it was clear that the retirement of a partner could take either of two forms and the question whether the transaction would amount to an assignment or release of his interest in favour of the continuing partners or not would depend upon what particular mode of retirement was employed. If, instead of quantifying his share by taking accounts on the footing of notional sale, parties agreed to pay a lump sum in consideration of the retiring partner assigning or relinquishing his share or right in the partnership and its assets in favour of the continuing partners, the transaction would amount to a transfer within the meaning of section 2(47) of the Income-tax Act, 1961. In the document, the assessee stated that he did “hereby assign and release unto the continuing partners and each of them all his right, title, interest and undivided half share in the partnership firm…” Having regard to the particular mode employed to effect and bring about the retirement of the assessee from the partnership, the transaction had to be regarded as amounting to a “transfer” within the meaning of section 2(47) inasmuch as the assessee could be said to have assigned, released and relinquished his interest and share in partnership and its assets in favour of the continuing partners. The transaction could not be regarded as amounting to the distribution of capital assets upon the dissolution of a firm.

16. The decision of the Gujarat High Court in Mohanbhai Pamabhai's case, [1973] 91 ITR 393 and of this court in Tribhuvandas Patel's case, [1978] 115 ITR 95 were cited before this court in the case of CIT v. Patel Brothers, [1984] 145 ITR 614. The question was whether the assessee-firm was entitled to have the extra payment made by it to the estate of a deceased partner towards his share, in the appreciation in the value of shares added to the original cost of the shares for the purpose of computation of capital gains arising on the sale of those shares. It was noted that the real question on which the decision would turn was: what was the effect of the death of the deceased partner or what was the effect of the retirement of a partner. The court said that in the case of a retiring partner or an outgoing partner or in the case of death of a partner, all that the outgoing or retiring partner or the estate of the deceased partner would be entitled to was his proportion of the partnership assets after they had been realised and converted into money and the debts and liabilities of the partnership had been paid and discharged. The view taken by this court in Tribhuvandas Patel's case, [1978] 115 ITR 95 was that when there was no document or assignment by which the retiring partner proposed to assign or release to the surviving or continuing partners, there was no question of a transfer of a capital asset. In the particular case, no document had been executed and, therefore, the court was not called upon to consider any document executed between the parties. Had there been a document, its terms would have been required to be considered. The effect of the decision in Tribhuvandas Patel's case, [1978] 115 ITR 95 was that it was the mode in which the retirement had been brought about which determined the question whether there was a transfer or not. If there was to be an acquisition of interest, there had to be a mode by which the interest must pass. If there was no process by which a transfer of interest could be said to have taken place in respect of the interest of the deceased partner, but what the estate of the deceased partner got was only the money value of his interest, it had to be held that in the case of retirement or the death of a partner where moneys were paid to the retiring partner or to the estate of the deceased partner in lieu of his share in the partnership, there was no acquisition of any interest by the surviving or continuing partners.

17. Mr. Dwarkadas submitted that whereas the reasoning of the decision of the Gujarat High Court in Mohanbhai Pamabhai's case, [1973] 91 ITR 393 had not been accepted by the Division Bench of this court which decided Tribhuvandas Patel's case, [1978] 115 ITR 95, although it had not in terms disapproved of it, the Division Bench of this court which decided Patel Brothers' case, [1984] 145 ITR 614 had accepted that reasoning by equating the legal position that obtained on dissolution with that which obtained on retirement. It was submitted by Mr. Dwarkadas that the decision of this court in Tribhuvandas Patel's case, [1978] 115 ITR 95 was no longer good law, in view of this court's decision in Patel Brothers' case, [1984] 145 ITR 614 and the decision of the Supreme Court in Sunil Sid-dharthbhai's case, [1985] 156 ITR 509 referred to above.

18. In Tribhuvandas Patel's case, [1978] 115 ITR 95 (Bom), there was a document whereunder a partner retired. That document contained a clause whereby the retiring partner assigned his interest in the partnership and its assets to the continuing partners. In the circumstances, this court held that there was a transfer within the meaning of section 2(47) of the Income-tax Act, 1961. In Patel Brothers' case, [1984] 145 ITR 614 (Bom), there was no document whereunder the partner retired. The court observed that if at all there was to be an acquisition of interest, there had to be a mode by which that interest must pass. There being no such mode employed in the case before it, it was held that there was no transfer within the meaning, of section 2(47). The decision in Patel Brothers' case, [1984] 145 ITR 614 (Bom) does not in any manner affect the correctness of the decision in Tribhuvandas Patel's case, [1978] 115 ITR 95 (Bom). In fact, the two decisions are wholly reconcilable.

19. The unreported judgment of the Supreme Court Sunil Sunil Siddharthbhai v. Commissioner Of Income Tax, Ahmedabad, Gujarat. (since reported in [1985] 156 ITR 509), as we have already noted, does not come into the picture, for it was on quite a different point.

20. For that matter, we may note that in Mohanbhai Pamabhai's case, [1973] 91 ITR 393 (Guj), there was a document in the form of minutes under which the partner retired, but it contained no assignment of his interest to the continuing partners.

21. At this stage, we may note the decision of this court in CIT v. Aslot, [1978] 115 ITR 255, the facts of which have much affinity to those before us. There was a partnership deed which contained an arbitration clause. Disputes having arisen, they were referred to an arbitrator. He made an award. Its substance was that two partners were to stand retired as and from a particular date and the business was to be carried on by the continuing partners who were to pay to the retiring partners a quantified amount in satisfaction of their respective shares and interest in the partnership and its assets. The award stated that the partnership “stands dissolved by mutual consent so far as concerns the said H……………and N…………………(hereinafter referred to as the retiring partners) who retires from the said firm…………” The award also stated that “the said business shall…………………be carried on………………………by the remaining partners………………………………(hereinafter referred to as the continuing partners)”. As required by the award, a document was executed whereunder the retiring partners assigned and released to the continuing partners their share and interest in the partnership. The question, this court noted, which fell for consideration was whether what was brought about by the award read with the agreement was a dissolution of the partnership or a mere retirement of the two partners, permitting the remaining partners to continue the business of the firm. The real legal effect of the award read with the agreement would not be controlled by how the transactions had been described by the arbitrator or by the parties and, therefore, the use by the arbitrator of the word “dissolution” was not conclusive. The overall effect of the award and the agreement clearly was that the two outgoing partners were to be paid a certain sum and they were to execute the necessary documents required to assign and release in favour of the continuing partners, their respective share and interest in the partnership. The judgment in Tribhuvandas Patel's case, [1978] 115 ITR 95 (Bom) was a decision of a co-ordinate Bench and was binding. The tests laid down therein were satisfied. Accordingly, there was a clear liability in respect of capital gains attracted on the footing that the transaction was not one of dissolution of partnership but of a retiring partner assigning in favour of the continuing partners his rights and interests in the partnership assets.

22. We have, in the instant case, held that the overall effect of the consent terms is that they provide for the retirement of the assessee from the partnership. There is in the consent terms a clause providing for the assignment of the assessee's share in the partnership and its assets to the continuing partners. The facts are, therefore, similar to the facts in Tri-bhuvandas Patel's case, [1978] 115 ITR 95 (Bom) and, for that matter, in Aslot's case also [1978] 115 ITR 255 (Bom). Following those decisions, as we must, we hold that there was a transfer by the assessee within the meaning of section 2(47) of the Income-tax Act, 1961, and that liability to capital gains tax exists. The first question must, therefore, be answered in the negative and in favour of the Revenue.

23. The second question relates to the amount received by the assessee under clause 8 of the consent terms which has been quoted. Having regard to the decision of the Supreme Court in CIT v. Srinivasa Setty, [1981] 128 ITR 294 and the decision of this court in Evans Fraser & Co. Ltd. (In Liquidation) v. CIT, [1982] 137 ITR 493, it is not in dispute that so far as this court is concerned, there can be no liability for capital gains tax in respect of the amount received by the assessee under clause 8 on account of goodwill less the amount paid by the assessee on that account.

24. The amount received under clause 8 was a composite sum for goodwill and other assets. It was submitted by Mr. Dwarkadas that it would be impossible to bifurcate what amount was received on account of goodwill and what amount was received on account of assets. We are unable to to accept that submission. Difficult though it may be, it will be for the Tribunal to decide on the material placed before it, what part of the amount must be attributed to goodwill and what part to other assets, and to direct recovery of capital gains tax only in respect of the latter.

25. Accordingly, the second question will be answered thus: That part of Rs. 31,220 (Rs. 71,900 less Rs. 40,680) which is attributable to goodwill shall not be liable to capital gains tax. The balance amount shall be liable to capital gains tax.

26. This brings us to the third question which relates to the receipt of Rs. 40,600 under clause 12 of the consent terms, already quoted. The amount was to be paid in full satisfaction of the assessee's share in the outstandings and dues of the firm from the earnings of the firm received by it after September 30, 1961, but earned before that date, on account of work done by the assessee. It was submitted by Mr. Dwarkadas that this amount had been received by the assessee from a source of income which was lost and that this amount was, therefore, a capital receipt. The Appellate Assistant Commissioner had spread out the levy of tax upon this amount between the assessment years mentioned and the correctness of this is not questioned by the Revenue. The question is whether the aggregate amount of Rs. 40,600 is a capital receipt, as contended by the assessee, or a revenue receipt, as contended by the Revenue. Having regard to the clear terms of clause 12, we find it impossible to hold that this is a payment made towards a lost source of income and, therefore, a capital receipt. It is quite clearly a payment on account of the firm's earnings and is, therefore, a revenue receipt. The third question must, accordingly, be answered in the affirmative and in favour of the Revenue.

27. The questions are answered thus:

Question No. 1: In the negative and in favour of the Revenue.

Question No. 2: That part of Rs. 31,220 (Rs. 71,900 less Rs. 40,680) which is attributable to goodwill shall not be liable to capital gains tax. The balance amount shall be liable to capital gains tax.

Question No. 3: In the affirmative and in favour of the Revenue.

28. The assessee shall pay to the Revenue the costs of the reference.