CHANDURKAR C.J.


The assessee entered into an agreement of sale on February 2, 1971, with Chennai Bottling Company under which the assessee sold the running concern by the name of Dasaprakash Bottling Company for a sum of Rs. 32, 70, 898. The actual money received by the vendor was Rs. 8, 25, 000 and the purchaser took over liabilities of the value of Rs. 24, 45, 898. Admittedly, the value of tangible assets was as under :


Rs.


Value of current assets 9, 81, 402


Buildings 6, 48, 749


Machinery 6, 25, 821


22, 55, 972


Thus, there was an overall surplus of Rs. 10, 69, 346 received by the assessee.


Out of the above said amount, the Income-tax Officer worked out the profit under section 41(2) of the Income-tax Act, 1961, at Rs. 2, 01, 841. In respect of the balance amount of Rs. 8, 67, 505, the assessee's case was that this was relatable to the transfer of goodwill and, therefore, not taxable as capital gains in view of the decision of this court in CIT v. Ratnam Nadar 1969 (71) ITR 433. The Income-tax Officer, however, proceeded to tax this surplus amount on the authority of the decision of the Gujarat High Court in CIT v. Mohanbhai Pamabhai, 1973 (91) ITR 393. Thus, a sum of Rs. 8, 67, 505 was brought to tax under the head "Capital gains".


On appeal by the assessee, the Appellate Assistant Commissioner held that the sum of Rs. 8, 67, 505 was not assessable. He also set aside the finding in respect of the profit computed under section 41(2) of the Income-tax Act, 1961. An appeal by the Revenue came to be filed against this order of the Appellate Assistant Commissioner that the sums of Rs. 8, 67, 505 and Rs. 2, 01, 841 could not be brought to tax. However, the claim for addition of the amount of Rs. 2, 01, 841 was not pressed before the Tribunal. The Tribunal was, therefore, concerned only with the nature of the receipt of Rs. 8, 67, 505.The Tribunal on a consideration of the possibility of the concern yielding profits took the view that after a period of five years, the business would yield approximately a profit of Rs. 30, 000 per year to the purchaser which was not very appreciable. The Tribunal, therefore, found that one of the assets transferred was land which would not increase in value over some years in future and looking into the circumstances, 20 per cent. of the overall surplus of Rs. 10.69 lakhs could be attributed to goodwill, considering also that a popular soft drink was being marketed. Following the decision of this court in CIT v. Ratnam Nadar 1969 (71) ITR 433, the Tribunal held that the sum was not liable to tax on capital gains. Thus, deducting a sum of Rs. 2, 00, 000 out of the sum of Rs. 8, 67, 505 the Tribunal took the view that the balance of Rs. 6, 67, 505 had to be assessed as capital gains. This amount, according to the Tribunal, did not relate to any immovable property and necessarily it would relate to movable assets and, therefore, the full amount of Rs. 6, 67, 505 had to be considered for the assessment for the assessment year 1971-72. The Tribunal observed that it would become necessary to apportion this amount between long-term capital gains and short-term capital gains.


The Revenue and the assessee were both aggrieved by this view of the Tribunal and two questions have, therefore, been referred to this court, the first at the instance of the assessee and the second at the instance of the Revenue. The two questions are as follows :


"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that an amount of Rs. 6, 67, 505 related to surplus arising out of consideration attributable to sale of movables and had to be apportioned between gains attributable to short-term capital assets and long-term capital assets and was assessable as capital gains for the assessment year 1971-72 ?


2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that out of the surplus arising in pursuance of transactions emanating from the agreement of sale dated February 2, 1971, an apportionment could be made to goodwill ?" *


Learned counsel appearing on behalf of the assessee has contended that the entire amount of Rs. 8, 67, 505 should have been treated as consideration received for the goodwill and consequently it was liable to be excluded for the purpose of computing the tax payable by the assessee. While urging that the entire amount was liable to be excluded for the purpose of computing tax, it was not possible for the learned counsel to substantiate as to how in respect of a concern which had been running in loss during the five years preceding the year of assessment and almost during the entire period since it was started, such a large amount could be claimable by way of goodwill. Annexure 'A' to the Appellate Assistant Commissioner's order shows that in the accounting period from August 1, 1966, to March 31, 1967, there is a loss of Rs. 1, 04, 884 and this loss has gone up in the accounting period 1967-68 by Rs. 2, 19, 350. In the year 1969-70, no depreciation has been claimed, but it appears that if depreciation was claimed, there would also have been a larger loss. In the next two years, there are losses of Rs. 1, 06, 717 and Rs. 1, 23, 439. Undoubtedly, all the authorities have proceeded on the footing that there was some goodwill transferred and it appears that the agreement also refers to the transfer of goodwill. The only relevant circumstance for the purpose of ascertaining the value of the goodwill would, therefore, be some expected profits in the future which the Tribunal has estimated at Rs. 30, 000 per year on the basis of the figures in annexure 'A' referred to above. The Tribunal obviously was not left with any other alternative, but to make an estimate both in respect of the future profits and consequently the approximate value of the goodwill. It is not urged that the estimate made in respect of the future profits is erroneous. Ultimately, therefore, if this estimate made by the Tribunal of about 20 per cent. of the overall surplus is not shown to be patently unjustifiable, then that estimate must necessarily be accepted as a finding in this reference. There is, therefore, no reason to interfere with the finding recorded by the Tribunal that the approximate value of th

e goodwill should be computed at a round figure of Rs. 2, 00, 000. Once this finding is confirmed, necessarily the consequential finding that the balance of Rs. 6, 67, 505 will have to be treated as attributable to the sales of movable assets liable to be apportioned between long-term capital assets and short-term capital assets cannot be interfered with.In the view which we have taken, both the questions have to be answered in the affirmative. Accordingly, question No. 1 is answered in the affirmative and against the assessee. Question No. 2 is answered in the affirmative and against the Revenue. In view of the equal success and failure in these two references, there will be no order as to costs in both the cases.