G.P. Singh, J.
1. This is a reference made by the Income-tax Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961, at the instance of the department.
2. The assessee, Jaswantlal Dayabhai, is an individual. The relevant assessment year is 1962-63, for which the previous year ended on 31st March, 1962. There was a partnership consisting of the assessee and his three brothers, namely, Jayantilal, Suresh Chandra and Hemendra. Three other minor brothers of the assessee were admitted to the benefits of the partnership. This partnership was constituted by a partnership deed executed on 24th October, 1957. The assessee's share in the partnership was 15 per cent. On 16th April, 1961, a deed was executed between the assessee, the three major brothers who were partners and the guardian of the minors. The effect of this deed was that the assessee retired from the partnership with effect from 15th April, 1961. The goodwill of the partnership was valued at Rs. 6 lakhs. The assessee's share in the goodwill, therefore, worked out to Rs. 90,000. The guardian of the minors consented to pay off the assessee the value of his interest in the goodwill by debit of the proportionate amounts to the accounts of the respective minors. The interest of each of the minors was also increased to the extent of 5 per cent. As a result of this arrangement, which was agreed to by all concerned, a sum of Rs. 90,000 was credited to the assessee's account on 17th April, 1961, and corresponding debits of Rs. 30,000 each were made to the accounts of the three minors. In the assessment proceedings, the assessee claimed that the sum of Rs. 90,000 was exempt from taxation. The Income-tax Officer held against the assessee and taxed the amount as capital gains under Section 45 of the Act. In appeal, the Appellate Assistant Commissioner also took the same view. On a further appeal, however, the Tribunal came to the conclusion that the sum of Rs. 90,000, which was obtained by the assessee, in consideration of his interest in the goodwill of the firm at the time of his retirement, was not taxable as capital gains. On an application made by the department the following question of law has been referred to the High Court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that no amount is chargeable ascapital gains because the creation of the goodwill of the firm did not cost the assessee anything in terms of money ?'
3. 'Capital asset' is defined by Section 2(14) of the Act to mean property of any kind held by an assessee, whether or not connected with his business or profession. Goodwill of a business falls within this definition. The word 'transfer', as defined in Section 2(47), in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights or the compulsory acquisition thereof under any law. It may be assumed, although it is disputed by the assessee, that the transaction under which the assessee received Rs. 90,000 and retired from partnership involved a transfer of his interest in the goodwill for Rs. 90,000. Section 45, which is the charging section, in so far as relevant, provides that 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. Section 48 provides for the mode of computation and deductions. This section reads as under :
'48. The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :--
(i) expenditure incurred wholly and exclusively in connection with such transfer ;
(ii) the cost of acquisition of the capital asset and the cost of any improvement thereto.'
4. In the instant case, the goodwill of the business with which we are concerned was a self-created asset and had cost nothing in terms of money to the assessee. The question whether a transfer of a goodwill of this nature can be taxed as capital gains under Section 45 has been considered in a number of cases by various High Courts. The majority of the High Courts have taken the view that the transfer of such a capital asset is not taxable under Section 45--[See Commissioner of Income-tax, v. Rathnam Nadar : 71ITR433(Mad) , Commissioner of Income-tax v. Chunilal Prabhudas & Co. : 76ITR566(Cal) ; Jagdev Singh Mumik v. Commissioner of Income-tax : 81ITR500(Delhi) ; Commissioner of Income-tax v. Jacob : 89ITR88(Ker) : Commissioner of Income-tax v. Srinivasa Setty : 96ITR667(KAR) and Commissioner of Income-tax v. Home Industries & Co. : 107ITR609(Bom) ]. A contrary view has been taken only by the Gujarat High Court in Commissioner of Income-tax v. Mohanbhai Pamabhai  91 ITR 393. Learned counsel for the department has argued that the Gujarat view should be accepted by us. He has submitted that Section 45 should not be construed with reference to Section 48 whichis a machinery provision and that if the capital asset is such that the assessee had to spend nothing for its acquisition, the entire sale proceeds would be taxable as capital gains under Section 45.
5. Having given our anxious consideration to the submissions made before us, we have reached the conclusion that the view taken by the majority of the High Courts must be accepted. There are various reasons for this conclusion. Firstly, Section 45, which is the charging section, shows that the charge is on 'any profits or gains arising from the transfer of a capital asset' and not on the capital asset itself. The concept of 'profits or gains 'made chargeable under Section 45, itself implies that there is something received in excess of the cost of the capital asset which is transferred. In the case of a self-created or self-generated goodwill, the assessee incurs no cost in terms of money. On transfer of such a goodwill, it cannot be said that the assessee makes any 'profits or gains chargeable under Section 45. If the whole of the consideration received on such a transfer is taken to be 'profits or gains' to the assessee within the meaning of Section 45, it would amount to taxing the capital asset itself and not 'profits or gains' arising from its transfer. Secondly, the above construction of Section 45 is supported by the scheme of Section 48 which provides that the income chargeable under Section 45 is to be computed by deducting from the full value of the consideration 'the cost of acquisition of the capital asset and the cost of any improvement thereto'. The mode of computation provided in Section 48 shows that the capital asset, a transfer of which is taxable under Section 45, is one which costs in terms of money to the assessee, and is also one which can be improved by investing money. Self-created or self-generated goodwill is not that type of capital asset. Thirdly, even assuming that the construction for which the department contends is also open, the rule of construction applicable to a taxing statute is that the benefit of construction, when two constructions are equally open, should be given to the assessee. This rule requires that the construction adopted by the majority of the High Courts, which is certainly a reasonable construction of Section 45, should be accepted as it is favourable to the taxpayer, fourthly, when the Madras High Court in Commissioner of Income-tax v. Rathnam Nadar : 71ITR433(Mad) , decided against the department, an appeal was taken to the Supreme Court, but the appeal was not pressed, although at the time when the matter came up before the Supreme Court the department could have relied upon the decision of the Gujarat High Court. Fifthly, in the matter of a taxing statute of all India application it is very necessary that there should be uniformity in its construction throughout the country as far as possible. Lastly, a reading of the decision of the Gujarat High Court shows that the decision on this pointwas clearly obiter. For all these reasons, we are of opinion that the transfer of a self-created or self-generated goodwill is not taxable under Section 45.
6. We answer the question referred to us in the affirmative, in favour of the assessee and against the department. There shall be no order as to costs of this reference.