1. The assessee in this case is a registered firm and its assessed income of Rs. 55,37,160, inter alia, included a sum of Rs. 30,00,000 towards compensation money and Rs. 15,00,000 in respect of the transfer goodwill. There was an appeal against the assessment wherein the assessee contended that the transfer of assets did not result in capital gains in respect of the goodwill and, therefore, the said sum Rs. 15,00,000 cannot be assessed under goodwill. The assessee also contended that since certain portions of assets transferred belong to the partners of the firm in their individual capacity, the compensation money has to be apportioned as between the various assets which were the subject-matter of the bargain. The Appellate Assistant Commissioner held that the decision in Rathnam Nadar v. CIT : 71ITR433(Mad) would apply to the facts of the case and, therefore, the goodwill should be taken as a self-generating asset and, therefore, no capital gain will arise out of the transfer of that asset. As regards the other question relating to the ownership of various items of properties, the Appellate Assistant Commissioner held that since no claim was made at any stage that some of the assets belonged to the partners individually, all the assets should be taken as the assets of the firm and it is not possible to apportion the same(sic) to each of the assets transferred. The matter was taken on appeal to the Income-tax Appellate Tribunal. As regards the apportionment of the price, the assessee filed an appeal to the Tribunal. As against the relief granted to the assessee on goodwill, the Revenue went on appeal before the Tribunal. Both the appeals were heard together. In the grounds of appeal, a typed set of papers had been filed by the Revenue and they have also raised a ground, wherein, in the typed set of papers, they have included certain earlier years' assessment, indicating that the assessee had purchased the undertaking from some other party with a view to show that the goodwill is not self-generating asset in the hands of the assessee, but acquired from another party. But at the time of hearing before the Tribunal, the Revenue has merely contended that the decision in Rathnam Nadar v. CIT : 71ITR433(Mad) will not apply to the facts and circumstances of this case and particular reference has been made before the Tribunal to the document filed in the form of typed set of papers. The Tribunal, therefore, proceeded on the basis that the assessee did not acquire the goodwill from any third party, but in its hands it is only a self-generating one, which will not attract capital gain. In that view of the matter, it was held in favour of the assessee that capital gain cannot be charged on the cost of the goodwill. On the question raised by the assessee, as to the apportionment of the sale price towards various assets on the ground that such apportionment is necessary, as some of the assets belong to the partners in their individual capacity, the Tribunal feel that if at all, the assets transferred do not belong to the firm and some of the assets belong to the partners of the firm in their individual capacity, then naturally the sale price should be apportioned as between the various assets for the purpose of determining the capital gain in hands of the firm and, therefore, remitted the matter to the Income-tax Officer to find out whether any of the assets transferred belonged to the partners of the firm in their individual capacity as contended by the assessee. Aggrieved by the decision of the Tribunal, the petitioner seeks a direction to the Tribunal to refer the following three questions :
'(i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that there is no liability to capital gains tax in respect of the sum of Rs. 15,00,000 claimed by the assessee as having been received towards goodwill especially when it was argued that the sum of Rs. 15,00,000 admittedly represents consideration not merely for goodwill but also for trade marks, quotas, privileges, facilities, concessions, agreements, commitments including the tenancy interest for entitlements, etc.
(ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the several items of amounts received by the assessee consequent on the sale of the undertaking of M/s. Jeevanlal can be treated separately with regard to the taxability and that the capital gains arising out of the entire transfer cannot be assessed as much
(iii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in restoring the matter to the Income-tax Officer to give a finding on the question whether the land, building, machinery as well as the trade mark and licences transferred were the property of the firm and transferred by the firm as such and make a fresh assessment especially when it was brought out that the assessee-firm had treated the assets as belonging to the firm and also claimed depreciation thereon ?'
2. So far as the first question is concerned, the Tribunal proceeded on the basis that the assessee did not acquire the goodwill from a third party but it is a self-generating asset in its hands and, therefore, the decision in Ratham Nadar v. CIT : 71ITR433(Mad) would apply. It is no doubt true that subsequent to the decision of the Tribunal, the Revenue has filed a miscellaneous application for rectification of the order of the Tribunal on ground that the Tribunal has not given any finding on the question, as to whether the assessee had purchased the goodwill from a third party. Even though the Revenue has filed necessary documents in the form of typed set of papers, the Tribunal rejected that application on the ground that no case has been made out for rectifying the earlier order of the Tribunal, which is the subject-matter of this reference application. As against the order rejection the rectification application filed by the Revenue, a reference application was filed in Tax Case Petition No. 50 of 1983, and we have directed a reference in that case. Having regard to the fact, the question whether the Revenue is entitled to claim rectification of the order of the Tribunal on the ground that the Tribunal failed to consider certain documents placed before it in support of the Revenue's claim that the goodwill is not a self-generating asset in the hands of the assessee, does not arise at this stage. We are here concerned only with the question as to whether the Tribunal's finding that goodwill is a self-generating asset is correct. The Tribunal, as already stated, has proceeded on the basis that the materials on record indicated that the assessee started the business and in course of time, the business generated the goodwill. Perhaps, before the Tribunal, there was no material to indicate that the assessee had acquired the goodwill as part of the business from third party. We, have therefore, to say that Tribunal is right in applying the decision in Rathnam Nadar v. CIT : 71ITR433(Mad) , to the facts of the case. Therefore, we find that is no (sic) the first question.
3. So far as second and third questions are concerned, as already stated, the Tribunal has remitted the matter to the Income-tax Officer to determine the ownership of the assets. It cannot be disputed that some of the assets are owned by partners in their individual capacity and, therefore, those cannot be taken to be the assets of the firm. The contention of the Revenue is that all the assets belong to the firm, since depreciation has been claimed on those assets for earlier years and it is not open to the assessee now to contend that some of the assets which had been transferred belong to the partners individually. All these contentions have been urged before the Income-tax Officer, who has been directed by the Tribunal to investigate the question of ownership of the same. The learned counsel for the Revenue would say that in view of certain observations made by the Tribunal, the Revenue may be handicapped in putting forward their case at the stage of enquiry on the question of ownership of the assets. Therefore, we make it clear that since the question of ownership comes up for consideration for the first time, it is open to both the Revenue as well as the petitioner to put forth their contentions without being foreclosed by the observations of the Tribunal.
4. In this view, we do not see any justification or necessity for directing a reference in this case. Therefore, these tax case petitions are dismissed. No costs.