Case: Mangalore Electric Supply Co. Ltd Vs. The Commissioner Of Income Tax, West Bengal

which is, that the transfer of capital assets by reason of compulsory acquisition are comprehended within the meaning of the word "transfer". We are, therefore, clear that if an existing title is extinguished and a new one is created, there is within the meaning of section 12B(1) of the Act of 1922 transfer of a capital asset. The fact that the divestiture of title takes place under a law relating to the compulsory acquisition of property would make no difference to that position.10. The High Court of Madhya Pradesh in Commissioner of Income-tax v. Shrikrishan Chandmal [1963] 47 ITR 833 , the High Court of Madras in Wilfred Pereira Ltd. v. Commissioner of Income-tax [1964] 53 ITR 747 and Commissioner of Income-tax v. United India Life Assurance Company Ltd. [1966] 62 ITR 610 and the High Court of Gujarat in Vadilal Soda Ice Factory v. Commissioner of Income-tax [1971] 80 ITR 711 have taken the same view, namely, that the word "transfer" which occurs in section 12B(1) of the Indian Income-tax Act, 1922, is an expression of wide comprehension and includes within its sweep both voluntary and involuntary transfers.11. The judgment of the High Court dated August 25, 1971, leading to Civil Appeal No. 2160 of 1972 must, therefore, be affirmed and the appeal dismissedIn regard to Civil Appeal No. 2006 of 1972, the case of the appellant before the Income-tax Officer was only this that the compulsory acquisition of its undertaking did not amount to a "transfer" within the meaning of section 12B(1) of the Act of 1922. No case was made out that, alternatively, goodwill is not a capital asset. The appellant did not contend before the Appellate Assistant Commissioner also that goodwill is not a capital asset and, therefore, at least to the extent to which compensation was attributable to the goodwill the capital gains tax was not attracted. The appellant did contend before the Tribunal that, apart from its tangible assets, the State Government had taken over the goodwill attaching to the business and the appellants right to the management of that business and the amount referable to these items had to be deducted in computing the capital gains. The Tribunal answered this contention by holding that--"(a) goodwill as understood in law had no real significance in the present case and could not have been acquired by the Government;(b) it was not one of the assets shown in the balance-sheet;(c) there was no proof to show that the Government actually took over any goodwill;(d) if the case of the appellant was that even if it was not shown in the balance-sheet, payment therefor had to be evaluated or apportioned, the appellant should have produced proof regarding the evaluation of the goodwill;(e) the appellant had not placed any materials before the Tribunal to show whether any interference was called for in the matter of computation having regard to the value of goodwill as on January 1, 1954; and(f) the right of management was not independent of the business acquired and there were no materials to show that this right could have any value placed upon it in the fixation of compensationThe High Court was in our opinion right in taking the view that in the light of these circumstances the appellants contention, that goodwill should be valued separately and a part of the compensation attributable to it should be deducted from the compensation, could not be accepted. Even assuming for the purposes of argument that the two relevant questions, on which the High Court called for a reference from the Tribunal involved the consideration of any legal principle, the questions are mixed questions of law and fact because, unless it is found that the goodwill, in fact, had some value, it cannot be decided whether any part of the compensation is attributable to the goodwill of the business."12. Learned counsel for the appellant drew our attention to the grievance made by the appellant in his application dated February 8, 1972, for leave to appeal to this court to the effect that the Tribunal had expressed the view at the time of hearing of the appeal before it that it would only decide the point whether a part of the compensation was attributable to the goodwill of the business and that the question as regards the value of the goodwill as on January 1, 1954, would be left to the Income-tax Officer for his determination. The grievance of the appellant is that it was misled by the observations made by the Tribunal during the course of the hearing of the appeal and that is why it did not produce any evidence regarding the value of the goodwill. That there is no substance in this contention is clear from the order of the Tribunal dated October 9, 1968, by which it refused to refer for the opinion of the High Court the question regarding the evaluation of the goodwill. The Tribunal observes in its order that during the hearing of the appeal it had not expressed any view of the kind attributed to it by the appellant and that no assurance was held forth to the appellant that the question as regards goodwill would be left for determination to the Income-tax OfficerSince the question as to whether a part of the compensation is attributable to the goodwill of the appellants business is a mixed question of law and fact and since not only was the question not raised by the appellant before the Income-tax Officer or the Appellate Assistant Commissioner but, having raised it before the Tribunal, the appellant placed no material before it on the basis of which goodwill could be evaluated and a part of the compensation properly apportioned to the goodwill of the business, we cannot allow the appellant to raise the contention involved in the two questions. On those questions, therefore, the judgment of the High Court, for the reasons mentioned by us, has to be affirmed. Civil Appeal No. 2006 is also, therefore, dismissed.13.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We will take up Civil Appeal No. 2160 of 1972 first for our consideration. It involves for consideration the decision of the question whether the compulsory acquisition of property falls within the scope of section 12B of the Indian Income-tax Act, 1922, so as to render any surplus arising from such acquisition liable to tax under thatfind it impossible to accept this submission. In the first place, if it was intended that voluntary transfers alone should fall within the meaning of the section, it was unnecessary for the legislature to use the expression "transfer", an expression acknowledged in law as having a wide, connotation and amplitude. Earl Jowitt, in The Dictionary of English Law, says:"In the law of property, a transfer is where a right passes from one person to another, either (1) by virtue of an act done by the transferor with that intention, as in the case of a conveyance or assignment by way of sale or gift, etc., or (2) by operation of law, as in the case of forfeiture, bankruptcy, descent, or intestacy." Roland Burrows on Words and Phrases, volume V, contains a statement under the caption "Transfer on Sale" at page 331, that even a transfer of land under compulsory powers is a transfer "on sale". It is unnecessary for us to consider the question whether a compulsory acquisition of property is a "sale" within the meaning of section 12B(1) and indeed, it is needless, for the present purpose to go that far. We are concerned with the narrower question whether a compulsory acquisition of property can amount to a "transfer" within the meaning of section 12B(1) and upon that question it is important to bear in mind that the word transfer is comprehensive and is regarded generally as comprehending within its scope transfers both of the voluntary and involuntary kinds. Without more, therefore, there is no reason for limiting the operation of the word "transfer" to voluntary acts of transfer so as to exclude compulsory acquisitions of propertyThe argument that the word "transfer" must be construed ejusdem generis with the words, sale, exchange or relinquishment, has to be rejected because as stated in Craies on Statute Law (7th edition, pageHigh Court of Madhya Pradesh in Commissioner of Income-tax v. Shrikrishan Chandmal [1963] 47 ITR 833  , the High Court of Madras in Wilfred Pereira Ltd. v. Commissioner of Income-tax [1964] 53 ITR 747     and Commissioner of Income-tax v. United India Life Assurance Company Ltd. [1966] 62 ITR 610     and the High Court of Gujarat in Vadilal Soda Ice Factory v. Commissioner of Income-tax [1971] 80 ITR 711     have taken the same view, namely, that the word "transfer" which occurs in section 12B(1) of the Indian Income-tax Act, 1922, is an expression of wide comprehension and includes within its sweep both voluntary and involuntaryjudgment of the High Court dated August 25, 1971, leading to Civil Appeal No. 2160 of 1972 must, therefore, be affirmed and the appeal dismissedIn regard to Civil Appeal No. 2006 of 1972, the case of the appellant before the Income-tax Officer was only this that the compulsory acquisition of its undertaking did not amount to a "transfer" within the meaning of section 12B(1) of the Act of 1922. No case was made out that, alternatively, goodwill is not a capital asset. The appellant did not contend before the Appellate Assistant Commissioner also that goodwill is not a capital asset and, therefore, at least to the extent to which compensation was attributable to the goodwill the capital gains tax was not attracted. The appellant did contend before the Tribunal that, apart from its tangible assets, the State Government had taken over the goodwill attaching to the business and the appellants right to the management of that business and the amount referable to these items had to be deducted in computing the capital gains. The Tribunal answered this contention by holdinggoodwill as understood in law had no real significance in the present case and could not have been acquired by the Government;(b) it was not one of the assets shown in the balance-sheet;(c) there was no proof to show that the Government actually took over any goodwill;(d) if the case of the appellant was that even if it was not shown in the balance-sheet, payment therefor had to be evaluated or apportioned, the appellant should have produced proof regarding the evaluation of the goodwill;(e) the appellant had not placed any materials before the Tribunal to show whether any interference was called for in the matter of computation having regard to the value of goodwill as on January 1, 1954; and(f) the right of management was not independent of the business acquired and there were no materials to show that this right could have any value placed upon it in the fixation of compensationThe High Court was in our opinion right in taking the view that in the light of these circumstances the appellants contention, that goodwill should be valued separately and a part of the compensation attributable to it should be deducted from the compensation, could not be accepted. Even assuming for the purposes of argument that the two relevant questions, on which the High Court called for a reference from the Tribunal involved the consideration of any legal principle, the questions are mixed questions of law and fact because, unless it is found that the goodwill, in fact, had some value, it cannot be decided whether any part of the compensation is attributable to the goodwill of theThat there is no substance in this contention is clear from the order of the Tribunal dated October 9, 1968, by which it refused to refer for the opinion of the High Court the question regarding the evaluation of the goodwill. The Tribunal observes in its order that during the hearing of the appeal it had not expressed any view of the kind attributed to it by the appellant and that no assurance was held forth to the appellant that the question as regards goodwill would be left for determination to the Income-tax OfficerSince the question as to whether a part of the compensation is attributable to the goodwill of the appellants business is a mixed question of law and fact and since not only was the question not raised by the appellant before the Income-tax Officer or the Appellate Assistant Commissioner but, having raised it before the Tribunal, the appellant placed no material before it on the basis of which goodwill could be evaluated and a part of the compensation properly apportioned to the goodwill of the business, we cannot allow the appellant to raise the contention involved in the two questions. On those questions, therefore, the judgment of the High Court, for the reasons mentioned by us, has to be affirmed. Civil Appeal No. 2006 is also, therefore, dismissed.