COMMISSIONER OF WEALTH TAX vs. HARSHADKUAMR N DALAL

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WTR/28/1993HC GujaratGJHC24021503199307 November 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages
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What did the High Court hold?

The High Court of Gujarat held that the goodwill of M/s C.J. Patel & Co. was not to be considered for determining the value of the assessee's share of interest in the firm. The Court followed its previous decision in the case of the same assessee reported in (1996) 219 ITR 592. In that prior ruling, the Court had determined that where goodwill has not been purchased, it is not covered by Rule 2C(d) of the Wealth-tax Rules and therefore should not be taken into account for determining a partner's share in the firm. The question referred to the Court was answered in the affirmative, in favour of the assessee and against the revenue. The references were disposed of accordingly.

What were the facts?

The Commissioner of Wealth Tax (Revenue) filed these references at the instance of the Income-tax Appellate Tribunal, Ahmedabad. The references pertain to assessment years 1982-83 to 1986-87 and concern the valuation of the assessee's share of interest in the firm M/s C.J. Patel & Co. The core issue is whether the goodwill of the firm should be considered for determining the value of the assessee's share. The High Court of Gujarat at Ahmedabad heard arguments from both the revenue and the assessee.

What were the issues?

1. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the goodwill of M/s C.J. Patel & Co. was not to be considered for determining the value of the assessee's share of interest in the said firm? (Question of law turning on the interpretation of Wealth-tax Rules, specifically Rule 2C(d)). Assessee's Contention: The judgment does not record specific arguments made by the assessee, but it relies on a previous decision of the same court concerning this assessee. Revenue's Contention: The revenue, through its counsel, presented the case for the inclusion of goodwill in the valuation.

Which sections of the Income-tax Act were involved?

Section 27

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 28 of 1993 to WEALTH TAX REFERENCE No 28D of 1993

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF WEALTH TAX Versus HARSHADKUAMR N DALAL -------------------------------------------------------------- Appearance: 1. WEALTH TAX REFERENCE No. 28 of 1993 MR BB NAIK with MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 07/11/2001

ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH)

In these references at the instance of the revenue, the Income-tax Appellate Tribunal, Ahmedabad has referred the following common question under Section 27 of the Wealth-tax Act, 1957 in respect of assessment years 1982-83 to 1986-87 :-

"Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the goodwill of M/s C.J. Patel & Co. was not to be considered for determining the value of assessee's share of interest in the said firm ?"

2.

We have heard Mr BB Naik, learned counsel for the revenue and Mr RK Patel, learned counsel for the respondent-assessee.

3.

Our attention is invited to the decision of this Court in the case of this very assessee reported in (1996) 219 ITR 592 wherein this Court held that where the goodwill has not been purchased, it is not covered by Rule 2C(d) of the Wealth-tax Rules and such goodwill is not to be taken into account for determining the share of a partner in the firm in question.

4.

Following the aforesaid decision, we answer the question in the affirmative i.e. in favour of the assessee and against the revenue.

5.

The references accordingly stand disposed of with no order as to costs.

(M.S. Shah, J.)

(D.A. Mehta, J.) sundar/-

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