D.R.DHANUKA, J. - (1.) THE Income -tax Appellate Tribunal, Bombay bench 'E', has referred the following questions for the opinion of this court under section 256(1) of the Income -tax Act, 1961 : 1962 -63 assessment year : '1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 12.50 lakhs shown in the sale deed as considered for allocation towards the cost of the depreciable assets of the Central Studios purchased by the assessee from Mr. K. M. Mody and in directing the Income -tax Officer to grant depreciation on the same ?' 1963 -64 assessment year : '2. Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the profit under section 41(2)/loss under section 32(1)(iii) of the Income -tax Act, 1961, should consequently be calculated on the revised written down value as determined above for 1962 -63 assessment year ?'
(2.) THE relevant facts having bearing on the subject -matter of this reference are briefly summarised hereinafter : On or about December 13, 1945, the assessee -company purchased Central Studio from one Mr. K. M. Mody. The parties executed the sale deed dated December 13, 1945. The aggregate consideration of Rs. 20 lakhs fixed for the said transaction was bifurcated under the said sale deed as under : (a) Rs. 5,00,000 towards price of premises; (b) Rs. 2,50,000 towards price of equipment, machinery, plant, furniture and physical assets which were transferred for delivery; (c) balance of Rs. 12,50,000 towards price of goodwill of the business of the vendor carried on in the name of Central Studios and the book debts and the benefit of the hiring and other agreements as per the list given in the Third Schedule to said sale deed. In the assessment proceeding, concerning the vendor, the said Mr. K. M. Mody, the Department itself contended that in reality the said studio had no goodwill worth its name and the said sum of Rs. 12,50,000 did not truly represent the goodwill of the said business. The assessment proceedings pertaining to the vendor were contested by the parties right up to the stage of Tribunal. In the said proceedings, the assessing authorities including the Income -tax Appellate Tribunal held that having regard to the figures of profit made by the said Central Studios during the last three years prior to the date of the sale, the value of goodwill of the said studio sold to the assessee was either 'Nil' or inequitable (sic). The assessment proceedings pertaining to Mr. K. M. Mody have become final. In the said proceedings the Income -tax Officer was directed to distribute the said figure of Rs. 12,50,000 amongst various depreciable assets after deducting therefrom the amount of book debts and the benefits of hiring and other agreements whatsoever. By an order dated February 7, 1972, the Income -tax Officer worked out the relevant figures and distributed the said sum of Rs. 12,50,000 amongst the various depreciable assets. In the proceedings pertaining to the vendor, the cost of the depreciable assets was computed for the purpose of the 'balancing charge' under section 41(2) of the Act on the above referred footing.
(3.) HAVING regard to the findings recorded by the Income -tax Tribunal in the assessment proceedings concerning the vendor, the Income -tax Appellate Tribunal took the view in the assessment proceedings concerning the respondent herein that the above referred amount of Rs. 12,50,000 was liable to be added to the cost of depreciable assets. The view taken by the Tribunal as aforesaid is consistent with the view taken in the proceedings pertaining to the vendor. In our opinion, the view taken by the Tribunal is correct. It cannot be disputed that the assessing authorities were entitled to go behind the sale deed and arrive at appropriate findings regarding the value of the assets in question and the allocation of Rs. 12,50,000 in the sale deed as price of goodwill not be treated as conclusive.;