RADHA KISHAN KAPOOR R S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, Radha Kishan Kapoor (hereinafter referred to as the assessee), the following question of law has been submitted to us for our opinion :

(2.) THE case originally came up before a Bench consisting of R. N. Gurtu and B. Upadhya JJ., who called for a supplementary statement of the case, which having been received the reference has been put up before us for hearing. THE facts as emanating from the statement of the case and relevant for our purpose are as follows : THE assessee and his brother, Gauri Shanker Kapoor, constitute a registered partnership firm styled as Messrs. Hari Chand Kapoor and sons. This firms carried on canteen and contract business in the India Army. A partition took place between the brothers and out of seventeen contracts that they had, each got eight. With regard to the remaining one, which was a canteen shop run under the style of Irwin Stadium, New Delhi, the military authorities gave the brothers option for either of them to rum the business subject to his buying all the rights of the other. THE brothers entered into an agreement, the main clause of which was as follows :

(3.) WE have perused the Institute Rules, India (Army and Royal Air Force Head quarters, India 1938) which deal with military contracts and which have been made annexure to the statement of the case submitted to us by the Tribunal. These rules clearly provide that no person can run a canteen other than the one appointed by the military authorities and that the business was terminable at six months notice by the military authorities. There is thus no question of a free market and the business, is in the nature of a monopoly of the military department Consequently any ideas of competition are foreign to the real nature of the business. WE cannot, therefore, treat this payment of Rs. 45,000 to Gauri Shanker Kapoor as the amount paid to avoids competition WE are also unable to hold that his amount was paid by they assessee to buy the goodwill of Gauri Shanker Kapoor. The question of goodwill can arise only in connection with a business to carry on which a person has a right and in which continuity is excepted. Inasmuch as neither the assessee not Gauri Shanker Kapoor nor anyone else had a legal right to run the business except for the year for which they had the contract, there was no guarantee respect of the continuity of the business. There were therefore no certain prospects to earn profits. The life of the business was only one year, i.e. the period for which the contract was given, and that too subject to cancellation by notice. No one could look forward to the prospects of earning profits as of right and as we have said above there was no free market. In the circumstances, we do not see how it can be said that the sum of Rs. 45,000 was paid buy over the good will of Gauri Shanker Kapoor.