Judgment

PATHAK, J.:- The question in these appeals is whether the transfer of the goodwill of a newly commenced business can give rise to a capital gain taxable under S. 45, Income-tax Act, 1961.

2. The assessee, a registered firm, manufactured and sold agarbattis. Cl. (13) of the Instrument of Partnership executed on 28th July, 1954 showed that the goodwill of the firm had not been valued, and the valuation would be made on dissolution of the partnership. The period of the partnership was extended by an instrument dated 31st March, 1964, and it contained a similar clause (13). Subsequently, the assessee firm was dissolved by a deed dated 1st December, 1965. At the time of dissolution, it seems, the goodwill of the firm was valued at Rs. 1,50,000/-. A new partnership by the same name was constituted under an instrument dated 2nd December. 1965 and it took over all the assets, including the goodwill, and liabilities of the dissolved firm.

3. The Income-tax Officer made an assessment on the dissolved firm for the assessment year 1966-67 but did not include any amount on account of the gain arising on transfer of the goodwill. The Commissioner, being of the view that the assessment orde