The main legal point established in the judgment is that the test for determining capital expenditure versus revenue expenditure is whether the payment was made for the acquisition of goodwill or for the right to use it.

( 1 ) AT the instance of assesses. Income-tax Appellate Tribunal Delhi Benches b and c (inshort tribunal ) (ITR20/80by Delhi Bench-Banditr 325/80 by Delhi Bench-C) have referred the following questions, under Section 256 (1) of the Income-tax Act, 1961 (in short the Act ), for opinion of this Court: ITR No. 20/80:

" (1) Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the payment of Rs. 35,000. 00 in respect of assessment year 1976-77 represented capital expenditure and not payment as hire charges ?"

" (2) Whether on the facts and circumstances of the case, the payment of Rs. 35,000. 00- made by the assessee to the family of the deceased was an admissible deduction in computing the income of the assessee for the assessment year 1976-77 ?"itr No. 325/80:

" (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the payment of Rs. 16,521. 00 in respect of the assessment year 1977-78 represented capital expenditure and not payment as hire charges ?"

" (2) Whether on the facts and in the circumstances of the case the payment of Rs. l6,521. 00madebytheassesseetothefamilyofthedeceasedwas on admissible deduction in computing the income of the assessee for the assessment year 1977-78 ?"itr No. 20/80 relates to assessment year 1976-77 and ITR No. 325/80 relates to assessment year 1977-78.

( 2 ) BRIEF reference to the factual aspects would suffice: Shri J. M. Mehra, one of the partners of the assessee firm named M/s. Mehra Khanna and Co. , was practising as a Chartered Accountant. The firm was evidenced by a deed of partnership dated 1/11/1944, and Shri Kala Ram Khanna was die other partner. Clause 12 (b) of the deed of partnership provided that goodwill of the firm is property of both the partners in equal shares and in the event of death of one of the partners, the other partner would carry on the profession on payment of remuneration and/or hire charges for the use of the deceased partner s share in the goodwill of the firm, to his heirs. On 2/09/1968 Shri Kala Ram Khanna expired and in pursuance of the aforesaid clause, Shri J. M. Mehra entered into agreement dated 13/09/1968 with legal heirs of Kala Ram Khanna, according to which it was agreed that for the use of half share of the goodwill of the deceased by the assessee, legal heirs of the deceased were to be paid, for a period of nine years 25% of the net profits of the business, and thereafter for another three years 15% of the net profits. After that, the goodwill of the business was to become the sole property of Shri J. M. Mehra unless any of the sons of the deceased Kala Ram Khanna qualified as a Chartered Accountant during the period of 12 years as noted above and joined Shri J. M. Mehra as partner. Till 31/03/1973 net profits of the firm by way of hire charges for the use of half share of the goodwill was claimed as revenue expenditure. The same was allowed as claimed. Till the end of March, 1973 none of the sons of the deceased Kala Ram Khanna had qualified as Chartered Accountant. Therefore, it was considered necessary to modify the existing arrangement with regard to the deceased s share of goodwill. On 3/04/1973 fresh agreement was entered into by Shri J. M. Mehra with legal heirs of the deceased and under this agreement it was provided that he will pay to the other parties a sum of Rs. 1 lakh in consideration of the other party relinquishing their right and title to the goodwill. The amount was to be paid in three instalments of Rs. 33,000. 00, Rs. 33,000. 00 - and Rs. 34. 000. 00, payable on or before 31/03/1974; 31st March, 1975 and 31s 31/03/1976 respectively. It was also agreed that the other party shall have no claim, right title or interest in the name of the firm M/s. Mehra Khanna and Co. , or its successors or any of the clients or its assets and liabilities including the business premises. In the assessment for the years 1974-75 and 1975-76, amounts p