1. SAJJAD ALI SHAH, J.---In this appeal with leave is challenged judgment dated 12-8-1987 and announced on 13-8-1987 passed by Division Bench of the High Court in Income-tax Reference No,1 of 1979, whereby question of law framed in the reference has been answered in negative and it is held that on the facts and circumstances of the case the learned Tribunal was not justified in holding that the goodwill is not an asset within the meaning of section 2(e) of Wealth Tax Act, 1963.
2. Briefly stated the relevant facts in the background are as under:- Appellant, who is an assessee and would be referred hereafter as such, did not declare value of goodwill in the returns filed by him under the Wealth Tax Act, 1963 and Wealth Tax Officer under section 16(3) of the abovesaid Act, added estimated value of the goodwill to the wealth of assessee as under:- Assessmentyear 1964-65 Rs, 2,44 " " 1965-66 Rs, 61,607 " " 1966-67 Rs, 90,908 " " 1967-68 Rs, 89,145 " " 1968-69 Rs, 68,322 " " 1969-70 Rs, 72,035 " " 1970-71 Rs,1,05,561 " " 1971-72 Rs,1,02,508 " " 1972-73 Rs,1,29,894 During assessm ent proceedings, assessee produced copy of balance-sheet in support of assets of Ankalsaria Nursing Home and value of goodwill was estimated on the basis of last three yearsincome from the said Nursing Home which worked out in the amounts shown in the quote.
3. Feeling aggrieved, assesses filed nine appeals, before Appellate Assistant Commissioner of Wealth Tax "C" Range, Karachi, which were allowed vide order, dated 1-8-1974, holding that goodwill is not an asset within the meaning of section 2(e) of Wealth Tax Act, 1963 and as such value of goodwill should be excluded from all Wealth-tax assessments. Against the said decisions, the Wealth Tax Officer filed appeals at the instance of the Department before Income Tax Appellate Tribunal, Karachi, which dismissed the said appeals vide order, dated 18-6-1976, upholding the view taken by Appellate Assistant Commissioner, as stated above. Reference was filed in the High Court and in it question of law was framed as stated below:- "Whether in the facts and circumstances of the case, the learned Tribunal was justified in holding that the goodwill is not an asset within the meaning of.Section 2(e) of the Wealth Tax Act of 1963?"
4. Finding of the Tribunal was assailed on 'the ground that it was not given on proper appreciation of legal position as enunciated in the decision reported as Haji Abdul Kadir Sahib v. C.I.T. (1961 ITR (42)
5. 296), wherein it has been held that goodwill is a taxable asset. Learned Judges in the High Court in the impugned judgment have dealt at length with definition of "assets" as defined in section 2(e) of the Wealth Tax Act, 1963, meaning to include property of every description movable or immovable, but does not include comparing it with definition of "property" as given in Estate Duty Act, 1950, meaning to include any interest in movable or immovable property and came to the conclusion that the two definitions are not identical unless it is found that goodwill is "property". After going through the definition of property in detail in the light of case-law, High Court has finally held that goodwill is intangible property and as such is to be considered as movable property, hence learned Tribunal was not justified in holding that goodwill is not an asset within the meaning of section 2(e) of the Wealth Tax Act, 1963.
6. In order to appreciate what is stated above, it would be necessary to go into definition of certain terms including "goodwill" to be able to ascertain the real intention of legislature for the purpose of correct interpretation of the provision under consideration. In Black's Law Dictionary, fifth Edition "goodwill" is defined to mean as under:- "Goodwill. The custom or patronage of any established trade of business; the benefit or advantage of having established a business and secured its patronage by the public. The advantage or benefit which is acquired by an establishment, beyond the mere value of the capital, stocks, funds, or property employed therein,, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence or punctuality, or even from ancient partiality or prejudices. And as property incident to business sold, favour vendor has won from public, and probability that all customers will continue their patronage. It means every advantage, every positive advantage, that has been acquired by a proprietor in carrying on his business, whether connected with the premises in which the business is managed, or with any other matter carrying with it the benefit of the business.
7. The excess of cost of an acquired firm or operating unit over the current or fair market value of net assets of the acquired unit. Informally used to indicate the value of good customer relations, high employee morale, a well-respected business name, etc. Which are expected to result in greater than normal earning power. The ability of a business to generate income in excess of a normal rate on assets due to superior managerial skills, market position, new product technology, etc. In the purchase of a business, goodwill represents the difference between the purchase price and the value of the net assets. Goodwill is an intangible asset which possesses an indefinite life and cannot, therefore, be amortized for Federal income-tax-purposes."
8. With advantage reference can be made to Lawson, who in his Introduction to the Law of Property has described "goodwill" as under:- "Goodwill is property of a highly peculiar kind. It is the right to enjoy all the advantages of an established trade connection. Customers who have been in the habit of dealing with a business will, probably continue to do so, even if the business changes hands, and this probability is regarded as so valuable that large sums of money are commonly paid for it. So well established a head of property is it that its value must be taken into account for purposes of taxation. Yet it is an odd kind of property since only the person who has transferred the goodwill can be placed under a duty to respect it. He indeed can be restrained from soliciting his former customers and he may also agree not to carry on a competing business. But no third party can be restrained from trading in such a way as to reduce the value of the goodwill. Yet as a marketable object, goodwill must be considered . Property."
9. From what is stated above about goodwill, it appears beyond dispute that it does mean popularity of any business or trade sometimes appearing as one of its assets with a marketable money value attracting customers on account of its local position or reputation for efficiency or any other such purpose or convenience.
10. There are some important cases in which term "goodwill" came up for consideration. In the case of Commissioners of Inland Revenue v. Muller & Co.'s Margarine, Limited (1901 AC 217), agreement was made in the United Kingdom vendor abroad and purchaser in England to sell the premises of the wholesale manufacturing business carried on abroad for a lump sum. The vendor covenanted not to engage in any similar trade within fifty miles of the existing premises. All the customers of business were abroad. House of Lords held that agreement was made in England but the goodwill was "property locally situated out of the United Kingdom" within the meaning of section -59 of the Stamp Act, 1891, hence agreement was therefore not chargeable with ad valorem duty. Comment on the term "goodwill" from page 236 of report is reproduced hereunder:- "The goodwill sought to be taxed is that of a manufacturer of margarine. His business was to manufacture and sell. His factory was in Germany; the owner was a German living in Germany; he had no agency or place of business abroad; hiscustomers were all in Germany, and his business, so far as selling was concerned, was a wholesale and not a retail business. He covenanted not to carry on business within fifty miles of the old place. If, therefore, the goodwill of a wholesale manufacturer can be regarded as situate anywhere, the goodwill in this case can only be regarded as situated in Germany. No one of its elements is, or can possibly be, regarded as situate anywhere else. The contention for the Crown was that some part of the goodwill, namely, such part of it as did not simply enhance the value of the land and buildings of the factory, could not be regarded as situate anywhere, and was, therefore, liable to stamp duty. This view, if sound, would be very embarrassing to buyers and sellers, who have to see that they stamp their agreements properly.
11. But the view contended for is, in my opinion, quite untenable.
12. Goodwill is daily taxable as property; and the legal conception of property appears to me to involve the legal conception of existence somewhere. Incorporeal property has no existence in nature and has, physically speaking, no locality at all. We, however, are dealing not with anything which in fact fills a portion of space, but will a legal conception, or, in other words, with rights regarded as property. But to talk of property as existing nowhere is to use language which to me is unintelligible."
13. In the case of Messrs S.C. Cambatta and Co. v. Commissioner of Excess Profits Tax, Bombay (AIR 1961 SC 1010), "goodwill" came up under consideration in the light of section 8 of Indian Excess Profits Tax. Act and it was held as under:- "It will thus be seen that the goodwill of a business depends upon a variety of circumstances or 'a combination of them. The location, the service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors go individually or together to make up the goodwill, though locality always plays a considerable part. Shift the locality, and the goodwill may be lost, At the same time, locality is not everything. The power to attract customers depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill."
14. Coming back to the judgment under appeal, question for consideration is whether "goodwill" is asset within the ambit of section 2(e) of Wealth Tax Act, 1963, which is applicable in Pakistan and as such is taxable or not. Under the said provision "assets" is defined as under:- "2(e) "assets" includes property of every description, movable or immovable, but does not include- -
(i) agricultural land and growing crops, grass or standing trees on such land;
(ii) any building owned or occupied by a cultivator or receiver of rent revenue out of an agricultural land: Provided...................................
15. It is noteworthy that legislature in order to describe "assets" has used word "includes" which shows that intention of the legislature is to leave the scope wide enough to include property of every description which is movable or immovable except the property which is specified expressly not to be included in the definition. In the book "Salmond on Jurisprudence twelfth edition; by P.J.
16. Fitzgerald at page 413, property is described as 'corporeal and incorporeal'. Corporeal property is the right of ownership immaterial things while incorporeal property is any other proprietary right in rem. Incorporeal property is divided into parts; (1) jura in re alien or encumbrances, whether over material or immaterial things (for example, leases, mortgages, and servitudes), and (2) jura in re propria over immaterial things, (for example, patents, copyrights, and trade-marks). In the first mentioned corporeal property as stated above are included rights of ownership in material things such as land and chattels. Author of the book mentioned above, went further in the distinction between movable and immovable property and in that context stated that in all legal systems these two classes of objects are to some extent governed by different rules though in no system is the difference so great as in British system. Conserved in its legal aspect an immovable property is termed A piece of land including elements, such as a determinate portion of earth's surface, the ground beneath the surface down to the centre of the world, column of space above the surface, objects which are on or under the surface in its natural state; for example, minerals and natural vegetation and lastly all objects placed by human agency on or under the surface, with the intention of permanent annexation. Distinction between movable and immovable is in truth and in fact applicable to material objects only.
17. In the book `Salmond on Jurisprudencereferred to above at page 418 is further discussion on the classification of the property between movable and immovable and relevant paragraph therefrom is reproduced as under:- "It is clear that the distinction between movables and immovables is in truth and in fact applicable to material objects only. Yet the law has made an unfortunate attempt to apply it to rights also.
18. Rights no less than things are conceived by the Jaw as having a local situation, and as being either movable or permanently fixed in a definite locality.. The origin of this illogical conception is to be found in the identification of rights of ownership with the material things which are the objects of them. I am said to own land and chattels, as well as easements, shares, debts, contracts, and patents. All these things are equally property, and since some of them have a local situation and can be truly classed as movable or immovable, the law has been led by inadvertence to attribute these qualities to all of them. It has recognised in things which are incorporeal certain attributes which in truth pertain to things corporeal only. It has divided the whole sphere of proprietary rights by reference to a distinction which is truly applicable not to rights at all, but to physical objects. Nor is this merely a peculiarity of English law, for it is found in Continental systems also.
19. On what principle, then, does the law determine whether a right is to be classed as immovable or as movable? The general rule is that a right has in this respect the same quality as its subject- matter. All rights over immovable things, whether rights in re propria or rights in _re alien, are themselves to be classed as immovable property; unless, indeed, as in the case of mortgages, they are merely accessory to debts or other bona mobilia, in which case they may partake, for some purposes at least, of the quality of the thing to which they are .Appurtenant. Similarly all rights over movables are bona mobilia themselves. So far there is no difficulty. What shall we say, however, of those rights which have no material objects at all, such as a copyright, a patent, the goodwill of a business, a trade-mark, or the benefit of a contract? The answer is that all such rights are classed by the law as movable. For the class of movable property is residuary, and includes all rights which can make good no claim to be classed as 'immovable."
20. It is, therefore, manifestly clear and further there is no dispute about it, in the light of what is stated above, that goodwill is incorporeal property in the class of patents, copyrights and trade-marks and as such is movable property and is therefore, caught within the definition of "assets" including property of every description movable or immovable as contemplated under section 2(e) of Wealth Tax Act, 1963.
21. In the Indian Income Tax Act of 1922 under section 2(4A) goodwill of a business is treated as capital asset and excess realised over its book value of sale of goodwill is capital gain taxable under section 12-B. In the case of Haji Abdul Kader Sahib v. Commissioner of Income-tax, Madras (1961 ITR
(42) 296); these provisions of Indian Income Tax were considered in detail and relevant portion from the judgment is reproduced as under:--- "According to Adamson's Valuation of Assets, the value of goodwill is ascertained by valuing the business as a whole and by deducting from its the value of the tangible assets (see Venkoba Rao's Commentaries On the Companies Act, 1956, 1957 Edition, Volumes II and III, page 564). It was not disputed, that though intangible in nature, goodwill is very often of substantial value to a business.
22. The definition of "capital asset" in section 2(4A) of the Act as "property of any kind held by the assessee, whether or not connected with the business, profession or vocation" is of such wide amplitude as to take in an intangible asset of this kind. Indeed, the learned counsel was placing more reliance on the third contention as applicable to goodwill, that its value, also received by the assessee in shares, has not been realised and has not brought him any profit, a contention, which we have endeavoured to .Point out, was not the basis of the reference on the second question relating to goodwill. On these grounds we answer question (ii), in the affirmative, that is, that "Rs,47,207, being the capital gain on the sale of goodwill is assessable under section 12B.
23. In the case of Commissioner of Income-tax, Madras v. K. Rathnam Nadar (1971 PTD 982), in addition to two questions, one question was framed under the orders of the Court at the instance of assessee to the effect whether there was any capital gain at all in respect of goodwill liable for assessm ent in relation to the facts of the case. High Court of Madras in this respect held that under section 12-B(2)(ii) of Income-tax, Act, 1922, capital gain arises only on transfer of capital asset, which has actually costs to the assessee something. Such actual cost in the context of the Income- tax being cost in terms of money, cannot apply to transfer of capital assets which did not cost anything to the assessee in terms of money in its creation or acquisition. Unlike British American Taxation Laws, Indian Act does not contemplate that self-created assets like copyrights, patents and goodwill should be subjected to capital gains arising on their transfer, hence capital gains on the transfer of goodwill are not liable to be taxed under section 12-B.
24. In the case of Controller of Estate Duty, Lahore v. Muhammad Bashir Muhammad Nazir and others 1974 PTD 1, goodwill came in for consideration before Lahore High Court in the light of section 2(14) and (4) of Estate Duty Act, 1950 and it was held by the High Court that share of deceased partner in the partnership assets including goodwill is property which definitely passes to his legal representatives and the view of tribunal that it was incapable of passing under section 4 read with section 2(14) of the Estate Duty Act is not correct. In view of what is stated above, it becomes crystal clear that term "goodwill." has been accepted as movable property in legal phraseology in the context of and in interpretation of provisions of similar fiscal laws and enactments.
25. Mr. Iqbal Naeem Pasha learned A.S.C. For appellant before us vehemently argued against the proposition stated above and submitted that goodwill isnot an asset within the meaning of section 2(e) of Wealth Tax Act, 1963 for the reasons as follows. Firstly, that in the definition of "assets" as mentioned in section 2(e) are included property of every description movable or immovable with certain properties which are specifically mentioned therein as not included. According to learned counsel, Wealth Tax Act was promulgated in the year 1963 and before that Estate Duty Act, 1950 was already operative of which the legislature was very much aware. In the Estate Duty Act, 1950 in section 2(14), definition of "property" is given to include, any interest in the property movable or immovable and the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale. Under the said Act, rules have been framed which are known as Estate Duty Rules, 1950 and in Rule 3 which provides definition of "assets" is defined as includes goodwill. On this premise, it is argued that if the intention of the legislature was to include "goodwill" in the definition of "assets" in the Wealth Tax Act, 1963, there was nothing to prevent legislature from including , "goodwill" in the definition of "assets". This argument is untenable for the reason that there is difference between Wealth Tax Act, 1963 and Estate Duty Act, 1950 as their preambles are different and the schemes for which they have been enacted are also different. Scheme of the Estate Duty Act necessitated to define property to include any interest in property movable or immovable and further need was felt to include goodwill in the definition of "assets" as provided in rule 23.. Estate Duty Act was enacted to provide for levy and collection of Estate Duty in the Provinces of Pakistan and the Capital of Federation in respect of properties of deceased persons. A deceased person may leave property after him including goodwill which could be treated as part of assets. On the other hand is the Wealth Tax Act, 1963 which has been enacted in different context and under different scheme with the object of recovering wealth tax in respect of property of a person who is living. In section 2(e) of the said Act, definition of "assets" is left open on purpose to include property of every description movableor immovable which automatically includes "goodwill" which is recognised as movable property and part of assets in the interpretation of other fiscal laws. No need was felt to define it further in the rules under the said Act on similar lines as was done in connection with Estate Duty Act and Rules framed thereunder.
26. In the context of what is mentioned above and in support of his contention, Mr. Iqbal Naeem Pasha learned A.S.C. Has cited case of Commissioner of Wealth Tax v. U.C. Mahtab reported in 1973 (27)
27. Tax 174, which is a decision of Calcutta High Court and upon which reliance was also placed by Income Tax Appellate Tribunal in the instant case. In the reported case in view of definition of "assets" as mentioned in section 2(e) of Indian Wealth Tax.Act, 1957, it was held as under:- "that although the assessee's rights vested in the State immediately on the notification under section 4 of the West Bengal Estates Acquisition Act, under the provisions of that Act, there was no legal right yet in the assessee to compensation, which right would arise only on the final publication of the compensation assessment roll, as rightly held by the Appellate Tribunal. In the definition of "assets" in the Wealth Tax Act, the words "property of every description" are qualified by the words "movable or immovable", and, consequently, properties which do not ordinarily answer the test of movability or immovability, such as intangible rights or incorporeal rights, will not be assets within the meaning of the Wealth Tax Act. Where agricultural land has been taken away and has vested in the State under the Act, but where the final compensation assessment roll has not been prepared and published and the compensation officer has not calculated the amount, if any, at all payable to the assessee, then this inchoate right is not yet a legal right which can be regarded as an "asset" within the meaning of section 2(e) of the Wealth Tax Act. Not being an asset, the mechanism of valuation provided in section 7 of the Wealth Tax Act will not apply."
28. In the case mentioned above the facts are entirely different and it is so stated in very unequivocal terms that in the circumstances of that case there was no legal right yet in the assessee to compensation which right would arise only on the final publication of the compensation assessm ent roll as was rightly held by the appellate Tribunal in that case. Ratio of the judgment, therefore, is that in that case right had not yet materialised as such could not be equated with legal right for the reason that still stage was to come for final publication of compensation assessm ent roll after 'which legal right would accrue which would be equated with asset. Such intention is very much manifest in another paragraph in the same judgment at page 188 of the report, which is reproduced as under:- "We are not to be misunderstood as holding the a right to compensation- under no circumstance cannot be property or assets. Certainly, such a right can be an asset or property in appropriate circumstances. The appropriate circumstances are that it must be legal right, not inchoate, vague, indeterminate, problematical, contingent, and a mere possibility or expectancy. What we are holding is that it is hot so on the present facts before us under the scheme and the sections of the West Bengal Estates Acquisition Act. After the final publication of the compensation assessment roll when the compensation becomes certain or where the ad interim payments of compensation are made under section 12 of the West Bengal Estates Acquisition Act this chance or expectancy for compensation will mature or rather materialise into a legal right to compensation which can then come within the meaning of wealth or asset under the Wealth Tax Act."
29. In the light of what is stated above, it would appear beyond dispute that the ratio of the Indian case as reported above, is that in the peculiar facts of that case since compensation assessment roll was not prepared, future right to compensation, when Zamindari rights had vested in State under West Bengal Estates Acquisition Act, was not treated as asset and liable to wealth tax and could be so treated after final publication of compensation assessment roll. Indian case of Mahtab, mentioned above, decided by Division Bench of Calcutta High Court, is dissented from in the impugned judgment by Division Bench of Sindh High Court for the reasons firstly that in the Indian case due effect is not given to the words and phrase "property of every description" and secondly, that goodwill is intangible property as such can be equated with movable property. For facts and reasons stated above, we are in .Complete agreement with High Court of Sindh that view taken in the Indian case of Mahtab was confined to the peculiar facts of that case as the right to compensation had not matured as legal right for the reason. That compensation assessment roll was not prepared and as such is not applicable to the facts of this case.
30. Second argument of Mr. Iqbal Naeem Pasha, learned% A.S.C. For appellant is that section 3 of Wealth Tax Act, 1963 is charging section but no machinery provisions have been provided either in the Act or Rules framed thereunder for recovery of tax on goodwill. In this context if study is made of the provisions of the said Act and rules, it would appear that under section 46 of the said Act rules are to be framed showing, inter alia, the manner in which the market value of any asset is to be determined. It is correct that there is no separate rule framed for the purpose of valuation of goodwill but rule 8 is available and can take care of valuation of goodwill. Rule 8 provides for valuation of assets other than cash. This rule envisages that subject to the provisions of sub-rules mentioned thereunder, the value of any asset (other than cash) shall for the purposes of assessm ent to wealth tax be estimated to be the price, which in the opinion of Wealth Tax Officer, it would fetch if sold in the open market on the valuation date.
31. Additionally it can be said that if the intention of legislature was not to include goodwill in the assets as defined in section 2(e) of the Wealth Tax Act, 1963, then such intention could have been manifested in unequivocal terms by mentioning this item under section 5 of the said Act under which as many as 11 items are specifically mentioned as not included in assets in respect of which exemption has been granted.
32. Learned counsel for appellant has drawn our attention to unreported judgment in Civil Appeal No,K-140 of 1981 entitled B.P. Biscuit Factory Ltd. Karachi v. Wealth Tax Officer and another and other connected Civil Appeals Nos. 64-K, 65-K and 66-K of, 1985, which were disposed of, by common judgment dated 19th January, 1989. In the said judgment, definition of expression "assets" as contained in section 2(e) was examined not to consider whether it includes property of every description movable or immovable but to consider effect of immovable property held for the purpose of business of construction and sale of letting out of property as contemplated under section 2(e)(ii). This judgment, therefore, does not help and give any support to the contention of the appellant raised in this appeal.
33. On the other hand, Mr. Nasrullah Awan learned A.S.C. For respondent, very, emphatically urged before us that goodwill is asset and is taxable. Goodwill of business is an intagible asset and is attributable to the ability of the concern to earn profits over a course of years or in excess of normal amounts because of its reputation, location and other features. He further submitted that goodwill is a price a buyer would pay for a business over and above the economic value of its tangible assets. In support he has referred us to the definition of "goodwill" at 2.5 in Law and Practice of Gift Tax and Wealth Tax by CA. Gulanikar 1989, and definition of "goodwill" in Law Lexicon by Ven Kataraniya.
34. For facts and reasons aforementioned, I hold that goodwill though intangible, is still movable property and part of assets as defined in section 2(e) of Wealth Tax Act, 1963. Whether a particular trade or business has acquired goodwill as taxable or not is a question of fact which is to be decided by taxing forums. This is not done in the instant case. Wealth Tax Officer has only mentioned estimated value of goodwill without giving any reasons in support of G his conclusions.
35. Assistant Commissioner of Wealth Tax and Income-tax Appellate Tribunal considered only legal aspect and came to the conclusion that goodwill is not taxable. In the interest of justice this question is to be decided after hearing the assessee. In the circumstances, reference is returned to Income-tax Appellate Tribunal to take further action according to law.
36. AJMAL MIAN, J.---I have had the advantage of reading the judgment proposed by my learned brother, Sajjad Ali Shah, J. Though I am in agreement with him as to the legal proposition that "goodwill", being incorporeal property, is susceptible to be included within the definition of "assets" given in section Act, but I am of the view that the factum, whether a trade or a business name 2(e) of the Wealth Tax Act, 1963 (XV of 1963) hereinafter referred to as the or a business premises has acquired any goodwill in order to become an incorporeal property, is a question of fact, which will depend on the facts of each case. It may be pertinent at this juncture to refer to the original definition of the term "goodwill" given by Lord Eldon in the case of Cruttwel v. Lye ((1810) 17 Ves 335) that goodwill was nothing more than "the probability that the old customers would resort to the old places". The above definition was expanded and improved upon in subsequent cases of inter alia English Jurisdiction. The extended meaning now not only includes trade or business name, but also other allied items. The classic definition of "goodwill" was enunciated by Lord Macnaghten in the case of The Commissioners of Inland Revenue and Muller & Co.'s Margarine Limited (1901 AC 217), which reads as follows:- "It is benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which 'brings in customers. It is the one thing which distinguishes an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However, widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction, sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element may preponderate here and another element there. To analyse goodwill and split it up into its component parts, to pare it down as the Commissioners desire to do until nothing is left but a dry residum ingrained in the actual place where the business is carried on while everything else is in the air, seems to me to be as useful for practical purpose as it would be to dissolve the human body into the various substances of which it is said to be composed. The goodwill of a business is one whole, and in a case like this it must be dealt with as such."
2. The definitions/descriptions of the term "goodwill" given in Black's Law Dictionary, Lawson's in his Introduction to the Law of Property, and in the various other treatises on the subject and in the judgments of the superior Courts of Indo-Pak and foreign jurisdiction, are in line with the above- quoted definition.
3. In my view, similiciter adoption of a trade or a business name or carrying on a particular business at a particular place, does not necessarily result in generating goodwill until it reaches at a stage, when it acquires power of attraction sufficient to bring customers because of its standing good name reputation and businesses connection, etc. Furthermore, as pointed out by Lord Macnaghten goodwill differs in its composition in different trades and in different business. In the instant case, the assessee has an interest in a Nursing Home which is run under the name of Dr. Burjor Ankalasaria Nursing Home. The above Nursing Home for the purpose of Wealth Tax has been valued at different amounts for different years. But the Wealth Tax Officer had also assessed the value of the goodwill for the years in question, separately on the basis of three yearsincome from the Nursing Home preceding to the relevant assessment years on the assumption that the above Nursing Home had acquired goodwill without adverting to the question, whether factually it had acquired any goodwill as to make it an incorporeal property. The Appellate Assistant Commissioner and the Income Tax Appellate Tribunal decided the case in favour of the assessee on the assumption that the goodwill was not covered by the definition of "assets" given in section 2(e) of the Act. They have also not dilated upon the above question of fact.
4. In my view, the above question of fact should have been attended to and adjudicated upon by the hierarchy of the forums provided for under the Act. The above exercise would have inter alia involved probe into the factum, whether the assessee could sell the name of Burjor Ankalasaria Nursing Home. To put it differently, whether simpliciter above name of Nursing Home, if used by some other person in the same premises or in a different premises, will attract patients. Generally a Nursing Home is run on the patronage of the leading doctors who recommend their patients to have a room in a particular clinic because of the facilities provided therein and not because of its name. Since inter alia the above question of fact was not adverted to by the forums which were competent to record a finding of fact in respect thereof, the High Court could not have answered the question as was framed namely: "Whether in the facts and circumstances of the case the learned Tribunal was justified in holding that goodwill is not an asset within the meaning of section 2(e) of the Wealth Tax Act?"
37. In the negative. The proper order of the High Court would have been that after dealing with legal aspects, the matter should have been left open for adjudication on the above question of fact by the hierarchy of forums provided for under the Act. I am, therefore, of the view that the above appeal is to be disposed of by holding that though goodwill is covered by the definition of "assets" given in section 2(e) of the Act but the question, whether a trade or a business name or a business premises has acquired any goodwill as to make it a specie of incorporeal property, will have to be determined as a question of fact in each case, which was not done in the present case which may be done hereafter. Reference is returned to the Tribunal for taking further action in accordance with law.
38. The parties shall hear their own costs.