M/S. S. C. CAMBATTA & CO. PRIVATE LTD., versus THE COMMISSIONER OF EXCESS PROFITS TAX, BOMBAY

Citation: [1961] 2 S.C.R. 805 · Decided: 30-11-1960 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Case Allowed
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Judgment (excerpt)

2 s.c.R. SUPREME COURT REPORTS 
805 
case reported as Liverpool Gorn Trade .Association v. 
Monks (1). 
In our opinion the judgment of the High Court is 
right and the appeals are therefore dismissed with 
costs. One hearing fee. 
Appeals dismissed. 
M/S. S. C. CAMBATTA & CO. PRIVATE LTD., 
BOMBAY 
v. 
THE COMMISSIONER OF EXCESS PROI!'ITS 
TAX, BOMBAY 
(J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.) 
Excess Profits Tax-Assessment-Sale of theatre and restaurant 
-Goodwill-Value of-Principle of computation-Excess Profits 
Tax Act, z940 (XV of I940). 
The appellant carried on various businesses and one such 
was the running of a Theatre and Restaurant. In October, 1943, 
a subsidiary company was formed which was using the premises 
of the Theatre under a lease granted to it from April, 1944· In 
working out the capital of the two companies for excess profits 
tax, a claim of rupees five lakhs for goodwill as part of the capi-
tal of the subsidiary company was not taken into account. 
On reference to the High _Court it held that the Tribunal 
should have allowed the value of the goodwill whatever it 
thought was reasonable at the date of transfer. Thereafter the 
Tribunal took into account only the value of the lease-hold of 
the site to the subsidiary company, and came to the conclusion 
that no goodwill had been acquired by the business of the 
Theatre as such and whatever goodwill there was related to the 
site of building itself, and estimated the value of goodwill at 
rupees two lakhs. Petition under ss. 66(1) and 66(2) read with 
s. 21 of the Excess Profits Tax Act being rejected by the Tribu-
nal and the High Court, the appellants came in appeal by spe-
cial leave. 
Held, that the goodwill of a business needed to be consider-
ed in a broader way. It depended upon a variety of circumstan-
ces or a combination of them. The nature, the location, the 
(1) (1959) 36 I. T.R. 222, 
102 
Delhi Sto&k 
E:t&hange 
Association Ltd. 
v. 
Commissioner 
of Income-la:<, 
Delhi 
Kapur ]. 
November 30. 
M/s. S. C. 
Camballa ©- Co. 
PPivale Ltd., 
Bombay 
v. 
806 
SUPREME COURT REPORTS 
[1961] 
service, the standing of the business, the honesty of those who 
run it, and the Jack of competition and many other factors went 
individually or together to make up the goodwill, though the 
locality always played a considerable part. Shift the locality, 
and the goodwill may be lost but it was not everything. The 
power to attract custom depended on one or more of the other 
factors as well. 
The Com1nissioner 
In the instant case a question of law did arise, whether the 
of E.cess P1oftts goodwill of the Eros Theatre and Restaurant Ltd. was calculated 
Ta#, Bo1nbay 
in accordance with la\v. 
Cruttwell v. Lye, (1810) 17 ves. 335, Trego v. Hunt, (1896) 
A. C. 7 (H. L.), Inland Revenue Commissioners v. Muller 0- Co.'s 
Margarin, Lid., 1901 A. C. 217 (H. L.), Daniell v. Federal Com-
missioner of Taxation, (1928) 42 C. L. R. 296 and Federal Commis-
sioner of Taxation v. Williamson, (1943) 67 C.L.R. 561, discussed. 
CIVIL 
APPELLATE 
JURISDICTION: 
Civil Appeals 
Nos. 776 and 777 of 1957. 
Appeals by special leave from the judgment and 
order dated September 25, 1956, of the Bombay High 
Court in Income-tax Application No. 48of1956; and 
from the judgment and order dated March 17, 1954, of 
the Income-tax Appellate Tribunal, Bombay, in 
E.P.T.A. Nos. 757, 903 and 944 of 1948-49, respecti-
vely. 
A. V. Viswanatha Sa.!tri and G. Gopalakrishnan, for 
the appellants. 
A. N. Kripal and D. Gupta, for the respondent. 
1960. November 30. The Judgment of the Court 
was delivered by 
Hidayatullah J. 
HIDAYATULLAH, J.-These are two appeals, with 
special leave, against an order of the High Court of 
Bombay rejecting a petition under s. 66(2) of the 
Indian Income-tax Act and the order of the Income-
tax Appellate Tribunal, Bombay, in respect of which 
the petition to the High Court was made. Messrs. 
S. C. Cambatta & Co. (Private) Ltd., Bombay, have 
filed these appeals, and the Commissioner of Excess 
Profits Tax, Bombay, is the respondent. 
We are concerned in these appeals with three 
chargeable accounting periods, each ending respective-
ly on December 31, beginning with the year, 1943 and 
ending with the year, 1945. 
.-
II
~
2 S.C.R. SUPREME COURT REPORTS 
807 
The appellants carry on various businesses, and one 
1960 
such business was the running of a theatre and restau-
M 
c 
rant, called the Eros Theatre and Restaurant. In Cambl~~:·s. c 
Octob
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