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10. In so far as the questions raised by the assessee and the revenue are concerned, as the facts are common, they are being dealt with together.

11. The assessee trust came into existence under a deed of trust executed on 21st August 1980 with effect from 7th August 1980. The trust along with various individuals formed a partnership firm with effect from 16th August 1980 in the name and style of M/s Accurate Engineering Co. (the firm). The trust had 50% share in the profit and loss as per the terms of the partnership deed. The partnership was dissolved under a deed of dissolution dated 30th October 1980 with effect from 30th September 1980. Under the said deed of dissolution, the business of the firm was taken over by the trust; and the trust as proprietor of the business, continued to carry on the business upto 31st March 1984.

18. The Tribunal, taking up the issue of device in the first instance, did not concur with the views expressed by the assessing officer and the CIT (Appeals). The Tribunal has found that the new firm was genuine and on that basis, the new firm was granted registration under the provisions of the Act. That during the short period of its existence i.e. three months, the new firm had carried on substantial business and for this, the Tribunal referred to the balancesheet and profit & loss account of the new firm. The Tribunal further found that there was no material to show that the new firm had been granted registration under the Act under a misconception of law, or due to a mistake; and even if there was a mistake, no remedial action had been initiated by revenue to rectify such a mistake. In other words, the registration granted to the new firm had become final and remained undisturbed. It has further been found by the Tribunal that the revenue has not been able to place on record any fact or circumstance or the evidence on the basis of which it could be held that the trust had taken recourse to a colourable device. The Tribunal has further found that, in the process of transferring the proprietary business, by the Trust to the new firm, and on dissolution, by the new firm to the company, the assessee trust had been subjected to a greater tax liability. In light of these findings, the Tribunal held that no case was made out by revenue to show that the assessee trust had adopted a colourable device and the ratio of the Apex Court decision in case of McDowell & Co. Ltd. (supra) was not applicable.

22. In relation to the cost of goodwill, after referring to the decision rendered by the Supreme Court in case of Commissioner of Income Tax, Bangalore v. B.C. Srinivasa Setty, (1981) 128 ITR 294, the Tribunal held that, on principle, there could be no dispute that goodwill, which is self-generating asset, would normally not have any cost of acquisition. However, the Tribunal has found that, as recorded by CIT (Appeals), goodwill was taken over along with all assets, liabilities, quota rights etc. when the trust took over the entire business of the firm at the time of dissolution on 30th September 1980. That while taking over the business at that time, trust paid for goodwill also, and though the same was not quantified or disclosed in the books of account, the same could be determined as on 30th September 1980 adopting the same basis which was adopted for determination of goodwill as on 1st July 1984.