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(ix) The Income-tax Officer has, therefore, the right to examine the nature of the claim of goodwill and if it is found to be incorrect, he is justified in treating it or a portion of it as representing the enhanced value of other assets".

34. However, the Assistant Commissioner held that the Assessing Officer had committed mistakes in the calculation of the goodwill. By a general scheme of reorganisation, the assessee-company along with Kalindi Investments P. Ltd. (old Sarabhai M. Chemicals Ltd.) were decided upon to became investment companies and the family members of the Sarabhai transferred most of their shares to the mentioned main companies or their subsidiary investment companies. On account of the applicability of executive instructions for calculating share values of private investment companies, the assets of the family members would have registered a substantial fall for wealth-tax purposes. The assessee had created a goodwill of Rs. 10 crores which would have increased the value of shares of KPPL. The increase had been got rid of by an ingenious method. The assessee created about 48 new subsidiaries. The assessee sold the shares held by it to about 22 investment companies (subsidiaries) out of these 48. The assessee sold the shares of these twenty-two subsidiary investment companies (51) to a corresponding set of another twenty-two subsidiaries. On account of the sale of shares of the 22 companies, they ceased to be subsidiaries of the assessee, but they became the subsidiaries of another set of subsidiaries (52). Since the sale of shares was of investment companies, the assessee applied the instructions in the Board's circular for valuation of shares of investment companies, issued for wealth-tax purposes. Since the twenty-two companies had existed for a few months, they did not earn any income. Since the income yield was nil, applying the Board's instructions, the value of the share was to be computed at half of the break up value of value based on yield which was zero since yield was nil. Hence, the assessee sold the shares to the subsidiaries (52) at almost half the price. On account of the sale the assessee incurred an artificial loss and this was used to set off against the artificial increase of Rs. 10 crores due to creation of goodwill. It is also worth noting thai the assessee had taken care that it held only 99.98 to 99.9 per cent, of the shareholding so that the capital loss could be taken into account. The Assistant Commissioner also gave an illustration how the assessee floated the subsidiary investment company called Alkapuri Investments Pvt. Ltd. and concluded that every move of the assessee had been aimed at tax avoidance and tax planning and the creation of goodwill was only a part of the programme of tax avoidance and tax planning and there was, therefore, need for proper inquiry as to whether the question of goodwill had been given at an exaggerated figure. Even while holding that there was need for inquiry for purposes of ascertaining the correct figure of goodwill as accepted by the principles of accountancy, the Assistant Commissioner came to the conclusion that the inquiries conducted by the Income-tax Officer were incomplete and, therefore, the Assistant Commissioner came to the conclusion that in the interest of justice the assessee should be provided with one more opportunity to furnish its estimate of the market value of assets transferred on which the profits can be taxed. The Assistant Commissioner, accordingly, set aside the assessment with the following directions to be observed by the Income-tax Officer while refraining the assessment :