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Issues Involved:
The judgment addresses three main issues raised by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961: 1. Taxability of amount received on retirement from a partnership firm under section 28(iv) of the Act. 2. Taxability of the same amount under section 45 of the Act. 3. Taxability of the amount as an adventure in the nature of trade. Issue 1: Taxability under Section 28(iv) of the Act: The assessee received Rs. 1,25,092 on retirement from a partnership firm. The Income-tax Officer initially deemed this amount as business income from an adventure in the nature of trade or taxable under section 28(iv) of the Act. However, the Commissioner of Income-tax (Appeals) ruled in favor of the assessee. The Tribunal, citing relevant case law, held that the amount received in cash on retirement was not taxable under section 28(iv) of the Act. The High Court concurred with this finding based on established legal precedents, emphasizing that section 28(iv) does not apply when the amount received is in cash. Issue 2: Taxability under Section 45 of the Act: The question of whether the amount received by the assessee on retirement would be liable to tax as capital gains under section 45 of the Act was also considered. Citing previous judgments, the High Court reiterated that the receipt of such amount by a partner on retirement does not involve a transfer of a capital asset, hence not resulting in income chargeable to tax as capital gains. The court upheld the Tribunal's decision that the amount was not liable to capital gains tax under section 45. Issue 3: Taxability as Adventure in the Nature of Trade: The assessee had contributed land to the partnership firm as stock-in-trade, and upon retirement, received the amount in question directly related to the land contributed. The Tribunal correctly determined that this amount was not taxable as income from an adventure in the nature of trade. The High Court affirmed this decision, stating that the amount received by the assessee was not liable to tax under this category. In conclusion, the High Court disposed of the reference with no order as to costs, upholding the Tribunal's decisions on all three issues in favor of the assessee.
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