2011 (5) TMI 964 - AT - Income Tax

Summary

Issues involved: The appeal raised by the revenue against a common order dated 17.8.2009 passed by the CIT(A) for the assessment years 2001-02, 2002-03, 2003-04, and 2004-05 regarding the treatment of amount received by the assessee as capital or revenue receipt.

Issue 1 - Treatment of amount received by assessee as capital or revenue receipt:

The ITAT considered whether the amount received by the assessee, after the death of her husband from the firm, is a capital or revenue receipt. The Assessing Officer argued that the payment received is revenue in nature based on the partnership deed clause, while the assessee claimed it to be a capital receipt. The ITAT referred to previous cases and observed that the payment was not related to business activity, loss of profits, or services rendered by the assessee. It was a recognition of valued services by the deceased partner and a relief to the family, as per the partnership deed terms. The ITAT upheld the CIT(A) order, following the decision in CIT vs. Mrs. Jaya Bhaskaran and the Hon'ble Supreme Court decision in the case of P.H. Divecha, stating that the payment was a capital receipt and not taxable as income.

Conclusion:

The ITAT dismissed the revenue's appeals for all the years under consideration, confirming the CIT(A) order treating the amount received by the assessee as a capital receipt. The decision was based on the similarity of the issue with AY 2005-06 and the precedent set by previous judgments.