2016 (2) TMI 573 - HC - Income Tax

Exclusion from the income of the firm the amounts relatable to the retired/deceased partner/s share - diversion on account of overriding title in favour of the expartner/ s or their heirs/ executors by virtue of the partnership deed - Tribunal held that sum paid to ex partners amounted to diversion of income by overridding title and so was allowable as deduction? - Held that - We find that the impugned order of the Tribunal has dismissed the Revenue s appeal by inter alia recording the fact that in the order of the Commissioner of Income Tax (Appeals) (CIT(A)) had only followed the consistent view of the Tribunal in the assessee s own case for the earlier Assessment Years. Also see CIT Vs. Mulla and Mulla and Craigie Blunt and Caroe (1990 (9) TMI 32 - BOMBAY High Court ) while dismissing the Revenue s appeal.

Issues:
1. Appeal by Revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for Assessment Year 2008-2009.
2. Question of law regarding the deduction of a sum paid to ex-partners as diversion of income.
3. Exclusion of amounts related to retired/deceased partners' share by diversion due to overriding title in favor of ex-partners or their heirs/executors.
4. Justification of Tribunal's decision based on previous orders and court decisions.
5. Additional question of law raised by Revenue regarding the alleged adoption of a colorable device to evade tax.
6. Dismissal of the additional question of law as it did not arise from the Tribunal's order and was not raised before the authorities.
7. Disagreement with Revenue's insistence on raising new issues and highlighting the importance of judicial time.
8. Emphasis on the finality of Tribunal's factual findings and the need for Revenue to accept those findings unless proven otherwise.

Analysis:

1. The High Court of Bombay heard an appeal by the Revenue challenging the Income Tax Appellate Tribunal's order for the Assessment Year 2008-2009. The main question of law revolved around whether the sum paid to ex-partners, amounting to Rs. 1,20,89,002, should be considered as a diversion of income and thus allowable as a deduction.

2. The central issue in this appeal was the exclusion of amounts linked to retired/deceased partners' shares due to diversion based on overriding title in favor of ex-partners or their heirs/executors. The Tribunal's decision was based on previous orders and court decisions, including the Commissioner of Income Tax (Appeals) and the High Court's rulings in similar cases.

3. The Revenue sought to introduce an additional question of law concerning the alleged adoption of a colorable device to evade tax. However, the Court rejected this argument as it was not raised before the authorities or the Tribunal and did not stem from the Tribunal's order.

4. The Court emphasized the importance of respecting the Tribunal's factual findings as the final fact-finding authority. It criticized the Revenue for attempting to introduce new issues during the appeal process and highlighted the need for responsible conduct by the Revenue's Counsel to avoid unnecessary delays in the judicial process.

5. Ultimately, the Court dismissed the appeal, underscoring the need for the Revenue to accept the Tribunal's findings unless there is evidence of perversity or arbitrariness in those findings. No costs were awarded in the judgment.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Court's reasoning behind dismissing the appeal.

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