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TMI Blog1983 (1) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... to be for the transfer of good will notheless it is not tax able in view of the decision of the supreme Court in the case of CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981)128 ITR 294 (SC). The revenue has challenged the decision of the CIT(A) on several grounds in these appeals. 2. The fact briefly are partners sri T.Ponniah pillai and sri P.Thirumalai Nainar retired from a firm M/s Thirumalai Mills on 9th March, 1977 which fell within the accounting year relevant for the asst yr. 1977-78. Difference of opinion arose among the partners was settled outside the court. As a result the retiring partners were paid Rs. 2,86,494 and Rs. 3,99,110 respectively which amount have been arrived at by mutual agreement. The ITO assessed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lightly contrary decision was noticed in the case of CIT vs. Tribhuvandas G. Patel (1978) 115 IRR 95 (Bom). The CIT (A) also upheld the alternate contention of the assessee that even if the excess amount received by the retiring partners was towards the share of interest in the good will of the firm, it was not liable to capital gains by relying on the decision of the supreme court in the case of CIT vs. Srinivasa Setty cited supra. Accordingly he allowed the appeals filed by the assessees. 4. The ld. departmental representative has been heard. He reiterated the ground taken in these appeals and relied strongly on the decision of the Bombay High Court cited supra (1978) 115 ITR 95 (Bom) and also another decision in the case if CIT vs. H.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on terms mentioned hereunder: NOW, THIS DEED OF RETIREMENT WITNESS: (1) The retiring partners (1) and (2) namely T.Ponniah Pillai and (2) T. Thirumalai Nainar shall retire from the firm "Thirumalai Mills" (hereinafter referred to as "the firm") on and with effect from 2nd July, 1975. The Continuing partners shall along be partners in the said firm from the said date. (2) Continuing partners 1 to 15 hereby agree jointly and severally to pay the retiring partners (1) and (2) in lieu of all the rights inclusive of rights under the deed dt 3rd October, 1972 and 28th November, 1973 aforesaid of the retiring partners in the said firm a sum of Rs. 6,85,604 (Rupees six lake eighty five thousand and six hundred and four only) as principal amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners of the firm. The Calcutta High Court has held in the case of CIT vs. Bhupinder Singh Atwal (1981) 20 CTR (Cal) 291 : (1981) 128 ITR 67 (Cal). when a partner retires from the partnership the amount of his share in the partnership asset after deduction of liabilities and prior charges is determined and on taking the accounts, what he received is the share in the partnership and there is no consideration for any transfer of his interest in his partnership to the continuing partners. Consequently there is no transfer or sale as contemplated by s. 45 of the IT Act, 1961. The Calcutta High Court decision in part and also referred to the contrary decisions of the Bombay High Court in the case of Tribhuvandas G. Patel (1978) 115 ITR 95 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal position would be the same even in a case where a lump sum payment is made to the retiring partner without taking accounts of the firm. In his view of the matter and contrary decision given by the Bombay High Court in the case of CIT vs. Tribhuvandas G. Patel wherein it made a distinction between an adhoc payment and a payment after ascertaining the net share in the partnership, was not approved by the Hon ble Madras High Court. Recently the Andhra Pradesh High Court in the case of CIT vs. L. Raghu Kumar has also held likewise and specifically referred to the contrary decisions of the Bombay High Court in the case of Tribhuvandas G. Patel and CIT vs. Aslot (H.R.) cited supra, but dissented therefrom. 8. In view of the factual positi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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