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TMI Blog2015 (8) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the amount of Rs. 1,75,000/- received by the Appellant at the time of retirement on settlement of his account with the firm was taxable under Section 10(3) of the Act?" 3. The Appellant became a partner in M/s. Omega Research Laboratories (the Firm) w.e.f. 1st April, 1990. The firm was in business as manufacturer and dealers in petroleum and allied product since 1969. The Appellant did not bring in any capital into the firm and was inducted as a working partner, entitled to a share of 35% in the profit of the business. 4. In the year 1991, due to personal reasons, the Appellant had to shift base from Mumbai to Baroda, requiring him to retire from the said firm w.e.f. 1st April, 1991. At the time of retirement, it was mutually decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax (Appeal) [CIT (A)]. On consideration of the facts involved by an order dated 1st September, 1995, the Appeal of the Appellant was allowed, inter alia holding that the amount of Rs. 1,75,000/- received by the Appellant cannot be subjected to tax under Section 10(3) of the Act. This inter alia, on the ground that the amount received by the Appellant as retiring partner, was goodwill attributable to Appellant i.e. the income earning capacity of the firm. Consequently, holding that Section 10(3) of the Act would not no application as it is not casual and nonrecurring receipt. Further, in th alternative, it was held that the issue stands concluded by the decision of the Supreme Court in Additional CIT, Gujarat v/s. Mohanbhai P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect as if for the words "five thousand rupees" the words "two thousand five hundred rupees" had been substituted: Provided further that this clause shall not apply to (i) capital gains chargeable under the provisions of section 45; or (ii) receipts arising from business or the exercise of a profession or occupation; or (iii) receipts by way of addition to the remuneration of an employee." 9. Mr. Joshi, learned Counsel appearing for the Appellant made following submissions: (a) The impugned order of the Tribunal setting aside the order of the CIT(A) to hold that the amount of Rs. 1.75 lakhs paid to the Appellant cannot be attributed to the goodwill belonging to the Appellant in the firm is without any evidence. It proceeds merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 1991. This on the ground that it is casual and nonrecurring. Further, he holds it is a capital receipt or a capital gain. 12. The crux of the dispute is the application of Section 10(3) of the Act to the present facts. A bare analysis of Section 10 of the Act would reveal that the incomes specified therein are not to be included in the total income. Amongst the income listed in subsection 3 thereof is any receipt which is not in excess of Rs. 5,000/- in the aggregate when they are casual and nonrecurring in nature. Further, this clause would have no application in case they arise out of capital gains chargeable to tax under Section 45 of the Act or arise from exercise of business or profession. 13. In the present case, the CIT(A) held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person doing the business. Second presumption that Appellant not entitled to goodwill as did not contribute any capital. No basis for this conclusion. In this case, the Appellant joined the business as working partner and his contribution was in running the business by which he would have contributed to goodwill of firm. Third presumption that retiring partners would have no right to a goodwill of a business as that is available only when the business is sold as whole and continuing entity. We are at a loss from where does the Tribunal gets this position in law. Lastly, the impugned order relies upon the Deed of PartnershipcumRetirement dated 3rd April, 1991 and in particular clause 15 thereof which states that no goodwill will accrue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the amount of Rs. 1,75,000/- paid to Appellant is goodwill. Once we reach a conclusion that the amount of Rs. 1,75,000/- was received by the Appellant in consideration of the goodwill left behind in the firm, then without anything more, the receipt of the above amount cannot be said to be casual for the purposes of Section 10(3) of the Act. In fact, the CIT(A) in his order holds that the amount received by the Appellant being a portion of the goodwill, cannot be said to be casual. The goodwill the firm possesses is inherent in it. It is at the time when the Appellant retired that the same was quantified to enable the firm to exploit the goodwill left behind by the retiring partner. For the purposes of Section 10(3) of the Act applying n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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