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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 ..... 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 not only should the receipt qualify as income but it has also to be casual and non-recurring. Therefore, the amount of ₹ 1,75,000/- received by the Appellant not being casual as it was always foreseen and anticipated prior to retirement. It has only been quantified at the time of retirement of the Appellant. Thus, the receipt is not hit by Section 10(3) of the Act - Decided in favour of assessee. - Income Tax Appeal No. 40 of 2001 - - - Dated:- 6-8-2015 - M. S. Sanklecha And N. M. Jamdar, JJ. For the Appellant : Mr V B Joshi For the Respondent : Mr Suresh Kumar ORDER P.C. This Appeal under Section 260-A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt under Section 10(3) of the Act by relying upon the decision of the Allahabad High Court in Gulabchand v/s. CIT 192 ITR 549. 6. Being aggrieved by the order of the Assessing Officer dated 27th December, 1994, the Appellant preferred an appeal to the Commissioner 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 ₹ 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 Pamabhai 165 ITR 166 to hold that what has been received on retirement by the Appellant cannot be subjected to tax as what is received by the partner is his share in partnership firm a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of capital receipt and the tax on the same is to be discharged by the Appellant under Section 45(4) of the Act is a settled position in view of the decision of Apex Court in Mohanbhai Pamabhai (supra) and also of this Court in Prashant V. Joshi v/s. Income Tax Officer 324 ITR 154. 10. As against the above, Mr. Suresh Kumar, learned Counsel appearing for the Revenue in support of the impugned order submits as under: (a) The impugned order of the Tribunal calls for no interference as the same is a well reasoned order; (b) The amount received by the Appellant is not on capital account as it is income under goodwill. This is because, the Appellant has not contributed in any manner and the goodwill of the firm having been a partner only for one year; and (c) The decision of the Apex Court in Mohanbhai Pamabhai (supra) would have no application as the present case dealt with a retirement of a partner and not dissolution of the firm consequently Section 45(4) of the Act being relied upon by the Appellant, is without basis. 11. The Assessing Officer has taxed an amount of ₹ 1,70,000/- out of ₹ 1,75,000/- received by the Appellant on his retirement from the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 or belong to a retiring partners. This clause dealt with the reconstituted firm which came into force on 3rd April, 1991. It was clauses 1 to 7 of the Agreement dated 3rd April, 1991 which dealt with the erstwhile partnership firm from which the Appellant retired. In clause 5 thereof, it has been specifically provided that : . . . . The retiring partners and continuing partner of the old firm shall be paid a sum of ₹ 5,00,000/- in addition to the amounts standing to the credit of their capital account as on 31st March, 1991. It is fur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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