9911796707
TMI Blog2016 (4) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT 255 ITR 273(SC) by Ld.CIT(A). 3.1 The brief facts of the case are that the assessee company is involved in the business of manufacture of terry towels and weaving of yarn products. The assessee-company has made adjustments to the profit and loss account as per books by adding back inadmissible and deducting admissible items under the Income-tax Act, thereby claimed deduction u/s.10B in respect of Unit-2 (100% ECU) and Unit- 3 (weaving division-100% ECU) amounting to Rs. 49.27,77,765/- and arrived at a loss of Rs. 5,67,51,537/- in the computation statement. Hence the assessee-company filed the Return of Income under the provisions of section 115JB admitting total income of Rs. 56,75,15,374/- and paid tax accordingly. During the course of assessment proceedings, while examining the Balance Sheet of the assesseecompany, as per clause-17, (notes forming part of the balance sheet) it was noticed that the assessee had invested by way of capital in the partnership firm, M/s. SJM Property Developers in which the assessee-company held 99% of interest till 05/03/2009. It is further found that the assessee-company has received from the said partnership firm by relinquishing its right of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment agreement copies, retirement deed copies, account copy of the assessee-company in the firm SJM Properties were called for and obtained from the assessee company. On going through the settlement deed dated 0910312009, it was seen that there was an agreement dated 06/02/2007 entered into between SJM Property Developers and MIs Metro Corp for relinquishment of 99% of shares of the assessee-company in the firm, M/s S,JM Property Developers in favour of Metro Corp., a third party (not a partner in MIs SJM Property Developers) for a consideration of Rs. 52 crores. The assessee-company was asked to file a note on this. In response, assessee filed letter dated 19/12/2011 enclosing the following documents: i) Copy of property deed purchased on 06/02/2007 for SJM Property Developers for a consideration of Rs. 4 crores. ii) Memorandum of Understanding dated 06/02/2007 between the assessee-company, A.Srinivasan, S.Srinivasan, referred to as first party of this agreement and another firm MIs Metro Corp. Bangalore (copy of this agreement is enclosed with the assessment order as Annexure-l). iii) Copy of the retirement cum reconstituted partnership firm deed dated 31/01/2009 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 06.02.2007, assessee transferred 99% of the share capital in M/s. S.J.M. Property Developers and for that assessee has to receive Rs. 99,000/-. In the same deed in clause-2 on page-4 of the agreement, the assessee company agreed to advance Rs. 25 crores to M/s. S.J.M. Property Developers. As per clause-3 of the agreement, M/s Metro Corp has agreed to compensate the assessee -company a sum of Rs. 27 crores and issued a post dated cheque. There is a Retirement cum Reconstituted partnership deed dated 31.01.2009 wherein shri D.Srinivasan, shri S.Srinivasan and Shri Uday Reddy were retired from the firm and shred M Devaraj was admitted a new partner. There was no revaluation of assets was done but the amount payable was to the outgoing partners shri D.Srinivasan, shri S.Srinivasan and Shri Uday Reddy were determined as Nil, Nil and Rs. 37/- respectively. Shri D.M. Devaraj was admitted to the partnership firm with a contribution of Rs. 500/-. Accordingly, the balance sheet was drawn on 31.01.2009. The assessee company was contributed a sum of Rs. 2/- towards capital. Thus lead o total share capital contribution of the assessee company in the partnership firm is Rs. 99,000/- (99% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of the share held by the assessee and this amount was credited to the capital account of the assessee in the books of account of M/s. S.J.M. Property Developers. Consequently, the Deed of Retirement was executed on 06.03.2009 and the account was settled on retirement and firm was continued by the remaining partners. According to the ld.A.R, the amount credited to the capital account of the assessee company being partner of M/s. S.J.M. Property Developers cannot be taxed in terms of sec.45(4) of the Act. 4(a)(i). He relied on the judgement of Kerala High Court in the case of Kunnamkulam Mills reported in 257 ITR 544 wherein it was held that: "what is postulated under section 45(4) of the Income-tax Act, 1961, is that the profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm would be chargeable to tax as the income of the firm. Ownership of property does not change with the change in the constitution of the firm. As long as there is no change in ownership of the firm and its properties, for the simple reason that the partnership of the firm stood reconstituted, there is no transfer of capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sharadha Terry Products Ltd., or Facility Agreement dated 07.03.2009 between M/s Metro Corp Infrastructure and assessee in favour of the assessee towards part of consideration of payment or Construction agreement dated 07.03.2009 between M/s Metro Corp Infrastructure and the assessee as part of consideration of payment or Settlement deed dated 09.03.2009 between the assessee and M/s Metro Corp, Deepak Krishnappa and Uday Reddy cannot have any bearing to hold that the amount received by the assessee is taxable amount. According to him on 06.02.2007 on the date of agreement with M/s Metro Corp, it is only a third party. The only relation between the assessee and M/S Metro Corp is that they were to act as developer of the property to be owned by the firm M/s. S.J.M. Property Developers. The said agreement was for a commitment by the developer and had nothing to do with any compensation as narrated by the AO. If he assessee proposed to retire from the partnership, as per the agreement cited, the AO has no basis for taking it as an evidence to hold that the amount received becomes taxable. The AO has to legally take into consideration only the evet that subsequently happened in Febru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit derived by the assessee in the field of revenue account for investing Rs. 25 crores in M/s. S.J.M. Property Developers by way of loan and it is to be brought to tax. Further, he submited that the approach of assessee in revaluation of asset is not consistent and when on 31.01.2009 three partners were retired, there is no revaluation of assets. On 06.03.2009, only when the assessee was retired, there is revaluation of assets. He submited that if the provisions of the section 45(4) is not applicable, it should be assessed as an income in terms of Sec.28(iv) or Sec.28(v) or Sec.28(va) of the Act. 5(a)(i) According to DR the Tribunal can give such direction, being the final fact-finding authority in view of the judgement of Supreme Court in the case of Kapur Chand Shrimal Vs. CIT reported in 131 ITR 451(SC) wherein held that: "it is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of capital gains and business profits which were chargeable to tax under section 45(4)" . 5(a)(iv) Further, he relied on the judgement of Delhi High Court in the case of Bishan Lal Kanodia Vs. CIT reported in [2002] 257 ITR 449 (Del) wherein it was held that: "whether it was held to be a case of dissolution of the partnership or of retirement, having regard to the provisions contained in section 47(ii) of the Act, as it stood prior to 1988, the assessee was entitled to the benefit thereof only with respect to the assets, he derived from the partnership firm and not to the excess amount. The excess amount was liable to tax as capital gains". 6.1 We have heard both the parties and carefully gone through the orders of the lower authorities and perused the Paper Book filed by the assesee before us including following documents : S.No. Date Particulars 1 01.02.2007 Partnership deed dated 01/02/2007 of M/s. S.J.M. Property Developers between Sharadha Terry Products Ltd, D.Srinivasan, S. Srinivasan Deepak Krishnappa and Uday Reddy 2 01.02.2007 Pan Card Copy - SJM property Developers 3 06.02.2007 Acknowledgement of registration of Firm - SJM property Developers 4 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring shares in, a cooperative society, company or other AOP or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.' Explanation : For the purposes of sub-cls. (v) and (vi), "immovable property" shall have the same meaning as in cl. (d) of s. 269UA.' 6.2.2 Section 2(14) defines Capital asset, as meaning "property" of any kind held by the assessee, whether or not connected with his business or profession. The above exhaustive definition is subject to the following exclusions like stock-in-trade, consumable stores or raw material held for the purpose of business or profession, personal effects, agricultural land in India, certain gold bonds, special bearer bonds and gold deposit bonds. The share or interest of a partner in the partnership and its assets would be property and, therefore, a capital asset within the meaning of the aforesaid definition. To this extent, there can be no doubt. The next question is as to whether it can be said that there was a transfer of capital asset by the retiring partner in favour of the firm and its continuing partners so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partner when he brings his personal asset into the partnership firm when neither can the date of dissolution or retirement be envisaged nor can there be any ascertainment of liabilities and prior charges which may not have even arisen yet. Therefore, the consideration which a partner acquires on making over his personal asset to the firm as his contribution to its capital cannot fall within the terms of s. 48 of the Act. And as that provision is fundamental to the computation machinery incorporated in the scheme relating to the determination of the charge provided in s. 45, such a case must be regarded as falling outside the scope of capital gains taxation altogether. In coming to the above conclusion the Hon'ble Court relied on the decision of the Hon'ble Supreme Court in Addanki Narayanappa v. Bhaskara Krishnappa AIR 1966 SC 1300. The Hon'ble Supreme Court in the said decision explained the nature of partnership and the right of the partners over the assets of the partnership as follows (p. 1303 of AIR) : ".... whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The effect of this was that the profits and gains arising from the transfer of a capital asset by a partner to a firm are chargeable as the partner's income of the previous year in which the transfer took place and the amount recorded in the books of account of the firm, shall be deemed to be the full value of consideration received or accruing as a result of transfer of the capital asset. 6.2.5 In the case of dissolution where partners are allotted capital assets of the firm, it was held that there was no transfer. In Malabar Fisheries Co. v. CIT [1979] 120 ITR 49/ 2 Taxman 409, the Hon'ble Supreme Court has explained the nature of distribution of assets of a partnership on dissolution amongst its partners and as to whether such distribution of assets would constitute transfer within the meaning of s. 2(47) of the IT Act as follows : "A partnership firm under the Indian Partnership Act, 1932 is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or firm's assets all that is meant is property or assets in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as under : "Any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons." Section 47 of the Act lays down which are the transactions not regarded as transfer for the purpose of s. 45 of the Act. 6.2.8 The Finance Act, 1987, w.e.f. 1st April, 1988, omitted this clause, the effect of which was that distribution of capital assets on the dissolution of a firm would w.e.f. 1st April, 1988 be regarded as "transfer". Therefore, instead of amending s. 2(47), the amendment was carried out by the Finance Act, 1987, by omitting s. 47(ii), the result of which was that distribution of capital assets on the dissolution of a firm was regarded as "transfer". The effect was that the profits or gains arising from the transfer of a capital asset by a firm to a partner on dissolution or otherwise would be chargeable as the firm's income in the previous year in which the transfer took place and for the purposes of computation of capital gains, the fair market value of the asset on the date of transfer was deemed to be the full value of the consideration received or accruing as a result of the transfer. 6.2.9 Thus Parliament brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose and object of the Act of 1987 was to bring to charge of tax arising on distribution of capital assets of firms which otherwise was not subject to taxation. If the language of sub-s. (4) is construed to mean that the expression "otherwise" has to partake of the nature of dissolution or deemed dissolution, then the very object of the amendment could be defeated by the partners by distributing the assets to some partners who may retire. The firm then would not be liable to be taxed thus defeating the very purpose of the amending Act. The Court noticed that the position prior to the amendment by introduction of s. 45(4) by the Finance Act, 1987, was that there was no transfer of assets by the firm to the partners on dissolution or transfer of assets to the retiring partner on retirement. The effect was that the profits or gains arising from the transfer of a capital asset by a firm to a partner on dissolution or otherwise would be chargeable as the firm's income in the previous year in which the transfer took place and for the purposes of computation of capital gains, the fair market value of the asset on the date of transfer would be deemed to be the full value of the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsistence of the partnership and on dissolution of the partnership or on his retirement from the partnership to get the value of his share in the net partnership assets which remain after satisfying the debts and liabilities of the partnership. When therefore a partner retires from a partnership and the amount of his share in the net partnership assets after deduction of liabilities and prior charges is determined on taking accounts on the footing of notional sale of the partnership assets and given to him, what he receives is his share in the partnership and not any consideration for transfer of his interest in the partnership to the continuing partners. His share in the partnership is worked out by taking accounts in the manner prescribed in the relevant provisions of the partnership law and it is this, namely, his share in the partnership which he receives in terms of money. There is in this transaction no element of transfer of interest in the partnership assets by the retiring partner to the continuing partner. The transfer of a capital asset in order to attract capital gains tax must be one as a result of which consideration is received by the assessee or accrues to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e former type of transaction will be regarded as sale or release or assignment of his interest by a deed attracting stamp duty while the latter type of transaction would not. In other words, it is clear, the retirement of a partner can take either of two forms, and apart from the question of stamp duty, with which we are not concerned, the question whether the transaction would amount to an assignment or release of his interest in favour of the continuing partners or not would depend upon what particular mode of retirement is employed and as indicated earlier, if instead of quantifying his share by taking accounts on the footing of notional sale, parties agree to pay a lump sum in consideration of the retiring partner assigning or relinquishing his share or right in the partnership and its assets in favour of the continuing partners, the transaction would amount to a transfer within the meaning of s. 2(47) of the Act." 6.2.17 The above decision was followed by the Hon'ble Bombay High Court in the other two cases of N.A. Modi ( supra) and H.R. Aslot ( supra). The Pune Bench of the Tribunal in the case of Shevantibhai C. Mehta(83 TTJ 542)(Pune) had considered the aforesaid dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timately, the disputes between the parties were amicably settled out of Court and under a deed dt. 19th Jan., 1962, the assessee retired from the firm w.e.f. 31st Aug., 1961, and the remaining partners continued to carry on the business of the firm. On the occasion of such retirement, the assessee was paid : (1) Rs. 1 lakh as his share of profits of the firm for the broken period ended 31st Aug., 1961, (2) Rs. 50,000 as his share of the value of the goodwill, and (3) Rs. 4,77,941 as his share in the remaining assets of the firm. The issue relevant for our purpose is the liability of the sum of Rs. 4,77,941 or any part thereof to capital gains tax. The Hon'ble Court took up for consideration as to what is the real nature of the transaction when a partner retires from the partnership. Does the transaction amount to any relinquishment of his share or interest in the partnership in favour of the continuing partners, or does it stand on the same footing as an adjustment of his rights that results upon dissolution of the partnership. On behalf of the assessee it was contended that retirement of a partner and quantification of his share and payment thereof to him stands on the same fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth hereby release the continuing partners and each of them from all covenants, agreements, matters and things in the here before recited partnership dated, the 8th Jan., 1951, and the supplementary agreement dt. 24th Aug., 1957, contained and in further pursuance of the said agreement and in consideration of the premises aforesaid and without making any further payment of any amount to him the retiring partner as beneficial owner doth hereby assign and release upto the continuing partners and each of them all that his right, title, interest and undivided half share in the said partnership firm and all his share and interest on the said pieces of land and premises, structures and buildings standing thereon ....... and machinery, plant, equipment, etc...To hold the same unto the continuing partners absolutely in equal shares as tenants-in-common ........ And this indenture further witnesseth that in pursuance of the said agreement and in consideration of the premises aforesaid the retiring partner doth hereby release, grant, convey and transfer and assure all that his individual half share in all the several pieces or parcels of land to have and to hold the said undivided half share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm M/s SJM Property Developers out of the advance receipts bf the sale proceeds. in case there is a shortfall in the re-payment such shortfall shall be paid by the party of the second part .to MIs S J M Developers for repayment of the Loan at the* time of relinquishment of share of 99%of the parties of the First Part along with the original capital contributed by the party of the first part Rs. 99,000 (Rs ninety nine thousand). For ensuring and securing the aforeald repayments of the amounts to the Parties of the First Part, the Party of the Second Pasrt shall issue_post dated cheques for the requisite amount, from Vijaya Bank, Jatahatti Branch, Bangatore. The Party of the Second Part shall also issue a letter to Vijaya Bank, indicating that they will not issue a stop payrment instruction to the Bank, on the above mentioned cheques. The Party of the Second Part shall..compensate the Party of the First Part with a sum of Rs. 27,00,00,000 (Rupees Twenty seven crores only), on relinquishment, as a consideration for the 99% share held by the party of the first part. The above figure is based on current income tax rate of 33.66 %. in case the tax rate is revised by the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on behalf of the aforesaid firm, in favour of prospective purchasers of the sites in the Layout to be formed on the Schedule Property on thé receipt of the entire - consideration due from the PARTY OF THE SECOND PART under this agreement. 7. The Parties of the First Part and Second Part agree that they shall have the right to enforce specific Performance of this Agreement and the parties are bound by this Memorandum of Agreement. 8. It is hereby agreed by both the parties that a separate retirement deed shall be prepared on the date of retirement of the party of the first part. The terms of such retirement deed shall be in line with the terms agreed by this agreement as far as the compensation payable by the party of the second part for the relinquishment of the said 99% in favor of the party of the second part. 9. Time is the essence of this agreement. 10. This agreement is prepared in duplicate and each one of them shall be treated as original. Sd/- S J M PROPERTY DEVELOPERS Sd/- For METROCORP Sd/- SHARADHA TERRY PRODUCTS LTD - PARTNER" 6.4 The contention of the ld.D.R is that the assessee received the above amount of Rs. 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm and the amount of his share in the partnership assets after deduction of liabilities and prior charges is determined on taking accounts in the manner prescribed by the partnership law, there is no element of transfer of interest in the partnership assets by the retired partner to the continuing partners and the amount received by the retiring partner is not capital gain under section 45 of the Income-tax Act, 1961. In this view of the matter, we do not find any substance in the argument of the D.R. 6.9 It is worthwhile to mention herein that the Tribunal ,Hyderabad Bench in case of Smt.Girija Reddy Vs. ITO (52 SOT 113) has taken a contrary view by holding that lump sum payment received by a retiring partner assigning or relinquishing his/her right in the partnership and its asset in favour of the continuing partners will attract capital gain tax. The Tribunal Hyderabad Bench while coming to such conclusion had mainly relied upon the following decisions:- a) CIT Vs.Tribhuvan Das G.Patel (115 ITR 95) b) CIT Vs. H.R.Ahot (115 ITR 255) c) N.A.Mody Vs. CIT(162 ITR 420) d) Mumbai Tribunal in the case of Sudhakar M.Shetty Vs. ACIT (130 ITD 197) e) Shevanti Bhai Vs. ITO (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that after taking into account the capital investment made by the retiring partner, the goodwill of the partnership business with regard to the immovable properties purchased by the partnership firm and efforts made and time given by the retiring partner of the partnership business, the party of first part is entitled to receive a sum of Rs. 1,25,00,000/- ( Rupees one crore twenty five lakhs only) from the continuing partners towards full and final settlement and payment of his shares, right, title and interest and the claims of the partnership business and its assets including goodwill" 14. While the Assessing Officer brought to tax the surplus amount of Rs. 25 Iakhs by treating it as a transfer of goodwill, the CIT (A) deleted the addition by holding that there is no 'transfer' when a partner received his share in the partnership business. Keeping in view the aforesaid basic facts we will now examine the legal issue whether there at all is a 'transfer' within the meaning of sec. 2(47) of the Act 15. The Hon'ble Supreme Court in case of CiT vs. R. Lingamallu Raghu Kumar (supra) while considering the issue of excess amount received by the assessee on retirement from partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dissolution, the same cannot be brought to tax in view of the decision of Hon'ble Supreme Court in case Tribhuvan Das G. Patel vs. CIT (236 1TR 515) and in case of CIT vs. R. Lingamallu Raghu Kumar (supra). While doing so, the Tribunal, Hyderabad Bench also held that in view of the decisions of Hon'ble Supreme Court, judgments of Hon'ble Delhi High Court and Hon'ble Bombay High Court (supra) are not applicable. The Hon'ble jurisdictional High Court in case of Chalasani Venkateswara Rao vs. ITO (supra) held as under: "20. In L Raghu Kumar (supra), a Division Bench of the Andhra Pradesh High Court followed the judgment of the Gujarat High Court in CIT v. Mohanbhai Pamabhai [19731 91 1TR 393 (Guj.) and held that no transfer is involved when a retiring partner receives at the time of retirement from the firm, his share in the partnership assets either in cash or any other asset. It further held that for the purpose of Section 45 of the I.T. Act, no distinction can be drawn between an amount received by the partner on the dissolution of the firm and that received on his retirement, since both of them stand on the same footing. 21. In P.H. Patel (supra), a Division Bench of the AP Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t choose to amend the law by making the partner liable when it amended the I.T Act,1961 by introducing clause (4) to s45 by the Finance Act,1987 w.e.f 14.1988 and made only the firm liable. Therefore the contention of the assessee has to be accepted and that of the Revenue is liable to be rejected. 16. A careful reading of the aforesaid decision of Hon'ble Jurisdictional High Court would make it clear that they approved the view of their earlier decision holding that the amount received by the partner on the dissolution of the firm or on his retirement stand on the same footing and no distinction can be drawn. The Hon'ble High Court further referred to the decision of jurisdictional High Court in case of CiT vs. P.H. Patel (171 1TR 128) wherein it was held that when a partner retires from a partnership taking his share of partnership interest, no element of transfer of interest in the partnership asset by the retiring partner to the continuing partner was involved. The aforesaid ratio laid down by the jurisdictional High Court clearly apply to the facts of the assessee's case. 1TA no.l200 of 2010 Shri N. Prasad , Executive Chairman, Matrix laboratories Limited. However, we need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds long term capital gains on transfer of goodwill. Bombay High Court observed that Tribunal while holding that amount received by the partner on his retirement from partnership firm are exempt from capital gains tax, relied upon the decision in the case of Prashant S.Joshi Vs. ITO. In the case of N.A.Mody Vs. CIT(162 ITR 420) has followed the decision of the Tribhuvan Das G.Patel Vs. CIT (115 ITR 95) (Bom.) and the same has been reversed by the Supreme Court in the case of Tribhuvan Das G.Patel (236 ITR 515)(SC) and held that amounts paid to the partner towards his shares in the assets, it should be treated under clause (ii) of Section 47 of the Act and will not be included as capital gain. In Prashant S.Joshi Vs. ITO (324 ITR 504) Bombay High Court has referred to the decision of Tribhuvan Das G.Patel Vs. CIT (supra) and placed reliance on the decision of Supreme Court in the case of CIT Vs.R.Lingamallu Raghu Kumar(supra) and held that there is no capital gain tax on retirement. Further, in Additional CIT Vs. Mohanbhai Pamabhai (91 ITR 393)(Guj), it was held that when a partner retires from partnership what he receives is his share in the partnership, which is worked out and real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicability of provisions of the section 28(iv), there is no receipt of any value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession by present assessee. It is only by retirement from the partnership firm, the assessee received the impugned amount. 6.9.6 Regarding the application of Sec.28(v) as discussed in earlier, what the assessee has received on retirement is his share in the value of the business carried on by the firm. The share in the value of the business is a capital asset which include goodwill and as such, such receipts are capital receipts in their hands as held by the Hon'ble Supreme Court in the case of Additional CIT Vs. Mohanbhai Pamabhai (supra) and that cannot be considered as business income of assessee u/s.28(v) of the Act and Sec.28(v) confined to any interest, salary, bonus, commission or remuneration, by whatever name called, due to or received by, partner of the firm, from such firm and it should be in revenue field. The receipt which is in the capital field cannot be brought u/s.28(v) of the Act This contention of the ld.D.R cannot have any merit. 6.9.7 Regarding the applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment even if made to the retiring partner in excess of capital account is not in nature of any profit or income within the meaning of sec.28(va) of the Act and it cannot be brought to tax as business income. 7. The other contention of the ld.D.R is that the amount received by the assessee at Rs. 26,99,00,000/- is quantified vide Memorandum of Agreement on 06.02.2007 between the assessee,D.Srinivasan, S.Srinivasan and M/s Metro Corp, and further agreement made on 31.01.2009, (Retirement cum reconstitution of partnership deed) and Memorandum of agreement of retirement from partnership dated 06.03.2009 are only arrangement to come out of the tax net by entering into series of retirement and fresh partnership, but has to get over arrangement dated 06.02.2007 which were already in existence between the assessee company and Metro Crop Bangalore and the amount was actually received by the assessee from Metro Crop and not from firm M/s. S.J.M. Property Developers where the assessee is a partner. As seen from the argument of ld.D.R, this argument is totally contradictory to the earlier argument of the ld.D.R. There is a serious doubt in the minds of the AO as well as the ld.D.R regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on the business of 100% EOU i.e receipts from the sale of scrap will also qualify for deduction is unacceptable. Sec.10B(4) clearly states that profits derived from export of articles should alone be considered. Needless to say that the income attributable to an activity is one step removed from the income derived. We are of the view that Ld.CIT(A) placing reliance on Supreme Court's decision in the case of Liberty Liberty India Vs. CIT reported in 183 Taxman 349, rejected this ground. We do not find any infirmity in the order of the Ld.CIT(A). Hence this ground is not allowed. Revenue's appeal in ITA No.990/Mds./2014 (A.Y 2009-10) 12. The Revenue has raised the ground with regard to computation of book profit by treating the receipt of Rs. 27.99 crores as short term capital gain. 13. This amount is straight away taken to General Reserve account and not appearing in the P&L A/c and there is no allegation that brought on loss account was not prepared in accordance with Part-II & III Schedules VI of Companies Act. Hence, the AO is precluded from disturbing the audited Accounts which is duly filed before the ROC as held by the Supreme Court in the case of Apollo Tyres Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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