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TMI Blog2014 (12) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... revisionary powers u/s 263 can be invoked by the CIT only when the claim of assessee allowed by the Assessing Officer is impermissible under law. It is settled legal proposition of law that if two views are possible on an issue and Assessing Officer has taken one of the possible views then the Commissioner has no jurisdiction to revise the order of Assessing Officer on the ground that he did not agree with the view taken by the Assessing Officer. As decided in Tribhuvandas G. Patel Versus Commissioner of Income-Tax [1996 (2) TMI 16 - SUPREME Court] even where a partner retires and some amount is paid to him towards his share in the assets, it should be treated as falling under clause (ii) of section 47. The view taken by the Assessing Officer on this question of taxability of the amount received by the assessee on retirement from the partnership firm is certainly not an impermissible or impossible view rather the view taken by the Assessing Officer is a proper and more logical view as it is fortified by the series of decisions of Hon'ble Supreme Court, Hon'ble High Court as well as of this Tribunal. There is no quarrel on the point that if the Assessing Officer has failed to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain by holding the same as lumpsum consideration received by the assessee on transfer of its rights in capital assets of the firm in favour of the continuing partners." 2. Both the assesses before us, were the partner along with three other persons in M/s Fine Developers with 12.5% capital contribution and 10% of share of profit each. The details of partners and their share of profit and loss are as under:- Sr. No. Name of the Partner Share of profit/loss vide Deed of Partnership dated 25.11.2005 Deed of partnership dated 6.7.2007 (i) The appellant 10% 10% (ii) Sapphire Land Developers 60% 10% (iii) Vision Finstock P. Ltd. 20% 20% (iv) Suraksha Developers P. Ltd. 10% 10% (v) Housing Development and infrastructure Ltd. (HDIL) - 50% Total 100% 100% 3. M/s Fine Developers own a plot of land which was purchased for a consideration of ₹ 28 crore. The assessee, (M/s Nisha Capital Services Ltd) was also partner in M/s Mahul Construction Corporation having 10% of share of profit along with six other partners. During the previous year relevant to the assessment year 2009-10, the assessee retired from these two partnership firms vide deeds of retireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we will discuss while considering the contention of the parties at appropriate stage of our finding. 4. Before us, the Ld. Authorized Representative of the assessee submitted that in the computation of income, the assessee has not offered this amount to tax and it was taken to the reserve and surplus in the balance sheet. He referred the schedule-B giving details of reserve and surplus and submitted that this amount was added during the year. Further in the notes on accounts, the assessee has made clear and explained that during the year, the assessee has retired from the partnership firms in question w.e.f 25.07.2008 and the addition to the capital reserve consist of assessee's share in the revaluation of asset belonging to firms in which the assessee was partner. The Ld. Authorized Representative then referred the notice issued by the Assessing Officer u/s 142(1) along with questionnaire and submitted that the Assessing Officer asked the assessee to furnish the details of compensation received and the same is credited to the capital account and in the balance sheet under Schedule B-6. The Assessing Officer also asked the assessee to file the copy of ledger account in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter he took a view which is fully justified as per the decisions relied upon by the assessee. When the Assessing Officer has taken a view after conducting a proper enquiry and the view taken by the Assessing Officer is a possible view, then the CIT is not permitted to take a difference view merely on the reason that he did not agree with the view taken by the Assessing Officer. The Ld. Authorized Representative has further contended that there was no other issue which was to be examined by the Assessing Officer except the compensation received by the assessee from partnership firms. Therefore, it is clear that the Assessing Officer has conducted exhaustive enquiries and after satisfying himself about the claim of the assessee, accepted the same. He has referred the show cause notices as well as impugned order and submitted that the CIT has also not raised the question about the enquiry conducted by the Assessing Officer. Thus the CIT has no jurisdiction to revise the order when the Assessing Officer has examined the entire facts on the issue involved. In support of his contention he has relied upon the following decisions;- (i) Spectra Shares & Scripts Vs. CIT (354 ITR 35)(AP) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee on retirement from the partnership firm is not taxable. Said decision of the Tribunal has been upheld by the Hon'ble High Court vide order dated 26.02.2013 in ITA no. 1969 of 2011. Therefore, the view of the Assessing Officer in accepting the claim of the assessee is proper and in accordance with law as supported by the various judgments referred above. The Ld. Authorized Representative has further contended that even, otherwise, the view taken by the Assessing Officer is not absolutely contrary to law or invalid, therefore, even on a debatable issue if the Assessing Officer has taken a possible view then the CIT has no jurisdiction to revise the order merely on the ground that he did not agree with the view of Assessing Officer. The Ld. Authorized Representative has pointed out that apart from the two assessee in the present appeals, in the case of third partner M/s Vision Finstock Pvt. Ltd., which was also retired along with these two assesses, the Assessing Officer assessed the amount received from the partnership firm to tax. However, on appeal, the CIT(A) deleted the addition made by Assessing Officer by holding that the compensation received on retirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring the capital asset in favour of the continuing partners. The Assessing Officer has failed to examine the mode of retirement in the case of the assessee. She has referred para 2 of the deed of retirement and submitted that the retiring partner conveyed that the continuing partner shall forever be entitled in share, right, title and interest of the said business of the erstwhile partnership firm together with the benefits of all contracts, licenses , agreements etc., The Assessing Officer allowed the claim of the assessee without applying his mind on the crucial facts of the case, therefore, the CIT is justified in invoking the revisionary powers u/s 263. She has referred para 15(e) of the impugned order and submitted that in the case of firm M/s Fine Developers, the Tribunal has held that the retiring partners has relinquished their right in the asset in the firm and in lieu of that the firm has paid the retirement money lying in their capital account. Obviously, assessee firm had not transferred any right in capital asset to the retiring partners rather it is the retiring partners who have transferred the rights in capital assets in favour of the continuing partners. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 and furnished all the requisite details and records as well as the submissions. The assessee has submitted a detailed note on the background of the assessee as a partner of the partnership firm in question as under:- "Background [1] The Company was incorporated in the year 1996. The registered office is at 3, Narayan Building, 23, LN. Road, Dadar (E), Murnbai -400 014. and the present directors are Sudhir Valia, Raksha Valia and Gaurang Parekh. [2] During the financial year 2005-06, the Company entered into partnership in the firms namely M/s Mahul Construction Corporation, M/s J. P. Corporation and Developers. Facts relating to ₹ 29.22 crores " During the year under consideration i.e. as on 1st" April, 2008, two partnershn firms namely M/s Fine Developers and M/s Mahul Construction Corporation, various commercial reasons, revalued their business assets. Accordingly, the firms made necessary accounting entries in their books of accounts by crediting respective partners capital accounts. Based on that, the assessee Company also made corresponding accounting entries in its books of accounts as on 01.04.2008 by debiting the firm M/s Fine Developers and M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w taken by the Assessing Officer. The Commissioner has relied upon the decision of this Tribunal in the case of Sudhakar Shetty Vs. Asst. CIT (supra) and held that if the retiring partner has been paid lump sump in consideration, the retiring partner assigned or relinquished his share of right in the partnership and its asset in favour of the continuing partners, then such a transaction would amount to transfer within the meaning of section 2(47) of Income Tax Act., giving rise to capital gain exigible to tax. The Commissioner has also placed reliance on the judgment of Hon'ble High Court Tribhuvandas G. Patel ( supra), CIT Vs. H.R. Aslot (supra) and in the case N.A. Modi Vs. CIT ( supra). It is pertinent to note that in the case of N.A. Modi Vs. CIT (supra), the Hon'ble High Court has followed the judgment in the case of Tribhuvandas G. Patel ( supra). The said judgment has been reversed by the Hon'ble Supreme Court in (236 ITR 515). In the said case, the question fell for consideration of Hon'ble Supreme Court are as under:- ""1.Whether, on the facts and in the circumstances of the case, ₹ 1,72,182 or ₹ 1,00,000 were liable to be included in the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retiring partner is his share in the partnership and not any consideration for transferring all his interest to the continuing partners. In the case of N.A. Modi Vs. CIT (supra), the Hon'ble Jurisdictional High Court has followed the Judgment in the case of Tribhuvandas G. Patel ( supra). As we have already mentioned that the judgment in the case of Tribhuvandas G. Patel (supra) was reversed by the Hon'ble Supreme Court. Therefore, following the decision in the case of N.A. Modi Vs. CIT (Supra) without considering the judgment of Hon'ble Supreme Court in the case of Tribhuvandas G. Patel ( supra) made out a case that the Commissioner has guided himself by a particular decision and not by considering the other relevant decisions on the point. Further a similar issue was considered by the Hon'ble Supreme Court in the case of CIT Vs. R. Lingmallu Raghukumar (247 ITR 801), wherein, the Hon'ble Apex Court has considered the earlier judgment and held as under:- ""Whether, on the facts and in the circumstances of the case, the excess amount of ₹ 46,500 received by the assessee on retirement from the two partnership firms is assessable to capital gains ?" (p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndas G. Patel v. CIT [1999] 236 ITR 515. Following the judgment of the Supreme Court in Sunil Siddharthbhai's case (supra), the Supreme Court held that even when a partner retires and some amount is paid to him towards his share in the assets, it should be treated as falling under clause (ii) of section 47. Therefore, the question was answered in favour of the assessee and against the revenue. Section 47(ii) which held the field at the material time provided that nothing contained in section 45 was applicable to certain transactions specified therein and one of the transactions specified in clause (ii) was distribution of the capital assets on a dissolution of a firm. Section 47(ii) was subsequently omitted by the Finance Act of 1987 with effect from 1-4-1988. Simultaneously, sub-section (4) of section 45 came to be inserted by the same Finance Act. Sub-section (4) of section 45 provides that profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assessable as capital gain u/s 45 of the Act. The judgment of the Hon'ble Gujarat High Court ITR 801(SC), the Supreme Court held, while affirming the principle laid down in the case of Mohanbhai Pamabhai (supra) that when a partner retires from the partnership firm and the amount of hrs share in net partnership assets after deduction of liabilities is determined, 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 4S of the Act. Further, the Learned Counsel for the appellant has correctly pointed out that the decision of the Hon'ble Bombay High Court in Tribhuvandas G.Patel (Supra) followed in the case of N.A. Mody (supra) has been reversed by the Hon'ble Supreme Court in the case of Tribhuvandas G.Patel reported In 236 ITR 515 (SC) on this aspect of the matter. In fact, the Hon'ble Bombay High Court in a recent decision in the case of Prashant S. Joshi ( Supra) has noted the aforesaid legal position. In this circumstances the reliance placed by the authorities below on the judgment of the Hon'ble B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner is not permitted to exercise the revisionary powers u/s 263 merely on the ground that he does not agree with the view taken by the Assessing Officer or even on the ground that there are divergent view on the issue. Therefore, in the view of the judgment of Hon'ble Supreme Court in the case of Mohanbhai Pamabhai (supra), Tribhuvandas G. Patel (supra), judgment in the case of CIT Vs. R. Lingmallu Raghukumar (supra), as well as the Judgment in the case of Prashant S. Joshi (supra), the view of the Assessing Officer cannot be said impermissible under law. 20. The decisions relied upon by the Ld. DR in the case of P.V. Sreenijin Vs. CIT (supra) would not help the case of revenue because in the said case the Commissioner found that the Assessing Officer had not applied its mind to the various factual aspects available on record, therefore, it was the case of overlooking the crucial facts available on record and was not a question of possible view taken by the Assessing Officer. It is settled legal position as held by the Hon'ble Supreme Court in the case of Malabar Industries Ltd. Vs. CIT (supra) as well as the judgment of Hon'ble Jurisdictional High Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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