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TMI Blog2018 (8) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... or capital gain tax under Section 45 of the Act. Moreover, it is also not a case of the Revenue that capital gain tax is leviable. AO found that it is not an expenditure relatable to the business or the royalty. This Tribunal is of the considered opinion that it is not a payment made towards business expenditure or towards royalty, but it is only a distribution of asset of the partnership firm on retirement of the partner due to family settlement. Since the business and its assets were kept by the coparceners intact, Shri Rengasamy and Smt. Vellaiammal were compensated by making payment of ₹ 2, 03, 40, 000/- and a sum of ₹ 22, 60, 000/- respectively. Therefore, even though it cannot be construed as expenditure for business or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer has also disallowed ₹ 2, 26, 00, 000/-, which was incurred by the assessee-firm consequent to a family settlement to a partner retired on 31. 03. 2014. According to the Ld. representative, the assessee M/s Anjappar Chettinad A/C Restaurant was initially established by Shri Anjappan. After the death of Shri Anjappan, his legal heirs Shri A. Rengasamy, Shri A. Kandasamy, Shri A. Maruthupandian, Smt. A. Vellaiammal and Smt. R. Valliammai inherited the restaurant, namely, M/s Anjappar Chettinad A/C Restaurant. A partnership firm was reconstituted by a deed dated 01. 04. 2002 by which, excluding Shri Anjappan s daughter, all other legal heirs, namely, Shri A. Rengasamy, Shri A. Kandasamy, Shri A. Maruthupandian and Smt. Vella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outstanding loans in some of the banks, it was agreed by the members of the family and Shri Rengasamy that the payment may be made by the partnership firm to the banks directly. Accordingly, the payments were made. According to the Ld. representative, since M/s Anjappar Chettinad A/C Restaurant is a partnership concern of the family of Shri Anjappan and to avoid dispute among family members, an amicable solution was made by way of family settlement. Hence Shri Rengasamy intended to retire from the firm. Consequently, the above said sum of ₹ 2, 03, 40, 000/- was paid to him. Therefore, according to the Ld. representative, the above said payment cannot be considered to be royalty, hence, TDS is not to be made. According to the Ld. repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ark was registered in the name of partnership firm, therefore, question of transferring the trade name of the partnership firm to retiring partner Shri Rengasamy does not arise for consideration. By way of sharing of profit, according to the Ld. D. R. , Shri Rengasamy has already derived benefit from the royalty payments received by the assessee-firm, therefore, the claim of the assessee that the royalty payment has to be settled is not correct. According to the Ld. D. R. , a sum of ₹ 2, 03, 40, 000/- was said to be paid to Shri Rengasamy and another sum of ₹ 22, 60, 000/- was said to be paid to Smt. Velliammal. Since the payment of ₹ 2, 26, 00, 000/- to Shri Rengasamy and Smt. R. Valliammai has no connection with the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lving the business of partnership firm, the family members of Shri Anjappan decided to pay monetary compensation to Shri Rengasamy who was willing to retire from the partnership firm as a partner and continue the partnership business of the family. Similarly, Shri Anjappan s wife Smt. Vellaiammal was also paid ₹ 22, 60, 000/-. The Assessing Officer disallowed the claim of the assessee on the ground that these payments made to Shri Rengasamy and Smt Vellaiammal are not related to the business and it is also not an expenditure for royalty. The Assessing Officer has also found that no TDS was made. The question arises for consideration is whether the payments of ₹ 2, 03, 40, 000/- made to Shri A. Rengasamy and ₹ 22, 60, 000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o family settlement. Since the business and its assets were kept by the coparceners intact, Shri Rengasamy and Smt. Vellaiammal were compensated by making payment of ₹ 2, 03, 40, 000/- and a sum of ₹ 22, 60, 000/- respectively. Therefore, even though it cannot be construed as expenditure for business or for royalty, certainly it is a division / distribution of partnership firm s asset by way of paying compensation to Shri Rengasamy and Smt. Vellaiammal. Merely because the payment was made to financial institutions and banks at the instructions of Shri Rengasamy and Smt. Vellaiammal, that may not change the character of payment. Since the capital of the assessee was kept intact and the business was continued by other coparceners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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