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TMI Blog1984 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... for the opinion of this court arising out of the order passed in ITA No. 885/JP/1972-73 dated 22-2-1974 and ITA No. 886/JP/1972-73 dated 22-2-1974: Case No. 42 of 1974: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 47,436 by holding that it was not revenue receipt and as such not liable to tax ?" Case No. 43 of 1974 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 30,000 by holding that it was a capital receipt and as such not liable to tax ?" Brief facts leading to Case No. 42 of 1974 are that M/s. Brahm Swaroop Bros. (hereinafter referred to as "the assessee") filed a return declari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion can also be considered as compensation received by the assessee and as such was liable to tax. In view of the above finding, the Income-tax Officer added the sum of Rs. 47,436 as income of the assessee in the relevant year of account. As such, the assessment was completed on a total income of Rs. 85,800. The assessee, aggrieved against the order of the Incometax Officer, filed an appeal before the Appellate Assistant Commissioner, but he also upheld the order of the Income-tax Officer and dismissed the appeal. The assessee then filed an appeal before Income-tax Appellate Tribunal. It was contended before the Tribunal that Brahm Swaroop, Jagannath, Prem Chand, Shiv Dayal Singh, Swaran Singh and Shivdev Singh had been carrying on bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tners may hereinafter along or in partnership with other or others continue and carry on the said business of the dissolved partnership under the same name of M/s. Gurunanak Steel Rolling Mills. It was thus submitted that after dissolution of the firm, the assessee's trading activity had come to an end and the assessee had parted with his rights of goodwill and the amount in question was a capital asset within the meaning of section 2(14) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and it was not a revenue receipt. The Tribunal found favour with the contention raised by the assessee and placing reliance on CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393 (Guj) observed as under: "In view of the aforesaid decision, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brahm Swaroop retired as partner from the firm, M/s. Gurunanak Steel Rolling Mills. The Tribunal has recorded the finding that there was no evidence to show that after June 30, 1965, Brahm Swaroop carried on the business in some other firm by investing the amount which he got as a result of his retiring from the firm, M/s. Gurunanak Steel Rolling Mills. Brahm Swaroop also retired from the firm, M/s. Rama Steel Rolling and General Engineering Works, with effect from March 9, 1968. The Tribunal further found that there was no material to show that the trading activity of Brahm Swaroop after retirement from the firm, M/s. Gurunanak Steel Rolling Mills, on June 30, 1964, continued. There was no evidence to show that after June 30, 1965, Brahm S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of a dissolution of partnership, there is no element of transfer. The transaction is in law an adjustment of the rights of the partners and not relinquishment or even extinguishment of interest of the retiring partner. Where a partner retired from a firm and received Rs. 20,000 as consideration for relinquishment of her interest in the partnership : Held, that there was no material to sustain the submission that the assessee entered into the partnership as part of her trading activity. With the relinquishment of her partnership interest, her source of income was entirely extinguished. The receipt of Rs. 20,000 could not, therefore, be held to be revenue receipt. As no transfer of any capital asset took place within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. B. C. Srinivasa Setty [1981] 128 ITR 294. In the above case, the Supreme Court laid down that goodwill generated in a newly commenced business cannot be described as an "asset" within the terms of section 45 of the Income-tax Act, 1961, and the transfer of goodwill initially generated in a business does not give rise to capital gain for the purpose of income-tax. In the above case, the question before the Supreme Court was "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no capital gains can arise under section 45 of the Income-tax Act, 1961, on the transfer by the assessee-firm of its goodwill to the newly constituted firm ?" While considering the above question, the Supreme Court consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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