9911796707
TMI Blog1989 (12) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ile basis. Return in this case was filed on 30-9-1983, declaring net income of Rs. 14,514. It was noted by the learned Income-tax Officer during assessment proceedings that the assessee had retired from the above firm, vide deed executed on 31-12-1982. Copies of arbitration award dated 28-12-1982 and arbitration agreement dated 21-12-1982, were placed on record. The ld. ITO understood, after perusal of those papers, that this was a case of retirement of a partner from the firm and not dissolution of the firm. From the dissolution deed, it was noted by the ld. ITO that party of third part, i.e., the assessee in this case, had retired from the firm leaving the entire assets and liabilities including the goodwill of the firm, trade marks, stock-in-trade, excepting land and building under construction at plot No. B-34, Focal Point, Ludhiana, to the parties of first and second part. The parties of first and second part had taken over the business of the firm as a going concern and all the benefits attached thereto. In fact, the remaining partners constituted themselves into a new firm and continued the same business. The ld. ITO considered that in this case there was a mere reconstituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Singh Atwal [1981] 128 ITR 67 (Cal.). After examining the ratios in those cases, the ld. AAC came to the conclusion that the amount received by the assessee in this case was not liable to capital gains. He thus deleted the inclusion of Rs. 40,000 made by the ld. ITO. 4. Therefore, the present appeal, by the revenue, before us. The ld. Sr. D.R. Sh.D. Chatterjee placed heavy reliance on the assessment order and placed further reliance on the ratios in the following cases :-- (a) A.S. Krishna Setty Sons v. Addl. CIT [1975] 100 ITR 587 (Kar.) ; (b) CIT v. Tribhuvandas G. Patel [1978] 115 ITR 95 (Bom.) ; and (c) CIT v. H. R. Aslot [1978] 115 ITR 255 (Bom.). According to the ld. Sr. D.R., there was a clear transfer of assets from the firm to the outgoing partner and that this being a case of mere reconstituted firm the ld. ITO was justified to include the difference, on account of capital gains and the ld. AAC unjustifiably excluded the said sum. It was also pointed out that the ld. AAC's order was very brief and there was no proper discussion on the facts and issues. 5. On behalf of the assessee, the ld. counsel Sh. Subhash Aggarwal relied upon the ratios and the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred for arbitration, by Sh. Sham Lal. Arbitration agreement was entered into between the concerned parties on 21-12-1982 and the award was actually made on 25-12-1982, as is clear from the copy placed at page 9 of the paperbook. As a result of that arbitration award, the firm got dissolved on 31-12-1982, as is clear from the deed, and the assessee Sh. Suresh Sood retired from the business, leaving the entire assets and liabilities, including the goodwill of the firm, trade marks, and stock-in-trade, and got only land and building under construction at B-34, Focal Point, Ludhiana. Other partners had taken over the business as a going concern, along with other benefits and liabilities. As is clear from pages 11 and 12 of the paperbook, the assessee got, on account of value of the property, he received, an extra amount of Rs. 40,696. It means that the value of the assessee's share was computed and then plot was given to him, whose value was more than the value of the assets, by an amount of Rs. 40,696. According to the ld. ITO, extra amount of Rs. 40,696 was a capital receipt received by the assessee as a result of transfer of his share to the firm and getting the plot in lieu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that when some partners retire from a firm and amount as received by the retiring partners in respect of their shares in the partnership including goodwill, no part of amount received is assessable as capital gains. Of course, there are other authorities also but this ratio, laid down by the Hon'ble Supreme Court, puts at rest the point that the amount received by the retiring partner could not be the subject-matter of capital gains. Similar view is seen to have been taken by the Hon'ble Andhra Pradesh High Court in the case of P.H. Patel and so also in the cases, relied upon by the ld. AAC, and in Smt. Mahinderpal Bhasin's case Bhupinder Singh Atwal's case and N. Palaniappa Gounder's case. So far so good. 12. In all those cases, relied upon by the contesting parties, it is seen that the issue involved was regarding the amount received by the retiring partners in respect of their shares in the partnership. In the view of some High Courts, it was taxable ; whereas in the view of some other High Courts, including the Supreme Court, it could not be subjected to capital gains tax. This issue thus is seen to have been settled by the judgment supra of the Hon'ble Supreme Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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