2021 (4) TMI 838 - AAR - GST

Partnership firm withdraws GST goodwill clarification application without authority observations.

The application seeking clarification on whether the goodwill paid to retiring partners is subject to GST was withdrawn by the applicant partnership firm. ... Advance ruling - withdrawal of application - applicability of GST on goodwill - supply in the course or furtherance of business - supplier and recipient liability under CGSTWithdrawal of application - advance ruling - applicability of GST on goodwill - Permissibility of the applicant's withdrawal of the advance ruling application and consequent disposal without adjudication on the merits of GST liability of goodwill. - HELD THAT: - The Authority recorded that the applicant sought an advance ruling on whether amounts characterized as goodwill paid to retiring partners were liable to GST. The application did not furnish necessary particulars and accounts showing how goodwill was computed despite repeated opportunities and hearings. The applicant subsequently requested withdrawal of the application, citing unavailability of their consultant. Given the absence of requisite financial details necessary to decide the question and the applicant's expressed desire to withdraw, the Authority allowed withdrawal. The Authority expressly refrained from expressing any view or observation on the admissibility of the application under Section 97(2) or on the applicability of GST to the goodwill payment, noting that the issue could not be decided on the materials before it. [Paras 7, 8]Application for advance ruling disposed of as withdrawn; no observations or rulings made on the GST liability of the goodwill or on admissibility under the Act.Final Conclusion: The Authority permitted withdrawal of the applicant's advance ruling petition and disposed it as withdrawn without deciding or commenting on whether the goodwill paid to retiring partners is liable to GST. Issues Involved:1. Whether the goodwill paid to the partners at the time of retirement is liable to be taxed under the GST Act.Issue-wise Detailed Analysis:1. Goodwill Paid to Retiring Partners and GST Liability:- Applicant’s Submission:The applicant, a partnership firm, sought clarification on whether the goodwill paid to retiring partners is subject to GST. They argued that the goodwill amounting to Rs. 1,15,04,000/- paid to the retiring partners cannot be considered a 'supply' under Section 7 of the CGST Act, as it does not constitute a transaction 'in the course of or for the furtherance of business.' They further contended that goodwill is not listed in any GST Act schedules and is an intangible asset eligible for depreciation under the Income Tax Act, but not an 'asset' as per section 45 of the IT Act, 1961. They cited the case of CIT vs. R. Lingamallu Rajkumar [247 ITR 801] to support their view that the amount paid upon retirement does not involve a transfer within the meaning of section 2(47) and is not chargeable to income tax.- Jurisdictional Authorities' Comments:The State Jurisdictional officer confirmed no pending adjudication or demand against the applicant. The Centre Jurisdictional authority commented that goodwill, an intangible asset, is paid to retiring partners for giving up their rights in the firm's existing goodwill and fixed assets. They stated that as per Section 2(52) and Section 2(102) of the CGST Act, 2017, goodwill falls under the definition of 'goods' and 'services' respectively. Section 7(a) of the CGST Act includes such transactions as taxable supplies. The Centre authority concluded that the goodwill amount is a taxable supply under CGST Act, and the tax should be paid by the retiring partners, not the continuing partners.- Hearing and Submission:The applicant appeared for hearings and submitted various documents, including partnership deeds, retirement deeds, and proof of payment to retiring partners. They reiterated their stance that the goodwill payment is not taxable under GST and requested further hearings to submit additional documents. However, due to the COVID-19 pandemic and the unavailability of their consultant, the applicant requested to withdraw the application.Ruling:The authority permitted the withdrawal of the application without offering any observations or comments on the admissibility of the application under Section 97(2) of the TNGST/CGST Act 2017 and the applicability of GST on the 'Goodwill.'Conclusion:The application filed by the applicant seeking advance ruling was disposed of as withdrawn.