TaxTMI 
TaxTMI 
2011 (5) TMI 278
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....ce it is not derived by the assessee from any participation in business activity of the firm." 3. Facts of the case are that the assessee received a sum of Rs. 20,26,444 from M/s. K.S. Aiyar & Co., which was claimed as capital receipt and hence not offered for taxation. The facts leading to the receipt of this sum are that the assessee is widow of Late Shri Mani Arjun Aiyer, who before his death was senior Partner of M/s. K.S. Aiyer & Co. As per partnership deed executed on 9-9-1992, the widow of the deceased partner was entitled to receive specified amount on retirement or death of partner of the firm. As per the terms and conditions of the partnership deed on the death of Shri Mani Arjun Aiyer, his widow or his estate was to be paid at t....
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....ed the matter before the learned CIT(A). It was submitted before the learned CIT(A) that the amount received by the assessee was not related to any business done or loss of profits and it was not recompense for service, past or future and the payment did not bear the character of income. In support of the contention that the amount in question was capital receipt, the assessee relied on the decision of P.H. Divecha v. CIT [1963] 48 ITR 222 (SC). It was also submitted before the learned CIT(A) that the decision in the case of Mrs. Jaya Bhaskaran (supra) squarely applied to the assessee's case as payment made therein was by the same firm M/s. K.S. Aiyer & Co. to the widow of another partner. The ld. CIT(A), after considering the object and pu....
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....nt case with those of Mrs. Jaya Bhaskaran's case (supra) and rightly held that the payments received by the assessee was not capital receipt. 6. On the other hand the learned Counsel for the assessee strongly supported the decision in the case of Mrs. Jaya Bhaskaran (supra). He submitted that the said decision clearly applied to the assessee's case. He further submitted that the object of the payment made to the assessee was an assurance given to the assessee which is same as in the case of Mrs. Jaya Bhaskaran (supra) where the eldest surviving child was to be nominated as partner i.e., it was on the assurance given to the partners to support their legal heirs in future. He further submitted that in the case of P.H. Divecha (supra) also th....
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....when some other partner of the firm died and the compensation was paid by the firm, the Revenue sought to tax the same. The Hon'ble Patna High Court in that case of Mrs. Jaya Bhaskaran (supra) upheld the Tribunal order by holding that the receipt was not taxable in the hands of the widow of the deceased. In holding so, reliance was also placed on the decision in the case of P.H. Divecha (supra) wherein the Hon'ble Supreme Court. In the said case of Mrs. Jaya Bhaskaran (supra), the Tribunal while deciding the issue following the case of P.H. Divecha (supra) has noted that the Hon'ble Supreme Court observed that : "In determining whether this payment amounts to a return for loss of a capital asset or is income, profits or gains liable to inc....
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....rincipal holder of the partnership firm nor had invested any capital nor had rendered any service to the firm. At the same time, it is palpable that it was her deceased husband, who was partner in the firm, on whose death, the firm paid the said amount to the assessee. It is further important to bear in mind that it was not a one-time payment. Rather it continued to be paid by the firm to the assessee over the period as per the terms of the partnership deed. As the payment was towards the recognition of the valued services rendered by the partner during his life time and it was a sort of relief to the distressed family, and that too as per the terms of the partnership deed, it could not be said to have a revenue character in her hands. Ther....