TaxTMI 
TaxTMI 
2013 (10) TMI 519
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....ssee was running a hotel with bar by name "Hotel Zeilo" in a place called Kolencherry as its proprietor. On 18-04-2006, the proprietary business was sold to a partnership firm, in which the assessee held 10% share. The Department carried out search and seizure operations u/s. 132 of the Act in the hands of the assessee on 27-03-2007, as part of the search and seizure operations conducted in the T.C. Mani Group. The AO completed the assessment for the year under consideration u/s. 143(3) of the Act on 23-12-2008 by determining the total income at Rs.57,58,774/-. Subsequently, the Assessing Officer reopened the assessment by issuing notice u/s. 148 of the Act on 21-03-2011 and completed it on 17-11-2011 by determining the total income at Rs.74,24,730/-. The assessee had received a sum of Rs. 24.00 lakhs towards "good will" on sale of his business to the partnership firm and declared the same under the head "Long term capital gain" and thus claimed concessional rate of tax thereon. The AO, however, treated the same as revenue receipt and subject it to tax at normal rates. The assessee had also received a sum of Rs.18.00 lakhs as compensation towards the bar licence fee paid by him in ....
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....see has contended that the AO has issued the notice for reopening of the assessment on mere change of opinion. 8. The assessee has filed a copy of the original assessment order and we have perused it. We notice that the said assessment order is a short one and further, we do not find any discussion about the good will amount of Rs.24.00 lakhs in the body of the assessment order. We notice that the assessing Officer has included the same while computing the total income of the assessee. It was not shown to us that the assessing officer did make any enquiry about the same during the course of assessment proceeding and was satisfied with the reply given by the assessee in that regard. In the absence of any discussion in the assessment order and also in the absence of any enquiry relating thereto, in our view, it cannot be said that the Assessing Officer had formed an opinion with regard to the assessment of goodwill. In that case, in our view, it cannot be said that the view entertained by the Assessing Officer that the goodwill amount has to be assessed as revenue receipt was on account of mere change of opinion. 9. We have already noticed that the assessment was re-opened on two r....
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....n this issue. 14. We have heard the rival contentions on this issue. We notice that the assessee did not transfer his proprietary concern as a going concern along with all its assets and liabilities. The compensation received by the assessee for transferring his proprietary business was split into specific heads, viz., amount received towards transfer of land and building, amount received towards good will and the amount received towards bar licence fee paid in advance. Hence, the view entertained by the AO that the proprietary concern did not disclose "good will" as an asset in its Balance sheet may not be relevant in this case. The view entertained by the AO that the conversion of proprietary business into a firm is not transfer within the meaning of sec. 2(47) of the Act also does not appear to be a correct legal proposition. Though the AO states that the partnership firm (purchaser) did not show the amount of Rs.24.00 lakhs as good will, yet we find that the AO did not make any enquiry in that regard with the partnership firm. Generally, the nature of payment could be determined by examining the agreement entered between two parties. In the instant case, there is no discussion....
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....ve said amount of Rs.24.00 lakhs, under an agreement, as compensation for not carrying out any activity in relation to any business. The tax authorities have not proved that there existed any such agreement. On the contrary, the assessee has continued to carry on the very same business as one of the partners of the partnership firm. Hence, the question of not carrying on any activity in relation to any business does not arise at all. 18. In view of the foregoing discussions, in our view, there is no reason to suspect the claim of the assessee that he received the amount of Rs.24.00 lakhs towards good will. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to treat the above said amount as good will only. 19. Now we shall take up the appeal filed by the revenue, wherein the revenue is assailing the decision of Ld CIT(A) in deleting the addition of Rs.18.00 lakhs relating to Bar licence fee. According to the assessee, the annual bar licence fee was Rs.18.00 lakhs and the same is required to be paid to the Excise department before the commencement of the financial year. Accordingly, the assessee paid the amount of Rs.18.00 lakhs for the financial year ....