2014 (8) TMI 203

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.... In the course of assessment proceedings, the assessing Officer noticed that the assessee firm had created and self-generated assets in the form of goodwill of business to an extent of Rs. 7,59,28,000/- and transferred it to the current accounts of the four partners proportionately consequent to reconstitution of assessee firm. The assessing authority felt that this good-will is chargeable to tax under the head "capital gains" and accordingly, brought it to tax as "long term capital gains". Similarly, the assessing authority noticed that one of the partners Sri Mahesh G. Shetty had introduced Rs. 40 Lakhs as capital in the appellate firm. On going through the capital account of the partner, the assessing authority found that there was no me....

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....e is no transfer and in view of Circular of CBDT notional transfer cannot be subjected to taxation and therefore an order for deduction of Rs. 7,59,28,000/- was made and accordingly, the appeal was allowed. Aggrieved by the said order, the revenue preferred an appeal to the Tribunal. The Tribunal after reappreciation of the entire material on record held that as is clear from the remand report a sum of Rs. 40,00,000/- was entered in the current account of Mahesh G. Shetty on 31.3.2008 and sources for such introduction are loans taken from three different parties by way of cheque and therefore, Setion 68 of the Act is nto attracted. The Appellate Authority was justified in deleting such addition. Insofar as addition on account of goodwill....

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....et. In the instant case, admittedly the retiring partners took money and walked out of the partnership firm. No asset much less capital asset was transferred in their favour. Therefore, Section 45 is not at all attracted much less Section 45(4) of the Act. Therefore, he submits that the order passed by the authorities cannot be found fault with. 5. From the aforesaid facts and the rival contentions, it is clear that the assets of the partnership was revalued and for the first time they valued the goodwill at Rs. 7,59,28,000/-. Thereafter it was credited to the four partners in accordance with the profit sharing ratio. Two of the partners retired. They have been paid actual amount due to them in the books of the partnership firm. The good....