TaxTMI 
TaxTMI 
2016 (4) TMI 1004
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Apex Court in the case of Apollo TyresVs CIT 255 ITR 273(SC) by Ld.CIT(A). 3.1 The brief facts of the case are that the assessee company is involved in the business of manufacture of terry towels and weaving of yarn products. The assessee-company has made adjustments to the profit and loss account as per books by adding back inadmissible and deducting admissible items under the Income-tax Act, thereby claimed deduction u/s.10B in respect of Unit-2 (100% ECU) and Unit- 3 (weaving division-100% ECU) amounting to Rs. 49.27,77,765/- and arrived at a loss of Rs. 5,67,51,537/- in the computation statement. Hence the assessee-company filed the Return of Income under the provisions of section 115JB admitting total income of Rs. 56,75,15,374/- and paid tax accordingly. During the course of assessment proceedings, while examining the Balance Sheet of the assesseecompany, as per clause-17, (notes forming part of the balance sheet) it was noticed that the assessee had invested by way of capital in the partnership firm, M/s. SJM Property Developers in which the assessee-company held 99% of interest till 05/03/2009. It is further found that the assessee-company has received from the said par....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claim of the assessee, further details like development agreement copies, retirement deed copies, account copy of the assessee-company in the firm SJM Properties were called for and obtained from the assessee company. On going through the settlement deed dated 0910312009, it was seen that there was an agreement dated 06/02/2007 entered into between SJM Property Developers and MIs Metro Corp for relinquishment of 99% of shares of the assessee-company in the firm, M/s S,JM Property Developers in favour of Metro Corp., a third party (not a partner in MIs SJM Property Developers) for a consideration of Rs. 52 crores. The assessee-company was asked to file a note on this. In response, assessee filed letter dated 19/12/2011 enclosing the following documents: i) Copy of property deed purchased on 06/02/2007 for SJM Property Developers for a consideration of Rs. 4 crores. ii) Memorandum of Understanding dated 06/02/2007 between the assessee-company, A.Srinivasan, S.Srinivasan, referred to as first party of this agreement and another firm MIs Metro Corp. Bangalore (copy of this agreement is enclosed with the assessment order as Annexure-l). iii) Copy of the retir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elinquished in favour of M/s Metro Corp, Bangalore. As per this agreement dated 06.02.2007, assessee transferred 99% of the share capital in M/s. S.J.M. Property Developers and for that assessee has to receive Rs. 99,000/-. In the same deed in clause-2 on page-4 of the agreement, the assessee company agreed to advance Rs. 25 crores to M/s. S.J.M. Property Developers. As per clause-3 of the agreement, M/s Metro Corp has agreed to compensate the assessee -company a sum of Rs. 27 crores and issued a post dated cheque. There is a Retirement cum Reconstituted partnership deed dated 31.01.2009 wherein shri D.Srinivasan, shri S.Srinivasan and Shri Uday Reddy were retired from the firm and shred M Devaraj was admitted a new partner. There was no revaluation of assets was done but the amount payable was to the outgoing partners shri D.Srinivasan, shri S.Srinivasan and Shri Uday Reddy were determined as Nil, Nil and Rs. 37/- respectively. Shri D.M. Devaraj was admitted to the partnership firm with a contribution of Rs. 500/-. Accordingly, the balance sheet was drawn on 31.01.2009. The assessee company was contributed a sum of Rs. 2/- towards capital. Thus lead o total share capital contribut....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... As a result, the increased value of the land owned by the firm was settled to the extent of the share held by the assessee and this amount was credited to the capital account of the assessee in the books of account of M/s. S.J.M. Property Developers. Consequently, the Deed of Retirement was executed on 06.03.2009 and the account was settled on retirement and firm was continued by the remaining partners. According to the ld.A.R, the amount credited to the capital account of the assessee company being partner of M/s. S.J.M. Property Developers cannot be taxed in terms of sec.45(4) of the Act. 4(a)(i). He relied on the judgement of Kerala High Court in the case of Kunnamkulam Mills reported in 257 ITR 544 wherein it was held that: "what is postulated under section 45(4) of the Income-tax Act, 1961, is that the profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm would be chargeable to tax as the income of the firm. Ownership of property does not change with the change in the constitution of the firm. As long as there is no change in ownership of the firm and its properties, for the simple reason ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reement dated 07.03.2009 between M/s Metro Corp Infrastructure and the assessee to sell Villa in favour of Sharadha Terry Products Ltd., or Facility Agreement dated 07.03.2009 between M/s Metro Corp Infrastructure and assessee in favour of the assessee towards part of consideration of payment or Construction agreement dated 07.03.2009 between M/s Metro Corp Infrastructure and the assessee as part of consideration of payment or Settlement deed dated 09.03.2009 between the assessee and M/s Metro Corp, Deepak Krishnappa and Uday Reddy cannot have any bearing to hold that the amount received by the assessee is taxable amount. According to him on 06.02.2007 on the date of agreement with M/s Metro Corp, it is only a third party. The only relation between the assessee and M/S Metro Corp is that they were to act as developer of the property to be owned by the firm M/s. S.J.M. Property Developers. The said agreement was for a commitment by the developer and had nothing to do with any compensation as narrated by the AO. If he assessee proposed to retire from the partnership, as per the agreement cited, the AO has no basis for taking it as an evidence to hold that the amount received becomes ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated as one common transaction entered through various separate agreements, but the common principle evolving is that it is the benefit derived by the assessee in the field of revenue account for investing Rs. 25 crores in M/s. S.J.M. Property Developers by way of loan and it is to be brought to tax. Further, he submited that the approach of assessee in revaluation of asset is not consistent and when on 31.01.2009 three partners were retired, there is no revaluation of assets. On 06.03.2009, only when the assessee was retired, there is revaluation of assets. He submited that if the provisions of the section 45(4) is not applicable, it should be assessed as an income in terms of Sec.28(iv) or Sec.28(v) or Sec.28(va) of the Act. 5(a)(i) According to DR the Tribunal can give such direction, being the final fact-finding authority in view of the judgement of Supreme Court in the case of Kapur Chand Shrimal Vs. CIT reported in 131 ITR 451(SC) wherein held that: "it is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....had to be upheld. However, the transfer of assets of the partnership to the retiring partners would amount to the transfer of the capital assets in the nature of capital gains and business profits which were chargeable to tax under section 45(4)" . 5(a)(iv) Further, he relied on the judgement of Delhi High Court in the case of Bishan Lal Kanodia Vs. CIT reported in [2002] 257 ITR 449 (Del) wherein it was held that: "whether it was held to be a case of dissolution of the partnership or of retirement, having regard to the provisions contained in section 47(ii) of the Act, as it stood prior to 1988, the assessee was entitled to the benefit thereof only with respect to the assets, he derived from the partnership firm and not to the excess amount. The excess amount was liable to tax as capital gains". 6.1 We have heard both the parties and carefully gone through the orders of the lower authorities and perused the Paper Book filed by the assesee before us including following documents : S.No. Date Particulars 1 01.02.2007 Partnership deed dated 01/02/2007 of M/s. S.J.M. Property Developers between Sharadha Terry Products Ltd, D.Srinivasan, S. Srinivasan D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of or acquiring shares in, a cooperative society, company or other AOP or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.' Explanation : For the purposes of sub-cls. (v) and (vi), "immovable property" shall have the same meaning as in cl. (d) of s. 269UA.' 6.2.2 Section 2(14) defines Capital asset, as meaning "property" of any kind held by the assessee, whether or not connected with his business or profession. The above exhaustive definition is subject to the following exclusions like stock-in-trade, consumable stores or raw material held for the purpose of business or profession, personal effects, agricultural land in India, certain gold bonds, special bearer bonds and gold deposit bonds. The share or interest of a partner in the partnership and its assets ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. At that time when the partner transfers his personal asset to the partnership firm, there can be no reckoning of the liabilities and losses which the firm may suffer in the years to come. All that lies within the womb of the future. It is impossible to conceive of evaluating the consideration acquired by the partner when he brings his personal asset into the partnership firm when neither can the date of dissolution or retirement be envisaged nor can there be any ascertainment of liabilities and prior charges which may not have even arisen yet. Therefore, the consideration which a partner acquires on making over his personal asset to the firm as his contribution to its capital cannot fall within the terms of s. 48 of the Act. And as that provision is fundamental to the computation machinery incorporated in the scheme relating to the determination of the charge provided in s. 45, such a case must be regarded as falling outside the scope of capital gains taxation altogether. In coming to the above conclusion the Hon'ble Court relied on the decision of the Hon'ble Supreme Court in Addanki Narayanappa v. Bhaskara Krishnappa AIR 1966 SC 1300. The Hon'ble Supreme Court in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the, of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges." 6.2.4 Parliament with the avowed object of blocking this escape route for avoiding capital gains tax by the Finance Act, 1987, introduced sub-s. (3) to s. 45 w.e.f. 1st April, 1988. The effect of this was that the profits and gains arising from the transfer of a capital asset by a partner to a firm are chargeable as the partner's income of the previous year in which the transfer took place and the amount recorded in the books of account of the firm, shall be deemed to be the full value of consideration received or accruing as a result of transfer of the capital asset. 6.2.5 In the case of dissolution where partners are allotted capital assets of the firm, it was held that there was no transfer. In Malabar Fisheries Co. v. CIT [1979] 120 ITR 49/ 2 Taxman 409, the Hon'ble Supreme Court has explained the nature of distribution of assets of a partnership on dissolution amongst its partners and as to whether such distribution of assets would constitute transfer within the meaning of s. 2(47) of the IT Act as follows : ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....previous year in which the said transfer takes place and, for the purposes of s. 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer." 6.2.7 Before the introduction of sub-s. (4) to s. 45, there was cl. (ii) of s. 47 which read as under : "Any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons." Section 47 of the Act lays down which are the transactions not regarded as transfer for the purpose of s. 45 of the Act. 6.2.8 The Finance Act, 1987, w.e.f. 1st April, 1988, omitted this clause, the effect of which was that distribution of capital assets on the dissolution of a firm would w.e.f. 1st April, 1988 be regarded as "transfer". Therefore, instead of amending s. 2(47), the amendment was carried out by the Finance Act, 1987, by omitting s. 47(ii), the result of which was that distribution of capital assets on the dissolution of a firm was regarded as "transfer". The effect was that the profits or gains arising from the transfer of a capital asset by a firm to a partner on dissolution....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es was in issue before the Hon'ble Court. The Court dealt with the issue as to what would be the effect of partners of a subsisting partnership distributing assets to partners who retire from the partnership. Does the asset of the partnership, on being allotted to the retired partner/partners fall within the expression "otherwise" ? The Court held that the purpose and object of the Act of 1987 was to bring to charge of tax arising on distribution of capital assets of firms which otherwise was not subject to taxation. If the language of sub-s. (4) is construed to mean that the expression "otherwise" has to partake of the nature of dissolution or deemed dissolution, then the very object of the amendment could be defeated by the partners by distributing the assets to some partners who may retire. The firm then would not be liable to be taxed thus defeating the very purpose of the amending Act. The Court noticed that the position prior to the amendment by introduction of s. 45(4) by the Finance Act, 1987, was that there was no transfer of assets by the firm to the partners on dissolution or transfer of assets to the retiring partner on retirement. The effect was that the profits or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as as to whether on retirement of a partner from a firm whether there is relinquishment of interest in partnership assets amounting to a transfer. The Hon'ble Gujarat High Court held : "The interest of a partner in a partnership is not an interest in any specific item of the partnership property. It is a right to obtain his share of profits from time to time during the subsistence of the partnership and on dissolution of the partnership or on his retirement from the partnership to get the value of his share in the net partnership assets which remain after satisfying the debts and liabilities of the partnership. When therefore a partner retires from a partnership and the amount of his share in the net partnership assets after deduction of liabilities and prior charges is determined on taking accounts on the footing of notional sale of the partnership assets and given to him, what he receives is his share in the partnership and not any consideration for transfer of his interest in the partnership to the continuing partners. His share in the partnership is worked out by taking accounts in the manner prescribed in the relevant provisions of the partnership law and it is th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... G. Patel (supra): "A couple of things emerge clearly from the aforesaid passages. In the first place, a retiring partner while going out and while receiving what is due to him in respect of his share, may assign his interest by a deed or he may instead of assigning his interest, take the amount due to him from the firm and give a receipt for the money and acknowledge that he had no more claim on his co-partners. The former type of transaction will be regarded as sale or release or assignment of his interest by a deed attracting stamp duty while the latter type of transaction would not. In other words, it is clear, the retirement of a partner can take either of two forms, and apart from the question of stamp duty, with which we are not concerned, the question whether the transaction would amount to an assignment or release of his interest in favour of the continuing partners or not would depend upon what particular mode of retirement is employed and as indicated earlier, if instead of quantifying his share by taking accounts on the footing of notional sale, parties agree to pay a lump sum in consideration of the retiring partner assigning or relinquishing his share or righ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or not on the principle laid down by the Hon'ble Bombay High Court in the case of N.A. Modi (supra). 6.2.19 In the case of Tribhuvandas G. Patel (supra), the assessee was a partner in the firm of KEW. The assessee had served on the other two partners a notice of dissolution of the firm w.e.f. 31st Dec., 1960, which was not accepted by the other partners. The assessee, therefore, filed a suit for dissolution and accounts, but, ultimately, the disputes between the parties were amicably settled out of Court and under a deed dt. 19th Jan., 1962, the assessee retired from the firm w.e.f. 31st Aug., 1961, and the remaining partners continued to carry on the business of the firm. On the occasion of such retirement, the assessee was paid : (1) Rs. 1 lakh as his share of profits of the firm for the broken period ended 31st Aug., 1961, (2) Rs. 50,000 as his share of the value of the goodwill, and (3) Rs. 4,77,941 as his share in the remaining assets of the firm. The issue relevant for our purpose is the liability of the sum of Rs. 4,77,941 or any part thereof to capital gains tax. The Hon'ble Court took up for consideration as to what is the real nature of the transaction w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Kumar Engineering Works constituted up to 31st Aug., 1961, as the entire business as a going concern together with all its assets, liabilities and goodwill, benefits of trade name, tenancy rights, import licences and/or quota rights ..... And this indenture further witnesseth that in consideration of the premises aforesaid they the continuing partners do and each of them doth hereby release the retiring partner and the retiring partner doth hereby release the continuing partners and each of them from all covenants, agreements, matters and things in the here before recited partnership dated, the 8th Jan., 1951, and the supplementary agreement dt. 24th Aug., 1957, contained and in further pursuance of the said agreement and in consideration of the premises aforesaid and without making any further payment of any amount to him the retiring partner as beneficial owner doth hereby assign and release upto the continuing partners and each of them all that his right, title, interest and undivided half share in the said partnership firm and all his share and interest on the said pieces of land and premises, structures and buildings standing thereon ....... and machinery, plant, eq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....% of the Share Capital in the Firm M/s S J M Property Developers, shaLt surrender to the Party of the Second Part the entire 98% of Its holding, In the Capital of S J M Property Devetoper5, being the Capital / contributed by them, amounting to Rs. 99,000. 2. The Party of the First Part holding 99% of Share in the Partnership has agreed to advance a Loan of Rs. 25, 00,00,000 (Rs. twenty Five Crores) to M/s S J M Property Developers. This amount will be reimbursed by the firm M/s SJM Property Developers out of the advance receipts bf the sale proceeds. in case there is a shortfall in the re-payment such shortfall shall be paid by the party of the second part .to MIs S J M Developers for repayment of the Loan at the* time of relinquishment of share of 99%of the parties of the First Part along with the original capital contributed by the party of the first part Rs. 99,000 (Rs ninety nine thousand). For ensuring and securing the aforeald repayments of the amounts to the Parties of the First Part, the Party of the Second Pasrt shall issue_post dated cheques for the requisite amount, from Vijaya Bank, Jatahatti Branch, Bangatore. The Party of the Second Part shall also issue a le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive purchasers of the sites in the layout to be formed on the Schedule Property to the extent of 70% of the total the first stage provided that the payments received from the Prospective purchasers for sale of the sites In respect of the 70% sital area are credited to the account of SJM Property Developers on a pro-rata basis from time to time. As far as the balance_30%: of the total sital area Is concerned, they will come forward either Individually or collectively to register the deeds of absolute sale and conveyance for and on behalf of the aforesaid firm, in favour of prospective purchasers of the sites in the Layout to be formed on the Schedule Property on thé receipt of the entire - consideration due from the PARTY OF THE SECOND PART under this agreement. 7. The Parties of the First Part and Second Part agree that they shall have the right to enforce specific Performance of this Agreement and the parties are bound by this Memorandum of Agreement. 8. It is hereby agreed by both the parties that a separate retirement deed shall be prepared on the date of retirement of the party of the first part. The terms of such retirement deed shall be in line with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....99] 236 ITR 515, wherein their Lordships held that any sum received by the assessee as his share of value of goodwill is not assessable as capital gains, wherein followed the decision in CIT v. B.C. Srinivas Setty [1981] 128 ITR 294(SC) and that even where a partner retires and some amount is paid to him towards his share in the assets, it should be treated as falling under clause (ii) of section 47 and accordingly, cannot be assessed as capital gains. In the subsequent decision in CIT v. R. Lingmallu Raghukumar [2001] 247 ITR 801(SC), their Lordships held that when a partner retires from a firm and the amount of his share in the partnership assets after deduction of liabilities and prior charges is determined on taking accounts in the manner prescribed by the partnership law, there is no element of transfer of interest in the partnership assets by the retired partner to the continuing partners and the amount received by the retiring partner is not capital gain under section 45 of the Income-tax Act, 1961. In this view of the matter, we do not find any substance in the argument of the D.R. 6.9 It is worthwhile to mention herein that the Tribunal ,Hyderabad Bench in case of Smt.G....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 18-1-2005 expressed his intention of retiring from the partnership. On the basis of mutual agreement between the partners the assessee was allowed to retire from the partnership w.e.f. 20-4-2005 by virtue of a deed of retirement executed on 20- 4-2005 and the other partners continued to carry on the partnership business. As per the terms of the deed of retirement, the assessee was to be paid a lump sum amount of Rs. 1,25,00,000/-. The ITA no.l2oo of 2010 Shri N. Prasad ,Executive Chairman, Matrix Laboratories Limited. Relevant clause of the deed of retirement is extracted hereunder for convenience: "it is agreed between the parties a that after taking into account the capital investment made by the retiring partner, the goodwill of the partnership business with regard to the immovable properties purchased by the partnership firm and efforts made and time given by the retiring partner of the partnership business, the party of first part is entitled to receive a sum of Rs. 1,25,00,000/- ( Rupees one crore twenty five lakhs only) from the continuing partners towards full and final settlement and payment of his shares, right, title and interest and the claims of the partner....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amount of Rs. 1,25,000 from the partnership firm towards his share in the partnership. The partnership firm did not transfer any capital asset to the assessee to the extent by which the firm ceased to have any right in the property. In the present case, according to the Assessing Officer there is transfer of goodwifi. The ITAT, Hyderabad Bench in case of Durdana Khatoon vs. ITO (supra) held that when a partner receives her/his share in the assets of the partnership firm or when hreceives anything in excess of her/his share in the assets of the partnership firm and even in a case a partner receives a share of profit either in case of retirement or in case of dissolution, the same cannot be brought to tax in view of the decision of Hon'ble Supreme Court in case Tribhuvan Das G. Patel vs. CIT (236 1TR 515) and in case of CIT vs. R. Lingamallu Raghu Kumar (supra). While doing so, the Tribunal, Hyderabad Bench also held that in view of the decisions of Hon'ble Supreme Court, judgments of Hon'ble Delhi High Court and Hon'ble Bombay High Court (supra) are not applicable. The Hon'ble jurisdictional High Court in case of Chalasani Venkateswara Rao vs. ITO (supra) held as under: "2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct, 1961 excluded these N.Prasad, Hyderabad vs Depaitnent Of Income Tax distribution of capital assets on the dlssution of a firm or other association of persons or body of individuals (not being a company or a co- operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purpose of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer." Thus it is clear that the legislature, even though it was aware of the above decisions, did not choose to amend the law by making the partner liable when it amended the I.T Act,1961 by introducing clause (4) to s45 by the Finance Act,1987 w.e.f 14.1988 and made only the firm liable. Therefore the contention of the assessee has to be accepted and that of the Revenue is liable to be rejected. 16. A careful reading of the aforesaid decision of Hon'ble Jurisdictional High Court would make it clear that they approved the view of their earlier decision holding that the amount received by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....suggested by the Assessing Officer. Therefore, considering totality of facts and the circumstances of the case and applying the ratio laid down by the Hon'ble jurisdictional High Court in the case of Chalasani Venkatesara Rao (supra), which is binding on us, we are of the view that the order passed by the CiT (A) needs to be upheld. Accordingly, we dismiss the grounds raised by the department. 18. In the result, the appeal filed by the department stands dismissed." 6.9.2. Further, Bombay High Court in the case of CIT Vs.Riyaz A.Shikh reported in ITA No.1969 of 2011 dated 26.02.2013, there was a question before Bombay High Court whether Tribunal was correct in reversing this decision of CIT(A) and deleting the additions made by the AO towards long term capital gains on transfer of goodwill. Bombay High Court observed that Tribunal while holding that amount received by the partner on his retirement from partnership firm are exempt from capital gains tax, relied upon the decision in the case of Prashant S.Joshi Vs. ITO. In the case of N.A.Mody Vs. CIT(162 ITR 420) has followed the decision of the Tribhuvan Das G.Patel Vs. CIT (115 ITR 95) (Bom.) and the same has been reversed by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of CIT Vs. A. N. Naik Associates And Another reported in [2004] 265 ITR 346 (Bom), in our opinion it cannot be applied to the facts of the present case. In that case, the asset of the partnership firm was transferred to retiring partner by way of Deed of Retirement, it is based on this document and subsequent deeds of retirement of partnership that the order of assessment was made holding that the assessees are liable for tax on capital gains, in that context the Bombay High Court held that when the assets of the partnership is transferred to retiring partner, the partnership which is assessable to tax ceased to have a right or it is a right in the properties stand extinguished in favour of the partner to whom it is transferred. 6.9.5 Regarding the applicability of provisions of the section 28(iv), there is no receipt of any value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession by present assessee. It is only by retirement from the partnership firm, the assessee received the impugned amount. 6.9.6 Regarding the application of Sec.28(v) as discussed in earlier, what the assessee has received on retirement ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ital contributions made by them, along with their profit shares. When the capital accounts are settled by paying the amounts to retiring partners, the share of the profits also have been credited. Settlement of the capital accounts takes care of such things. Moreover, even if there is an element of profit, for the sake of argument, such profits are not taxable in the hands of the partners by virtue of provisions of Section 10(2A) of Income-tax Act, 1961. (Para 10) The additional payments made to the retiring partners were not in the nature of any profit or income within the meaning of Section 28(va) and were non- taxable capital receipts. The CIT (A) was justified right in holding that the amounts are not taxable. (Para 12, 13) Being so, in our opinion additional payment even if made to the retiring partner in excess of capital account is not in nature of any profit or income within the meaning of sec.28(va) of the Act and it cannot be brought to tax as business income. 7. The other contention of the ld.D.R is that the amount received by the assessee at Rs. 26,99,00,000/- is quantified vide Memorandum of Agreement on 06.02.2007 between the assessee,D.Srinivasan, S.Sr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exemption u/s.10A has to be allowed without setting off brought forward unabsorbed losses or depreciation from earlier assessment year or current assessment year either in the case of non STP or in the case of from some other undertakings, being so depreciation loss of other units cannot be set off against the income fo the assessee from the export purpose. Thus, this ground of the assessee is allowed accordingly. 10. The last ground is that the CIT(A) erred in sustaining the reduction of Rs. 4,37,168/- being the miscellaneous receipts from the eligible profits in the computation of deduction u/s.10B of the Act without assigning proper reasons and justification. 11. The facts of the case are that the assessee's claim that the said amount of receipts were earned in the course of carrying on the business of 100% EOU i.e receipts from the sale of scrap will also qualify for deduction is unacceptable. Sec.10B(4) clearly states that profits derived from export of articles should alone be considered. Needless to say that the income attributable to an activity is one step removed from the income derived. We are of the view that Ld.CIT(A) placing reliance on Supreme Court's decision....