AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 606
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....h employment only. Thus the loss of employment is abundantly proved and makes it crystal clear that Rs. 35.00 lacs received by the assessee as compensation on termination of the retainership is capital receipt and nothing else. Thus the addition so made and confirmed on the basis of such incorrect finding deserves to be deleted summarily.'' 2.1 Brief facts of the case are that the return of income for the year 2012-13 was filed by the assessee on 29-03-2013 declaring total income of Rs. 13,80,580/- in the status of individual through E-filing. The case of the assessee was processed u/s 143(1) of the Act on 14-03-2014. Subsequently, the case of the assessee was selected under scrutiny through CASS. Accordingly, the notice was issued on the assessee on 8-08-2013 which was duly served upon the assessee on 16-08-2013. In compliance to notice, the ld. AR of the assessee attended the proceeding and filed the required details before the AO. During the course of assessment proceedings, the assessee had filed a reply dated 23-06-2014 narrating various details as under about the society and the agreement entered into with the society. (i) As per copy of the agreement dated 14-06-200....
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....the receipt of the consultancy fees of Rs. 50,00,000/- during the year. Accordingly, assessee's claim exemption of an amount of Rs. 35,00,000/- out of the total receipt of consultancy fees of Rs. 50,00,000/- treating it Capital Receipt is not allowed and this amount of Rs. 35,00,000/- added to the income of the assessee treating it as revenue receipt in the light of above detailed discussion. Hence this sum of Rs. 35,00,000/- is treated as assessee's income under the head of Income from business and profession and added to the income of the assessee .'' 2.2 In first appeal, the ld. CIT(A) had confirmed the action of the AO by observing as under:- ''I have carefully considered the facts of the case, finding of the AO and submission of the appellant. AO has given valid reasons for treating the receipts of the assessee as Revenue receipts instead of capital receipts in page 8 to 12 of his order. I find force in the reasons given by the AO. The Hon'ble Rajasthan High Court has also awarded the amount as legal frees/ retainership fees. It is seen that appellant received Rs. 50 lacs from this society out of which himself offered Rs. 15 lacs as income for the year under ....
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....rest @ 15% p.a. will be paid from the date of the termination of service/ retainership/'' The lower authorities have denied such claim of the assessee in their respective orders. It reveals from the agreement of the assessee with M/s. Marut Nandan Educational Society that the assessee was duty bound to give preference to the work of the society over his other legal practice and therefore, the compensation clause was inserted in the agreement. It is also noted from the submissions of the ld. AR of the assessee that by virtue of this contract the assessee had been in the employment of the Society as an Advocate since August 2001 and the assessee had been receiving retainership fees till Dec. 2007 and in pursuance to the agreement and continuous increase in the work of the society, the other practice of the assessee got deteriorated. The ld. AR further submitted that subsequently the Society had stopped making payment of the retainership fees to the assessee and after prolonged litigation the dispute was resolved vide compromise dated 15-11-2011 (Pages 3 to 6 Assessee's Paper Book) filed in S.B. Writ Petition No. 9348/2010 tiled as Marut Nandan Educational Society vs. Shri Muni....
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....to such arrangements with international firms of chartered accountants, as the assessee in the present case had done, with the same frequency and regularity with which companies carrying on business take agencies, simultaneously running the risk of such agencies being terminated with the strong possibility of fresh agencies being taken. In a firm of chartered accountant there could be separate sources of professional income such as tax work, audit work, certification work, opinion work as also referred work. Under the arrangement with DHS there was a regular inflow or referred work from DHS through the Calcutta Firm in respect of clients based in Delhi and nearby areas. There is no evidence that the assessee firm had entered into similar arrangements with other international firms of chartered accountants. The arrangements with DHS was a vogue for a fairly long period of time - 13 years - and had required a kind of permanency as a source of income. When that source was unexpectedly terminated, it amounted to the impairment of the profit making structure or apparatus of the assessee firm. It is for that loss of the source of income that the compensation was calculated and paid to th....