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2018 (5) TMI 1594
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....ecord, we find that this Tribunal on an identical issue in ITA No. 1357/Kol/2015 for the A.Y 2009-10 vide its order dt. 19-02-2018, copy of the said order is on record, in the case of Amit Kumar Choudhury, where an amount received on account of share of goodwill is held to be not chargeable to tax as capital gain. The Co-ordinate Bench came to such conclusion by following the order dt. 11-12-2015 of another Co-ordinate Bench of this Tribunal in the case of Ajay Kr. Doshi in ITA No. 1866/Kol/2012, wherein similar issue was decided by holding the amount received by assessee therein as a share of goodwill on retirement from the firm is not chargeable to tax under the head capital receipt. Relevant portion of order dt.19-02-2018 is reproduced herein below for better understanding:- "5. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the goodwill of the partnership firm of M/s. Process Chemicals Co. was created during the year under consideration on the basis of valuation report dated 27.10.2008 and the same was credited to the capital account of the assessee to the extent of Rs. 44,25,000/- in the ratio of ....
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....uent decision of the Hyderabad Bench of this Tribunal in the case of ACIT -vs.- N. Prasad [153 ITD 257], wherein the assessee on his retirement as a partner from the partnership firm had received a surplus amount of Rs. 25,00 000/- in addition to his capital account balance. The said amount was brought to tax by the Assessing Officer in the hands of the assessee under the head "capital gains" being the amount received on transfer of goodwill. The ld. CIT(Appeals), however, deleted the addition made by the Assessing Officer on this issue and the decision of the ld. CIT(Appeals) was upheld by the Tribunal holding that there was no transfer of any asset or goodwill by the assessee on his retirement to the partnership firm. For this conclusion, the Tribunal relied on the decision of the Hon'ble Andhra Pradesh High Court in the case of Chalasani Venkateswara Rao -vs.- ITO [349 ITR 423], wherein it was held that the amount received by the assessee as full and final settlement on dissolution of firm could not give rise to any capital gain chargeable to tax as there was no transfer of any capital asset. 6. The ld. counsel for the assessee has also relied in support of the assessee's case....
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....ny individual goodwill. The goodwill belonged to the firm and continued to remain with the firm. As clarified by the ld. Counsel, nothing was charged from the incoming partners by way of goodwill and, thus, there is no question of even indirect realization of the value of goodwill by the assessee from the incoming partner through the firm in a number of cases, referred to above, it has been held that what a partner gets at the time of retirement is nothing but his own share in the assets of the firm. In such a scenario, there cannot be any transfer of an asset and such has been the decision of Hon'ble Supreme Coon in the case of Mohanbhai Pamabhai and Tribhuvandas G. Patel (supra). The fact is that a provision corresponding to sub-section (3) regarding levy of capital gain tax when a partner brings in a capital asset to the firm does not exist on the statute book in case of retirement of the partner and, thus, general provisions of law, namely. that what he takes is his share in the assets of the firm continues to apply with the exception that under sub-section (4), when a capital asset is distributed to the partner on dissolution of the firm or on his retirement at less than t....
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....tion 55(2) of the Act is of no help to the case of the Department in view of the clarification made by the Board. We fail to appreciate how the amount could be assessed in the hands of the partners and that too under the head "Income from other sources. Goodwill is an intangible asset and transfer/surrender of which would attract Section 45 so that the value received would be a capital receipt and assessable if at all only under item 'E' of Section 14. It cannot be treated as a casual receipt and be subjected to tax under Section 56. The argument that even if the income cannot be chargeable u/s. 45, because of the inapplicability of the computation provided u/s. 48, it could still impose tax under the residuary head is thus unacceptable. If the income cannot be taxed u/s. 45, it cannot be taxed at all as has been held in the case of S.G. Mercantile Corporation (P) Ltd. -vs.- CIT [1972] 83 ITR 700 (SC)". 13. As the issue involved in the present case as well as all the material facts relevant thereto are similar to the cases of Shri Amitabh Singh (supra) and Nawshir H. Mirza (supra) decided by the Coordinate benches of this Tribunal, we respectfully follow the decision rend....