TaxTMI 
TaxTMI 
2019 (2) TMI 457
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....s the following question of law for our consideration: " Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in holding that the order u/s. 263 of the Act passed by the Commissioner of Income Tax is not sustainable?" 3 During the previous year relevant to the Assessment Year 2009-10, the Respondent was a partner in two firms - namely - M/s. Fine Developers and M/s. Mehul Construction Corporation. Both M/s. Fine Developers and M/s. Mehul Construction Corporation individually owned plots of land. During the previous year relevant to the subject Assessment Year, the two partnership firms - i.e. M/s. Fine Developers and M/s. Mehul Construction Corporation revalued their business assets. ....
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....f this Court in CIT v/s. Tribhuvandas G. Patel 115 ITR 95 and the decision of the Tribunal in Sudhakar M. Shetty v/s. Asst. CIT 130 ITD 197 to hold that, not taxing the partner on the retirement compensation, is erroneous and prejudicial to the interest of the Revenue. Besides holding that, the above issue was not examined by the Assessing Officer while passing an Assessment Order dated 26th December, 2011. Thus, the CIT by an order dated 14th June, 2013 held that, the amount received by the Respondent from M/s. Fine Developers and M/s. Mehul Construction Corporation on retirement, is chargeable to tax as capital gains under Section 45 of the Act. This on account of relinquishment by the Respondent's of its rights in the two partnership....
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....ted in law. The impugned order held that, the Assessing Officer while passing the Assessment Order dated 26th December, 2011 had applied his mind to the facts arising in the case and law applicable before concluding that, the amounts received by the Respondent on its retirement from the two firms, is not taxable in its hands. Therefore, the impugned order dated 18th December, 2014 set aside the order dated 14th June, 2013 passed under Section 263 of the Act by the CIT and restored the order dated 26th December, 2011 of the Assessing Officer. 6. Before us, Mr. Kotangle, on behalf of the Revenue submits that, exercise of jurisdiction under Section 263 of the Act by the CIT in the present facts is valid. This, for the reason that, this Cour....
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.... under:" At this stage, it may be noted that in CIT v/s. Tribhuvandas G. Patel [1978] 115 ITR 95, which was decided by a Division Bench of this Court, under a deed of partnership, the assessee retired from the partnership firm and was inter alia paid an amount of Rs. 4,77,941 as his share in the remaining assets of the firm. The Division Bench of this court had held that the transaction would have to be regarded as amounting to a transfer within the meaning of section 2(47) inasmuch as the assessee had assigned, released and relinquished his share in the partnership and its assets in favour of the continuing partners. This part of the judgment was reversed in appeal by the Supreme Court in Tribhuvandas G. Patel v/s. CIT [1999] 236 ITR 515. ....
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....ls with a situation where there is a transfer of a capital asset by way of a distribution of capital assets on the dissolution of a firm or otherwise. Evidently, on the admitted position before the court, there is no transfer of a capital asset by way of a distribution of the capital assets, on a dissolution of the firm or otherwise in the facts of this case. What is to be noted is that even in a situation where subsection (4) of section 45 applies, profits or gains arising from the transfer are chargeable to tax as income of the firm." [emphasis supplied] Thus, the view taken by the Assessing Officer is in accord with the view of this Court in Prashant S. Joshi (supra). 9. We further note the fact that, the CIT in his order dated ....