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2019 (3) TMI 1292
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....ities to the assessee which resulted into addition on account of unexplained credit." (ii) "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law by confirming only Rs. 8,08,60,000/- out of addition on two grounds totaling to Rs. 22,14,63,126/- made by the Assessing Officer on account of amount received and/or receivable from M/s Blue Circle Infratech even though the assessee had failed to produce any supporting documentation or confirmation as evidence that could support that these are capital receipts/" (iii) "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law by confirming only Rs. 8,08,60,000/- out of addition on two grounds totaling to Rs. 22,14,63,126/- made by the Assessing Officer on account of amount received and/or receivable from M/s Blue Circle Infratech without appreciating the facts that whatever assessee had received through capital account and as advance was over and above the share of profit and capital introduced." (iv) "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law by confirming only Rs. 8,08,60,000/- ....
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....e contested. 3.2 The learned CIT (A) erred in not deciding specifically Ground No-4 in which the appellant had challenged the addition of Rs. 9,41,63,126/- which was made without giving the assessee opportunity of being heard. 4 The above Grounds of Appeal are without prejudice to one another. 5 The Appellant craves leave to amend or alter any of the above grounds or to add new grounds during the course of appeal proceedings. 6 The learned CIT (APPEAL) erred in making on addition of Rs. 2,21,93,334/- on account of amount received in A.Y. 2013-14 only on the pretext that the assessee has received the amount from Partnership firm. 7 The learned CIT (A) has calculated the amount received at Rs. 8,08,60,000/- on receipt basis, but factually and actually amount received is of Rs. 4,47,68,663/-." 5. In the form of additional ground, the assessee raised following ground: - (i) "On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in not considering the provisions of section 28(iv) and section 45(4) of the I.T. Act, 1961." 6. Briefly stated the facts are that, the assessee, an individual, is....
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....ii) Rs. 12,73,00,000/- towards brokerage and commission. Total Rs. 19,07,00,000/- 9. As per the Consent Terms, payments of Rs. 3,16,66,666/- towards Amount debited to retiring partner's account for Income Tax payable as on 31.03.2011 and 04.05.2011 and Rs. 3,50,00,000/- made by Cheque/ RTGS totaling to Rs. 6,66,66,666/-. Assessee was issued following Cheques: - Date Cheque No. Amount (Rs.) Bank 26.05.2012 427081 2,21,93,334/- Citibank, Vashi Branch 26.06.2012 427082 2,54,60,000/- Citibank, Vashi Branch 26.07.2012 427085 2,54,60,000/- Citibank, Vashi Branch 26.08.2012 427087 2,54,60,000/- Citibank, Vashi Branch 26.09.2012 427188 2,54,60,000/- Citibank, Vashi Branch These payments were towards brokerage/commission of Rs. 12,73,00,000/-. The assessee was to receive 5 cheques of Rs. 2,54,60,000/- each. However, Rs. 32,66,666/- was deducted from the amount of 1 cheque being difference between Rs. 6,66,66,666/- (-) Rs. 6,34,00,000/-. However, cheque issued for Rs. 2,21,93,334/- only was cleared and the other four cheques got dishonored by the bank. 10. The Learned Assessing Officer while complet....
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....n was made by the Ld. AO. It is submitted that the order regarding Consent Terms was passed on 04.04.2012, and therefore if the income accrued to the assessee on the basis of the Consent Terms, then the amounts received were to be taxed in A.Y 2013-14 and not in A.Y 2012-13. Thus, the entire addition deserves to be deleted on this technical ground alone as these amounts were not received in A.Y. 2012-13. Ld. Counsel submitted that the Ld. CIT(A) in fact has noted that because of the dispute and litigation there was uncertainty about the payments and therefore since the assessee received the payments in A.Y 2013-14 addition in A.Y. 2012-13 is unjustified and be deleted fully. 14. Ld. Counsel for the assessee without prejudice to contentions raised above submitted that the amount of Rs. 1,00,00,000/- as per Consent Terms on account of Goodwill was not liable to Income Tax. He submitted that this amount was paid to the assessee pursuant to the Consent Terms on his retirement from the Firm. Goodwill if any was generated by M/s Blue Circle Infratech over a period of time. Even after retirement of the assessee, the Firm continued its business with three partners and Goodwill remained ....
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....which was added u/s. 68 of the Act by the Assessing Officer, Learned Counsel for the assessee argued that this amount is total of Rs. 4,67,00,000/- credited to the capital account with M/s D'Silva Enterprises, which is the proprietary concern of the assessee and Rs. 4,74,63,126/- credited to capital account of James P. D'Silva, the assessee. It was argued that the amount of Rs. 4,74,63,126/- was received by the assessee on account of share of profits from M/s Blue Circle Infratech. An amount of Rs. 4,78,57,241/- was credited to the assessee's capital account as assessee's share of profit in the firm M/s Blue Circle Infratech. Referring to P&L Account of M/s Blue Circle Infratech for A.Y. 2011-12 which is placed at page 92 of Paper Book it is submitted that M/s Blue Circle Infratech had earned STCG of Rs. 24,67,32,955/- during F.Y.2010-11 relevant to A.Y. 2011-12. Net profit of the firm was Rs. 14,39,47,362/-. The assessee's share of profit was Rs. 4,79,82,454/- and this amount was credited to his capital account. Ld. Counsel for the assessee submitted that this amount is exempt from income tax under section 10(2A) of the Act. In any case this was share of profit....
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....eld that the amount received/receivable by the assessee from M/s Blue Circle Infratech was on revenue nature and was liable to income tax. By passing a rectification order dated 18.01.2016 the Ld.CIT(A) corrected this amount to Rs. 8,33,93,334/-. The Ld CIT(A) also modified the amount of reduction/ deletion to Rs. 14,80,69,792/- in place of Rs. 10,18,40,000/-, vide order dated 18.01.2016, passed under section 154. It was argued that the Ld.CIT(A) was not right in upholding addition to the extent of the amount received by the assessee. It is submitted that the Ld.CIT(A) did not appreciate the fact that the amount was received by the assessee on his retirement from the firm M/s Blue Circle Infratech and amounts received on account of withdrawal of capital and also share of profit in the firm were not liable to tax. It is submitted that any amount received over and above the capital and share of profit was also not liable to tax because there was no transfer of asset and such receipt was also not of revenue nature. It is submitted that this issue is covered in favour of the assessee by the judgment of the Jurisdictional High Court in the case of Prashant S Joshi (supra). The High Cour....
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....ee on retirement from the firm were also not chargeable to tax under section 28(iv) or 28(v). This issue is squarely covered by the judgment of the Jurisdictional High Court in the case of Prashant S Joshi (supra). 23. Ld. DR vehemently supported the orders of the Assessing Officer. 24. We have heard the rival submissions, perused the orders of the authorities below. Assessee is in the business of real estate and film production. Assessee conducting the business as a proprietary concern of M/s. D'Silva Productions and various other concerns including the firm M/s. Blue Circle Infratech (BCI) which was constituted on 6.11.2006 with four partners as explained in earlier paragraphs. As the disputes arouse among the partners the assessee was forced to retire from the firm accordingly the deed for release was signed on 12.05.2011 and the assessee retired from the partnership w.e.f. 04.05.2011. The assessee was not paid his share of capital and profits of the firm as promised in the release deed. Assessee approached the court for appointment of court receiver to protect his interest in the firm. Finally, the assessee and the partners settled the dispute by entering into consent....
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.... Crore Seventy Three Lakh Only) towards Brokerage/Commission shall be payable by the Opponents jointly and severally to the Applicant unconditionally and without any deductions in 5 (Five) equal monthly installments of Rs. 2,54,60,000/- (Rupees Two Crore Fifty Four Lakh Sixty Thousand Only) each, provided however an amount of Rs. 32,66,666/- shall be reduced from the First installment payable to the Applicant, for which the Opponents have already issued 5 postdated cheques, as per the details mentioned here under and the same shall be honored on its presentation on the date mentioned in the cheques: Date Cheque No. Amount (Rs.) Drawn On 26.05.2012 427081 2,21,93,334/- Citibank, Vashi Branch 26.06.2012 427082 2,54,60,000/- Citibank, Vashi Branch 26.07.2012 427085 2,54,60,000/- Citibank, Vashi Branch 26.08.2012 427088 2,54,60,000/- / Citibank, Vashi Branch 26.09.2012 427188 2,54,60,000/- Citibank, Vashi Branch (2) The Opponents who are continuing partners of the firm jointly and severally undertake that the postdated cheques referred to in the sub clauses of Clause No.l, hereinabove would be honored on t....
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....) wherein it was held that when an amount paid to a partner upon retirement after taking accounts and upon deduction of liabilities there is no involvement of an element of transfer within section 2(47) of the Act. While holding so the Hon'ble Jurisdictional High Court observed as under: "13. During the subsistence of a partnership, a partner does not possess an interest in specie in any particular asset of the partnership. During the subsistence of a partnership, a partner has a right to obtain a share in profits. On a dissolution of a partnership or upon retirement, a partner is entitled to a valuation of his share in the net assets of the partnership which remain after meeting the debts and liabilities. An amount paid to a partner upon retirement, after taking accounts and upon deduction of liabilities does not involve an element of transfer within the meaning of Section 2(47). Chief Justice P.N. Bhagwati (as the learned Judge then was) speaking for a Division Bench of the Gujarat High Court in Commissioner of Income Tax, Gujarat v. Mohanbhai Pamabhai3 dealt with the issue in the following observations: - " ...When, therefore, a partner retires from a partn....
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....hare. It is, therefore, not possible to predicate that a particular amount is received by the retiring partner in respect of his share in a particular partnership asset or that a particular amount represents consideration received by the retiring partner for extinguishment of his interest in a particular asset. " 14. The appeal against the judgment of the Gujarat High Court was dismissed by a Bench of three learned Judges of the Supreme Court in Addl. Commissioner of Income Tax, Gujarat v. Mohanbhai Pamabhai4. The Supreme Court relied upon its judgment in Sunil Siddharthbhai v. Commissioner of Income Tax, (1985) 156 ITR 509 (S.C.). The Supreme Court reiterated the same principle by relying upon the judgment in Addanki Narayanappa & Anr. v. Bhaskara Krishnappa & Ors. [(1966) SC 1300]. The Supreme Court held that what is envisaged on the retirement of a partner is merely his right to realise his interest and to receive its value. What is realised is the interest which the partner enjoys in the assets during 4 165 ITR 166 the subsistence of the partnership by virtue of his status as a partner and in terms of the partnership agreement. Consequently, what the partner gets upon ....
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....f of the revenue is that there was an earlier decision of this Court in the matter of N.A. Mody v. CIT reported in [1986] 162 ITR 420 and it has not been considered in the decision rendered in the matter of Prashant S. Johsi (supra). 3. In the impugned order, the Tribunal does refer to the decision of this Court in the matter of N.A. Mody (supra) and states that it follows the decision of this Court in the matter of CIT v. Tribhuvandas G. Patel reported in 115 ITR 95 and the same has been reversed by the Apex Court in Tribhuvandas G. Patel v. CIT [1999] 236 ITR 515 (SC). This Court in the matter of Prashant S. Joshi (supra) has also referred to the decision of Tribuvandas G. Patel (supra) rendered by this Court and its reversal by the Apex Court. Moreover, the decision of this Court in the case of Prashant S. Joshi (supra) placed reliance upon the decision of the Supreme Court in the case of CIT v. R. Lingamallu Rajkumar reported in [2001] 247 ITR 801, wherein it has been held that amounts received on retirement by a parnter is not subject to capital gains tax. In the above circumstances, we see no reason to entertain the proposed question of law." 28. Similar view has ....
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....retirement from a firm, does not fall under clause (v) of section 28. In the companion petition, the attention of the Court is also drawn to the circumstances that on the date on which reasons were recorded by the Assessing Officer, the revenue had challenged the order of the CIT(A) before the Tribunal. One of the grounds of appeal is that the assessee had claimed in the Income tax returns that his share of Rs. 50 lacs received from the firm as a capital asset was not exigible to tax. The revenue, therefore, submitted that when the recipient claimed the receipt as capital expenditure, in the hands of the firm, the payment is also to be treated as capital expenditure." 31. As could be seen from the above the Hon'ble Jurisdictional High Court held that payment made to partner in realization of his share in the net value of the assets upon his retirement from the firm, does not fall under clause (v) of section 28 of the Act. It is not in dispute that the assessee retired from BCI by virtue of consent terms entered into among the partners including the assessee which was settled in the court of law as the assessee approached the District Court for appointment of a receiver and t....
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....Thus, we direct the Assessing Officer to delete the additions made towards, goodwill Rs. 1,00,00,000/-, share capital and share of profit of Rs. 9,41,63,126/- and the brokerage/commission of Rs. 12.73 crores and recompute the income for the year under consideration. Grounds raised by the assessee are allowed. 33. Coming to the Revenue's appeal the first ground of appeal is in respect of deletion of addition of Rs. 48,65,000/- made u/s. 68 of the Act. On a perusal of the of the order of the Ld.CIT(A), we notice that out of Rs. 48,65,000/- assessee received only Rs. 11,25,000/- during the assessment year under consideration and the balance amount was received from M/s. Brand Value Communication Ltd., in earlier years. Ld.CIT(A) also observed that the advances were received by the assessee in the course of conducting the business of film production and the details provided shows that these amounts were received as advances and therefore cannot be considered as income. Learned Counsel for the assessee submitted that since the advances to the extent of Rs. 37.40 lakhs was received in Assessment Year 2011-12 the same cannot be considered as unexplained cash credit during the curre....