TaxTMI 
TaxTMI 
2017 (1) TMI 1731
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....d in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition of Rs. 5,00,000/- as income from undisclosed source u/s 68 of the I.T. Act." 3. The learned Counsel for the assessee made endorsement on the grounds of appeal that he has not interested in prosecuting this matter and hence, the same are dismissed as not pressed. 4. The only serving issue in this appeal of assessee against the order of CIT(A) confirming the addition of funds received by assessee from firm M/s Deccan Enterprises at the time of retirement amounting to Rs. 36,42,860/-. For this assessee has raised three grounds: - "3. On the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in upholding alleged addition of Rs. 36,42,860/- received from Deccan Enterprise at the time of retirement from the said firm. 4. On the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in not accepting the alternative submission (without prejudice) to treat the alleged addition of Rs. 36,42,860/- received at the time of retirement as the income of the firm. 5. On the facts and in the circumstances of the case and in law ....
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....d added to the total income of the assessee. Aggrieved assessee preferred appeal before CIT(A), who also confirmed the action of the AO, but CIT(A) hold that this amount received is in the nature of goodwill and is liable to be taxed as such. 6. For this he observed in Para 6.2 as under: - "6.2 I have perused the facts of the case. I find that the amount has been received by the appellant consequent to her retirement form partnership. Admittedly, there were assets in the partnership and in immovable property, the share of which to appellant had not been received. In such a situation, it is obvious that the amount received is in the nature of goodwill which s liable to be taxed as income of the appellant. The addition made by the A.O. is therefore upheld although invocation of Se.68 of the present facts is not justified." Aggrieved, now assessee is in second appeal before Tribunal. 7. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee along with her other family members Shri Rajesh Sampath and Miss Rashmi Sampath were partners in the firm M/s Deccan Enterprises Bangalore and vide retirement deed dated 20-02-2....
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....the case of CIT V/s. 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." 8. Further, the reliance placed by the learned Counsel for the assessee on judgment of Hon'ble Bombay High Court in the case of Prashant S. Joshi (supra), Hon'ble Bombay High Court held has 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 i....
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....ent. The debts and liabilities have to be deducted from the value of the partnership assets and it is only in the surplus that the retiring partner is entitled to claim a share. 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. " 15. 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/s. 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/s. 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....