1978 (1) TMI 20

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....tember 30 each year. Smt. Mahinderpal Bhasin, one of the partners, retired from the firm with effect from October 1, 1967. The remaining two partners continued the business. A deed of retirement was executed on October 1, 1967, under which the assessee was paid her share of the capital and her share of profits up to the date of retirement and also a sum of Rs. 20,000 as consideration for relinquishment of her interest in the partnership firm. On October 3, 1968, Smt. Mahinderpal Bhasin filed a return for the assessment year 1968-69. In it she showed receipt of Rs. 20,000 as capital gains. The ITO held that the sum of Rs. 20,000 received by her as consideration for relinquishment of her interest in the partnership, in law, was a revenue r....

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..... Chunilal Prabhudas & Co. [1970] 76 ITR 566. It held that the sum of Rs. 20,000 was not taxable either as revenue receipt or as capital gains. At the instance of the department, the Tribunal has referred the following questions of law for our opinion: " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of of Rs. 20,000 received by the assessee could not be taxed as revenue receipt ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 20,000 was not liable to tax even as capital gains ?" On the first question, learned counsel for the department relied upon a decision of this court in Gangadhar Baijnath v....

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....he head " Capital gains " is provided under s. 48 onwards where from the full value of the consideration received, the cost of acquisition of the capital asset is deducted. The Tribunal has held that either as a share of the goodwill or as compensation for her relinquishment of the partnership interest the so-called capital asset did not cost anything initially to the assessee. Since no cost of acquisition could be deducted, no capital gains could accrue. As already stated, in support of this view, the Tribunal relied upon the decisions of Delhi, Madras and Calcutta High Courts mentioned above. We are, however, not disposed, to go into that question because the controversy can satisfactorily be resolved from another view-point. As alread....