{"id":7354,"date":"2013-11-28T10:03:08","date_gmt":"2013-11-28T04:33:08","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=7354"},"modified":"2013-11-28T10:03:08","modified_gmt":"2013-11-28T04:33:08","slug":"cit-vs-riyaz-a-sheikh-bombay-high-court-amount-received-by-partner-on-his-retirement-is-not-chargeable-to-tax-as-capital-gains","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/cit-vs-riyaz-a-sheikh-bombay-high-court-amount-received-by-partner-on-his-retirement-is-not-chargeable-to-tax-as-capital-gains\/","title":{"rendered":"CIT vs. Riyaz A. Sheikh (Bombay High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (riyaz_partner_retirement.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nAmount received by partner on his retirement is not chargeable to tax as capital gains<\/strong> <\/p>\n

The assessee, a partner in a firm, received Rs. 66 lakhs over and above his capital contribution on his retirement from the firm. The assessee claimed that the said sum was a capital receipt not chargeable to tax. However, the AO held that the retirement had resulted in a relinquishment of his pre-existing rights in the partnership firm and, therefore, the same was in the nature of capital gain on transfer of goodwill and liable to tax under s. 45 read with s. 2(47)(i) & (ii) of the Act. The CIT(A) and Tribunal (order not available but operative portion is reproduced in Rajnish M Bhandari<\/strong>, attached<\/em>) reversed the AO on the ground that when a partner retires from the firm and receives his share of an amount calculated on the value of the net partnership assets including goodwill of the firm, there is no transfer of interest of the partner in the goodwill, and no part of the amount received is assessable as capital gain u\/s 45 of the Act. It was also held that the decision of the Bombay High Court in Tribhuvandas G Patil<\/strong> 115 ITR 95 followed in N A Mody<\/strong> 162 ITR 420 has been reversed by the Supreme Court in Tribhuvandas G Patel<\/strong> 236 ITR 515 (SC) and that this legal position had been noted in Prashant S Joshi<\/a><\/strong> 324 ITR 154 (Bom). On appeal by the department to the High Court HELD dismissing the appeal:<\/p>\n

The Tribunal has correctly referred to the fact that N.A. Mody<\/strong> 162 ITR 420 (Bom) followed Tribhuvandas G. Patel<\/strong> 115 ITR 95 and that the same has been reversed by the Apex Court in Tribhuvandas G. Patel<\/strong> 263 ITR 515. This Court in Prashant S. Joshi<\/a><\/strong> 324 ITR 154 (Bom) has also referred to the decision of Tribuvandas G. Patel<\/strong> rendered by this Court and its reversal by the Apex Court. Moreover, the decision of this Court in Prashant S. Joshi<\/strong> placed reliance upon the decision of the Supreme Court in CIT v\/s. R. Lingamallu Rajkumar<\/strong> 247 ITR 801 wherein it has been held that amounts received on retirement by a partner is not subject to capital gains tax<\/p><\/blockquote>\n

Note<\/strong>: For the impact of s. 45(4) on retirement of partner\/ dissolution of firm see the Full Bench decision in CIT vs. M\/s Dynamic Enterprises<\/a><\/strong> (Kar)<\/div>\n","protected":false},"excerpt":{"rendered":"


\nAmount received by partner on his retirement is not chargeable to tax as capital gains<\/strong> <\/p>\n

The Tribunal has correctly referred to the fact that N.A. Mody<\/strong> 162 ITR 420 (Bom) followed Tribhuvandas G. Patel<\/strong> 115 ITR 95 and that the same has been reversed by the Apex Court in Tribhuvandas G. Patel<\/strong> 263 ITR 515. This Court in Prashant S. Joshi<\/a><\/strong> 324 ITR 154 (Bom) has also referred to the decision of Tribuvandas G. Patel<\/strong> rendered by this Court and its reversal by the Apex Court. Moreover, the decision of this Court in Prashant S. Joshi<\/strong> placed reliance upon the decision of the Supreme Court in CIT v\/s. R. Lingamallu Rajkumar<\/strong> 247 ITR 801 wherein it has been held that amounts received on retirement by a partner is not subject to capital gains tax<\/p>\n

Read more ›<\/a><\/div>\n

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