By Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
2017] 89 taxmann.com 95 (Pune-Trib.)
Smt. Vasumati Prafullachand Sanghavi vs.
DCIT
ITA No. : 161/Pune/2015
A.Y.: 2008-09 Date of Order: 13th December, 2017
FACTS
For the assessment year under consideration,
the assessee filed her return of income declaring therein a total income of Rs.
88,330. The Assessing Officer (AO) issued a notice u/s. 147 of the Act on the
ground that the amount of Rs. 21,52,73,777 received by her on relinquishing her
share in the partnership firm Deepak Foods (DF) has escaped assessment.
During the year under consideration, the
assessee retired as a partner from Deepak Foods and received an amount of Rs.
21,66,52,000. This amount was claimed in the return of income and was accepted
by the AO in the regular assessment as exempt.
The capital balance of the assessee, on the
eve of retirement from the firm, was Rs. 13,78,223. In the return of income,
the assessee furnished a note stating that the credit balance in capital
account of the assessee includes share of Goodwill received from Deepak Foods
on retirement from the firm. While
assessing the total income in reassessment proceedings, the Assessing Officer
(AO), by relying upon the decision of the Pune Tribunal in the case of Shevantibhai
C. Mehta vs. CIT [2004] 4 SOT 94 (Pune) taxed Rs. 21,52,73,777 as income
from long term capital gains. Further,
the AO, alternatively, assessed the amount of Rs. 21,52,73,777 as income from
other sources.
Aggrieved, the assessee preferred an appeal
to CIT(A) where it was contended that the similar addition was made in the
assessment of Smt. Shakuntala S. Sanghavi, the other retiring partner, who also
received identical amount. In her case,
upon completion of the assessment, the CIT in revision proceedings set aside
the order passed by the AO and taxed the amount in an order passed u/s. 263 of
the Act. The Tribunal quashed the revision order of CIT both on facts and on
merits. Consequential order passed by AO u/s. 143(3) r.w.s. 263 was also
quashed and original order restored by the Tribunal in the case of Smt.
Shakuntala S. Sanghavi. The assessee relied on the order of the Tribunal in the
case of Shakuntala S. Sanghavi vs. ACIT [ITA No. 956(Pn) of 2013) relating to
AY 2008-09, order dated 22.3.2014] regarding finality of the issue by the
Tribunal on the taxability of the said receipts.However, the CIT(A) held that
the amounts received by the assessee from Deepak Foods constitute a gift
taxable u/s. 56(2)(vi) of the Act.
Aggrieved, the assessee preferred an appeal
to the Tribunal.
HELD
The Tribunal observed that the ratio of the
decision of Pune Bench of the Tribunal in the case of Smt. Shakuntala S.
Sanghavi (supra) and order of the Tribunal in the case of ITO vs.
Rajnish M. Bhandari [IT Appeal No. 469 (PN) of 2011, dated 17.7.2012] and
the judgment of the Bombay High Court in CIT vs. Riyaz A. Sheikh [2014] 221
Taxman 118 (Bom.) suggest that the receipts of this kind are not to be
taxed under the head `Income from Capital Gains’ as well as under the head
`Income from Other Sources’ in general.
In view of the order of the Tribunal in the case of Smt. Shakuntala S.
Sanghavi, on similar facts, the non-taxability of the said receipt under the
head `Capital Gains’ as well as under the provisions of section 56 of the Act,
i.e. under the head `Income from Other Sources’ has reached finality.
As regards taxability of the said receipt
under the specific provision of section 56(2)(vi) of the Act, the Tribunal
noted that the assessee received
compensation of Rs. 21,66,32,000 from Deepak Foods on her
retirement when she surrendered her right, title, interest in the said
firm. Therefore, the amount of
compensation cannot be said to have been received without consideration. It observed that it is not the case of the
revenue that the assessee continues to be a partner even after receipt of the
consideration and that the assessee has not surrendered the rights of every
kind in the firm.
The Tribunal decided the appeal in favour of
the assessee.
