TMI Blog2022 (6) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... Neither does the Arbitration Award or Consent Terms anywhere specify that the sum of Rs.28 crores represents the payment to the assessee for her retirement from P.N.Writer Co. As a matter of fact, the basis of the Arbitration Award was never given. As rightly observed by the ld. Commissioner of Income Tax (Appeals) that the retirement of a partner from the firm has to be an evident fact and is not required to be indirectly inferred or to be guessed in substance. The assessee has received a consideration in lieu of a composite bundle of conditions which included giving up her rights and interests in assets which have no connection with her interest in the firm or its assets and also for withdrawal of all suits/legal proceedings filed by her against the other persons and against firms and entities owned or controlled by them. We agree with the ld. Commissioner of Income Tax (Appeals) that it is judicially settled that the special income must be considered in its wider sense. The definition of income is an inclusive one having a wide amplitude. Section 56(1) provides that income of every kind which is not to be excluded from the total income in this Act shall be chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, this new partnership deed was prepared without her consent and she was shown as retired from the said firm without her knowledge. The assessee, therefore, filed various suits against the partners, firm and various entities held by the partnership firm. Ultimately, the assessee was granted arbitration award of ₹.28,00,00,000/- on 25.09.2009 by the Arbitrator appointed by the Hon'ble Supreme Court as per mutually agreed Consent Terms for relinquishment of all her rights and benefits in the firm and for withdrawal of all claims against the partners, firm and entities held by partners. The arbitration award, however, made no mention of whether the assessee was actually retired from the firm in 1997. 4. During the course of assessment proceedings, the assessee was asked to explain on what basis the arbitration award of ₹.28,00,00,000/- was granted in her favour. The assessee submitted that arbitration award was granted to her in terms of consent terms signed by her and partners of M/s P.N. Writer Company. Copy of the Consent Terms was also submitted. On perusal of the Consent Terms, the AO observed the following: (i) The Consent Terms did not spea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tner of M/s.P.N.Writer Co., which has been scanned and reproduced at pages 13 to 16 of the assessment order. In his statement, Shri Denzil Dsouza had stated that the arbitration amount of ₹.28 crores was not an amount paid to retiring partner as she was already given her share as per the family arrangement earlier. That there was no balance available in her capital account and there was no accumulated profit in the firm. That the amount of crores was given for relinquishing of rights, claims and demands of any nature whatsoever, against the firm and partners. That there was no basis for determining the amount of ₹.28 crores between the assessee and partners of M/s P.N. Writer Co., but the amount was settled at ₹. 28 crores for relinquishment of all the rights, claims and demand and withdrawing all court cases against partners and partnership firm and entities of partners. The Assessing Officer also observed that there was no positive balance of the assessee in her capital account with M/s. P.N.Writer Co. and the question of the balance in her capital account being returned back to her did not arise. There were also no accumulated profits of the firm to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee wrote a letter to the Registrar of Firm on 17.09.2009 intimating that earlier she had caused a notice dated 31.07.2006 to desist from registering any form or deeds in connection with M/s P.N. Writer Co and now she was withdrawing the said notice and that she had no objection to the Registrar for taking on record any Forms and Deeds in respect of M/s P.N. Writer Co. The Assessing Officer observed that this was thus a withdrawal of intimation of notice dated 31.07.2006 and not any agreement submitted for retirement on the basis of which the assessee s name can be struck off in the records of the Registrar as a partner of M/s P.N. Writer Co. That even after this, her name continued to be a partner in M/s P.N. Writer Co in the records of Registrar of Partnership Firm. 10. Considering all the facts and circumstances of the matter, the Assessing Officer was of the view that the Arbitration Award was not just for retirement of the assessee from the firm as the Consent Terms stipulated that certain assets held in the name of the assessee and her husband were to be tranferred in favour of the partners of M/s P.N, Writer Co. That the Arbitration Award also included considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has received an arbitration award for Rs.28 crores, upon relinquishment of her rights in the partnership of M/s. P. N. Writer Co. Here it may be gainful to recount the brief history of the case which leads to the arbitration ward. The assessee was a partner in M/s P.N.Writer Co. A fresh partnership deed was executed in 1997 wherein the name of the assessee was excluded from the partnership firm. However, as claimed by the assessee, this new partnership deed was prepared without her consent and she was shown as retired from the said firm without her knowledge. The assessee, therefore, filed various suits against the partners, firm and various entities held by the partnership firm. Ultimately, the assessee was granted arbitration award of Rs.28,00,00,000/- on 25.09.2009 by the Arbitrator appointed by the Hon'ble Supreme Court as per mutually agreed Consent Terms for relinquishment of all her rights and benefits in the firm and for withdrawal of all claims against the partners, firm and entities held by partners, The arbitration award, however, made no mention of whether the assessee was actually retired from the firm in 1997. 21. In this regard, it may also be gainf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and her husband who had nothing to do with the said firm in any capacity are to execute all necessary documents to facilitate transfer of properties (listed at a. to f. under para 9 of Consent Terms) presently standing in their names either to the other partners of the firm and/or to persons nominated by them. The ld. Commissioner of Income Tax (Appeals) has further found that this property and assets included the following : i. 55 equity shares of Rs.1,000 each fully paid up in Ocean air Transport and Investment Company Pvt. Ltd. held in the name of the appellant which has no connection with her interest in the firm or the assets of the firm. ii. 2001 equity shares of Rs. 1,000 each fully paid up in JOSCO International Shipping Agency Pvt. Ltd. held in the name of Mr. Etienne Pinto, husband of the appellant, which has no connection with her interest in the firm or the assets of the firm. 23. From the above, we agree with the ld. Commissioner of Income Tax (Appeals) that when the arbitration award was given in consideration of the assessee giving certain rights and interests in assets which included rights and interests in assets which have not even a remote conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 28(iv) cannot be invoked. However, the ld. Commissioner of Income Tax. (Appeals) is very correct in holding that the same is taxable u/s. 56(1) as income from other sources. The fact remains that the assessee has received benefit of Arbitration Award for conditions, which included giving up her rights and interests in assets which have no connection with her interest in the firm or its assets and also for withdrawal of all suits/legal proceedings filed by her against the respondents (other partners) and against firms and entities owned or controlled by them. This should also be viewed in light of the fact that there is no positive balance of her in the partnership account. 26. Hence, we agree with the ld. Commissioner of Income Tax (Appeals) that it is judicially settled that the special income must be considered in its wider sense. The definition of income is an inclusive one having a wide amplitude. Section 56(1) provides that income of every kind which is not to be excluded from the total income in this Act shall be chargeable to tax income under the head income from other sources if it is not chargeable to income tax under any of the head as specified in section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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