Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2015 (8) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (8) TMI 853 - HC - Income TaxRetirement benefit on settlement of account with the partnership firm - whether was taxable under Section 10(3) in the hands of Partner? - ITAT held that the amount received by the Appellant is not on account of goodwill and set aside the order of the CIT(A) who held the amount not taxable under Section 10(3) - Held that:- The impugned order upsetting the finding of the CIT(A) is on a factually erroneous basis as pointed out herein above and cannot be sustained. The fact that the amount of ₹ 1,75,000/- paid to the Appellant by the firm was in the nature of payment of goodwill is also supported by the fact that the firm considered only the amount of ₹ 1,75,000/- being a part of ₹ 5 lakhs as attributable to Appellant goodwill. This amount was on account of having paid the retiring partners their contribution to the goodwill of the firm. Accordingly, we hold that the amount of ₹ 1,75,000/- paid to Appellant is goodwill. Once we reach a conclusion that the amount of ₹ 1,75,000/- was received by the Appellant in consideration of the goodwill left behind in the firm, then without anything more, the receipt of the above amount cannot be said to be casual for the purposes of Section 10(3) of the Act. In fact, the CIT(A) in his order holds that the amount received by the Appellant being a portion of the goodwill, cannot be said to be casual. The goodwill the firm possesses is inherent in it. It is at the time when the Appellant retired that the same was quantified to enable the firm to exploit the goodwill left behind by the retiring partner. For the purposes of Section 10(3) of the Act applying not only should the receipt qualify as income but it has also to be casual and non-recurring. Therefore, the amount of ₹ 1,75,000/- received by the Appellant not being casual as it was always foreseen and anticipated prior to retirement. It has only been quantified at the time of retirement of the Appellant. Thus, the receipt is not hit by Section 10(3) of the Act - Decided in favour of assessee.
|