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2018 (8) TMI 1926 - AT - Income TaxLong Term Capital Gain - money receipt pursuant to the dissolution of the firm - transfer u/s 2(47) - HELD THAT:- In the arbitration proceedings also both the partners admitted that they were partners. In the concerned award passed, it was clearly mentioned that the assessee was to retire from the said firm in lieu of the consideration to be given to him by Mrs. Vandana Suresh Punwani who was to continue as proprietor of the said firm thereafter. AO’s premise that there was no existence of the partnership firm, is not sustainable. Furthermore, the arbitration award clearly mentions that the amount is being paid to the assessee upon his retirement from the partnership firm. Since the partnership firm consists of two firms which got dissolved upon his retirement so the proceeds have to be considered as sum received pursuant to the dissolution of the partnership firm and/or retirement of the assessee from the partnership firm. The matter has even travelled to the Hon'ble Bombay High Court and the arbitration proceeding has been considered by the Hon'ble Bombay High Court also. Hence, the sum received by the assessee is clearly pursuant to the retirement of the assessee from the firm which cannot be taxed as capital gain. The agreement of acquisition of the development right was also in the name of the firm M/s. Vicky Developers and not in the name of the assessee. Hence, the Assessing Officer’s reference that the same was received by the assessee pursuant to his relinquishment of his right in the development right is not sustainable, as the assessee has no individual right in the said agreement. Hon'ble Bombay High Court in the case of CIT vs. Riyaz A. Sheikh [2013 (12) TMI 248 - BOMBAY HIGH COURT] supports the case of the assessee. In this case, it was held that the amount received by an erstwhile partner on his retirement from partnership firm arising on transfer of goodwill is not liable to be taxed as long term capital gain. Similar view was expounded by the Hon’ble Apex Court in the case of CIT vs. R. Lingmallu Raghukar [1997 (1) TMI 74 - SUPREME COURT] . In this case it was held that excess amount received by assessee on retirement from partnership firm was not assessable to capital gains as there was no transfer of any assets as contemplated by expression 'transfer' as defined in section 2(47) of the Act. We hold that the Assessing Officer’s view that there was no partnership firm and the amount received by the assessee cannot be said to be receipt on account of his retirement from the firm, is not sustainable. Accordingly, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals) and accordingly we uphold the same. - Decided against revenue.
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