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2020 (12) TMI 103 - AT - Income TaxCharacterization of income - consideration received by the partner of a firm upon retirement from the firm - retirement benefit - capital gain tax - HELD THAT:- As compensation received by the assessee upon retirement from the partnership firm as his share in the assets of the partnership firm is not liable to tax as there is no transfer of assets involved. In the case of Addl. CIT vs. Mohanbhai Pamabhai[1987 (2) TMI 59 - SC ORDER] - Court has affirmed the decision of the Hon’ble Gujarat High Court [1971 (9) TMI 56 - GUJARAT HIGH COURT] as held that any money received by the partner upon retirement from the partnership firm as his share in the assets of the partnership concern is not a consideration for transfer of his interest in the partnership to the continuing partners and there is no transfer within the meaning of section 2(47) of the Act. Hon’ble Supreme Court in the case of CIT v. Tribhuvandas G. Patel [1977 (9) TMI 13 - BOMBAY HIGH COURT] has held that any amount paid to the partner upon his retirement towards his share in assets is not a transfer within the meaning of section 47(ii) of the Act and not liable to capital gain - Even we find merit in the alternative plea taken by the assessee that if the computational provision of capital gain as provided under section 48 of the Act breaks down then the charging provision as provided under section 45 of the Act would also fail as held in the case of CIT vs. B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME COURT] - Decided in favour of assessee. Disallowance of finance charges - assessee submitted before the AO that the funds were borrowed during the preceding previous year for the purpose of business of the assessee which included hotel consultancy and trademark etc. - HELD THAT:- As assessee has not utilised the borrowed money for the purpose of his business. The Ld. CIT(A) has given a finding of fact that share of profit was assessed to tax on the income under the head “Income from other sources” which comprised of interest income from loans and deposits. We are in agreement with the conclusion drawn by the Ld. CIT(A) as the assessee has failed to establish that these expenses were incurred for the purpose of business of the assessee. Accordingly, we are inclined to uphold the order of Ld. CIT(A) on this issue by dismissing the ground raised by the assessee. Disallowance u/s 14A read with rule 8D - HELD THAT:- Assessee has incurred a total expenditure of ₹ 10,83,890/- which were incurred for the purpose of business of the assessee and none was having any connection to the exempt income ₹ 10,50,970/- -Thus the remaining expenditure out of the total expenditure was ₹ 32,920/- which can be only attributed to the exempt income. In our opinion, the disallowance can not exceed the actual expenditure incurred by the assessee. Partly allow the ground by directing the AO to restrict the disallowance accordingly.
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