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2017 (1) TMI 327 - AT - Income TaxRevision u/s 263 - transfer within the meaning of sec. 2(47) when a partner received his share in the partnership business - CIT observed that when a partner retires from a partnership firm, the amount received over and above the capital account of the partner is taxable in total without allowing any deductions towards cost of acquisition of the asset also A.O. without application of mind allowed the cost of acquisition claimed by the assessee, which is otherwise not allowable, therefore, the assessment order passed by the A.O. is prejudicial to the interest of the revenue - Held that:- We find force in the arguments of the assessee, for the reason that the coordinate bench in the case of ACIT Vs. N. Prasad [2014 (1) TMI 1681 - ITAT HYDERABAD ] held that when a partner retires from the partnership firm, taking his share of interest in the firm, no element of transfer is involved thereby not liable for capital gain tax. A similar view was expressed by the Hon’ble Supreme Court, in the case of CIT Vs. R. Lingamallu Raghu Kumar (1997 (1) TMI 74 - SUPREME Court) wherein held that on retirement of assessee partner from the firm, there was no element of transfer of interest in partnership assets by the retiring partner to the continuing partners and the amount received by him was not liable for capital gains. In view of the above judgements, it is abundantly clear that when a partner retires from the partnership firm, whatever amount received by the partner over and above his capital account is not liable for capital gain tax. Though, there is no transfer within the meaning of section 2(47)(v) of the Act, the assessee himself offered the capital gain on account of relinquishment of his right in the partnership firm, therefore, we are of the view that there is no prejudice is caused to the revenue and hence the CIT was not correct in coming to the conclusion that the order passed by the A.O. is prejudicial to the interest of the revenue. - Decided in favour of assessee.
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