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2015 (12) TMI 1174 - ITAT MUMBAI

2015 (12) TMI 1174 - ITAT MUMBAI - TMI - Taxability of amount received on retirement from partnership firm - whether taxable under the head “Capital Gains” on the mistaken belief that “retirement from partnership” amounts to “transfer” within the meaning of section 2(47)? - Held that:- The amount received by assessee on retirement from partnership firm is not taxable under the head ‘capital gains’. See Riyaz A. Sheikh [2013 (12) TMI 248 - BOMBAY HIGH COURT] wherein held Amounts received on retir .....

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. The CIT(A) erred in law and on facts in upholding the action of the AO that the amount received by the Appellant on retirement from partnership firm M/s. D.S. Corporation is taxable under the head Capital Gains on the mistaken belief that retirement from partnership amounts to transfer within the meaning of section 2(47) of the I.T. Act. 2. The CIT(A) failed to appreciate the facts of the case and the relevant law on the subject. 3. The CIT(A) erred in not following the judgement of the Suprem .....

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,98,088/- from the said firm M/s. D.S. Corporation. However, as observed by the learned Assessing Officer, the assessee did not disclose the aforesaid receipt of ₹ 30,87,98,088/- as her income in the relevant assessment year 2006-07. Search & Seizure action u/s. 132 of the Act were carried out in assessee s premises on 18.01.2007. Notices u/s. 153A, under section 143(2) and 142(1) of the Act were issued and duly served upon the assessee. Assessee was confronted and requested to explain .....

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hings is detailed hereinafter- I. A partnership firm was formed between 2 persons Shri Sudhakar Shetty - 40% and Shri Rakesh Kumar Wadhawan - 60% on 01.08.2005. II. The original capital contributions being ₹ 3,20,50,000/-. III. Thereafter, the land being Unity Compound was purchased in the year 2006, on a total consideration of ₹ 6.50 crores. IV. Smt. Hemlata Shetty becomes a partner in M/s. D.S. Corporation on 16.09.2005. The profit sharing ratio is divided into Shri Rakesh Kumar Wa .....

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by Shri Rakesh Kumar Wadhawan. VI. This land was valued in the balance sheet of M/s. D.S. Corporation on 2006 and the land was revalued at ₹ 194. 78 crores. VII. The sum of ₹ 194.78 crores was received by M/s. D.S. Corporation from M/s. HDIIL. VIII. A sum of ₹ 30.88 crores gave to Shri Sudhakar Shetty and ₹ 30.88 crores to Ms. Hemlata Shetty, upon their receipt from the firm M/s. D.S. Corporation. IX. The revaluation of land resulted in a notional profit of ₹ 154.4 .....

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having considered the same CIT(A) confirmed the order of Assessing Officer. Same has been opposed before us, inter alia, submitting that CIT(A) should have allowed the appeal of assessee. For the same assessee raised various legal and factual submissions and requested to allow the claim of assessee prayed. On the other hand the learned D.R. supported the order of Assessing Officer and submitted that the order of ITAT in the case of Shri Sudhakar Shetty should be followed because it is based on t .....

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also, in CIT vs. R. Lingamallu Rajkumar (2001) 247 ITR 801 held that amounts received on retirement by a partner is not subject to capital gains tax. Our view is also fortified by the decision by the Coordinate Bench in ACIT vs. Shri N. Prasad, Executive Chairman Secunderabad (ITA No. 1200/Hyd/2010) order dated 27/10/2014. 5. In this regard the learned Authorized Representative for the assessee requested that after the decision was taken in the case of Shri Sudhakar Shetty, the Department, follo .....

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nt under section 45(4) of the Act. This fact was not before the ITAT at the relevant point of time when the case of Shri Sudhakar Shetty was decided. So the decision of ITAT in the case of Shri Sudhakar Shetty should not be followed because it was decided in different facts and circumstances which have changed because of subsequent developments as discussed above. 6. The doctrine of judicial precedents; judicial discipline and res judicata have been evolved to ensure stability and certainty in l .....

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udge made and a major premise consisting of material facts of the case under consideration. There cannot be a judicial precedent on a question of fact. It is only the legal principle laid down on the basis of fact and the law that becomes judicial precedent. The precedent may not be binding when the judgement is per incurium i.e. in ignorance of the law or contrary to the law or its own earlier decisions of own or by inadvertence. Sometimes, there are conflicting judgements of the same court and .....

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the case of R.F. Nangrani, HUF vs. DCIT in ITA No. 6124/Mum/2012 on 10th December, 2014 wherein the decision in the case of Shri Sudhakar Shetty was also referred. In the said case the issue before the Tribunal was whether the amount of ₹ 14,15,61,370/- received from partnership firm Landmark Developments on retirement is a capital gain chargeable to tax? This issue was very similar to the issue in the case before us. While deciding the same ITAT E Bench, Mumbai in R.F. Nangrani, HUF (sup .....

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247 ITR 801 held that amounts received on retirement by a partner is not subject to capital gains tax. Our view is also fortified by the decision by the Coordinate Bench in ACIT vs. Shri N. Prasad, Executive Chairman Secunderabad (ITA No. 1200/Hyd/2010) order dated 27/10/2014. It was further brought to our knowledge by the learned Authorized Representative for the assessee that the Hon'ble Member who delivered the decision in the case of ACIT vs. N. Prasad, Executive Chairman, Secunderabad .....

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ter of Shri Sudhakar Shetty was decided. 7. We find that in Palitana Sugar Mills P. Ltd. vs. State of Gujarat (AIR 2007 SC 1701 it was observed as under: - It is well settled that the judgments of this Court are binding on all the authorities under Article 141 of the Constitution and it is not open to any authority to ignore a binding judgment of this Court on the ground that the full facts had not been placed before this Court and/or the judgment of this Court in the earlier proceedings had onl .....

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ur opinion, the inherent power will not be available under section 151, CPC as available to us in such a case but it is bound to be exercised in that manner in the interest of justice and public interest." From the above decision of the Hon'ble Supreme Court the following proposition emerges: - (a) It is immaterial that in a previous litigation the particular petitioner before the Court was or was not a party, but if law on a particular point has been laid down by the High Court, it mus .....

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d in para 24 of their order as under: 24. ……… In East India Commercial Co. Ltd. vs. Collector of Customs, Calcutta, AIR 1962 SC 1893, the Supreme Court held that an administrative authority or Tribunal cannot ignore the law declared by the highest Court in the State. The Supreme Court pointed out that taking into consideration the provisions of Arts. 215, 226 and 227 of the Constitution it would be anomalous to suggest that a Tribunal over which the High Court had superinten .....

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subject to its supervision should conform to the law laid down by it, for such obedience would be conducive to their smooth working, while otherwise there would be confusion in the administration of law, and respect for law would irretrievably suffer." Generally, earlier decisions are followed but there is exception to this rule. In case where either the earlier decision was arrived at in ignorance of the law through oversight or that on the law point subsequently, there is decision of Sup .....

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that decision of the jurisdictional High Court in the case of CIT vs. Shri Riyaz A. Sheikh (2014) 41 taxman.com 455 (Bom) which is on similar issue, was not available when the appeal of Shri Sudhakar Shetty was decided by ITAT. In the said case, i.e. Shri Riyaz A. Sheikh (supra) the Hon'ble Bombay High Court held as under: - 2. We find that by the impugned order, the Tribunal while holding that amounts received by a partner on his retirement from partnership firm are exempt from capital gain .....

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sion of this Court in the matter of N.A. Mody V/s. CIT reported in [1986] 162 ITR 420 and it has not been considered in the decision rendered in the matter of Prashant S. Johsi (supra). 3. In the impugned order, the Tribunal does refer to the decision of this Court in the matter of N.A. Mody (supra) and states that it follows the decision of this Court in the matter of CIT V/s. Tribhuvandas G. Patel reported in 115 ITR 95 and the same has been reversed by the Apex Court in Tribhuvandas G. Patel .....

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