TMI Blog2016 (4) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. - Decided against revenue Taxability of amount received by the assessee from M/s Samarth Erectors & Developers - Held that:- The assessee has spent money in connection with the land belonging to the Society cannot be disputed in this assessment year. Further, what the assessee received from M/s Samarth Erectors & Developers is the reimbursement of expenses already incurred by the assessee. When the said fact is confirmed by M/s Samarth Erectors & Developers in its capacity as the payer in final settlement of the claims of the assessee in respect of the land, we find no reason to suspect the same, particularly in view of the fact that the assessing officer has not brought any material on record to contradict the said claim. In that view of the matter, we are of the view that there is no scope to isolate the receipt of ₹ 1,30,00,000/- from the expenses incurred by the assessee, i.e., it cannot be treated that the receipt of ₹ 1,30,00,000/- as a separate source of income distinct and separate from the expenses incurred by the assessee on the land. It is also an admitted fact that the details of expenses incurred by the assessee are available in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The issue contested before us is about the taxability of the amount of ₹ 2.50 crores referred above. It is pertinent to note that the assessee declared the same as capital gains in its return of income and proposed to avail exemption u/s 54F of the Act by depositing the same in Capital Gains Scheme before purchasing a new residential house. However, during the course of assessment proceedings, the assessee changed his stand and contended the same represented capital receipt and hence not taxable. 5. The AO examined the claim of the assessee and took the view that the claim of existence of partnership firm itself is not acceptable for the following reasons:- (a) Even though it was claimed that the partnership agreement was entered on 19.10.1998, the same was registered only on 01.10.2003. (b) Under the deed of partnership, the role of the assessee is only to clear the encumbrances attached to a property, which was intended to be developed. (c) The partnersip firm did not maintain any books of accounts and it did not carry on any business activities. (d) The partnership firm did not file any income tax returns. Accordingly, the AO concluded as under in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce he proceeded to examine about the nature of receipt and finally concluded that the same represents revenue receipt and in this regard, he placed reliance on the decision rendered by Hon ble Delhi High Court, referred supra. 7. The Ld CIT(A) however held that the assessee has received the impugned amount from a partnership firm and accordingly held that the same is not taxable in the hands of the assessee and taxability of the same may be considered in the hands of the partnership firm u/s 45(4) of the Act, if other conditions of sec.45(4) are satisfied. The relevant observations made by the Ld CIT(A) are extracted below:- 6. In my opinion, on the facts of the case the addition made in the hands of the appellant is not justified because it is undisputed that the appellant was a partner in a firm by name and style of M/s Venus Builders (India) which was registered on 1/10/2003 w.e.f. 19/10/1998 and evidenced by a deed of partnership on stamp paper of ₹ 100/-. The issue that requires consideration is if this firm was validly formed as per the requirements of the Indian Partnership Act, 1932 and merely because it did not file an income tax return nor applied for registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case, erred in law in deleting the addition made of ₹ 2,50,00,000/- received by the assessee from the firm, on retirement treating it as capital receipt on dissolution of the firm. (ii) The Ld CIT(A), on the facts and in the circumstances of the case, erred in law in deleting addition made of ₹ 2,50,00,000/- received by the assessee from the firm, on retirement treating it as capital receipt on dissolution of the firm without appreciating the fact that the amounts received by the partner on retirement does not amount to transfer u/s 2(47) of the I.T Act and does not fall within the ambit of Sec. 45 of the Act as there is no transfer of capital assset. (228 ITR 202 Delhi) 9. Even otherwise the very fact that the fact that the Partnership firm is evidenced by a partnership deed; that it was registered under Indian Partnership Act (though belatedly, which is permissible under that Act); that the Hon ble High Court of Bombay has appointed an arbitrator accepting the fact of existence of partnership; that the arbitrator has expressly passed an order stating that the partnership firm shall stand dissolved clearly support the finding given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tax arising on distribution of assets on the dissolution of a partnership firm or association of persons or body of individuals is fastened upon firm or association or body and not upon the partners or members. It can further be noticed that, even if the assessing officer treats the partnership firm as association of persons as per the provisions of the Act, even then the liability, if any, shall arise on the association of persons only and not on its members. Hence, we are of the view that the Ld CIT(A) has rightly observed that the action, if any, can be taken only in the hands of the partnership firm u/s 45(4) of the Act, if the conditions prescribed therein are satisfied. 12. In view of the foregoing discussions, we do not find any infirmity in the decision of Ld CIT(A) in holding that the assessing officer was not right in law in assessing the impugned amount of ₹ 2,50,00,000/- in the hands of the assessee. Accordingly we uphold his decision on this issue. 13. The next issue contested by the revenue relates to the taxability of ₹ 1.30 crores received by the assessee from M/s Samarth Erectors Developers. The facts relating to the same are that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso furnished the details of expenses before the AO and also confirmation obtained from M/s Samarth Erectors Developers to the AO. Accordingly the Ld CIT(A) held that the expenditure of ₹ 1,37,52,449/- claimed by the assessee should be allowed. 17. We heard the rival contentions on this issue and perused the record. In our view, the approach of the assessing officer in this matter and the reasoning given by him to disregard the claim of expenses are devoid of merits. There is no dispute with regard to the fact that the assessee was entrusted with some work in connection with the land by the Society, referred above. It is also an undisputed fact that the assessee has incurred expenditure over the years in connection therewith and the same has been duly disclosed in the books of accounts of the earlier years. It is an admitted fact that the books of accounts of the assessee pertaining to the earlier years have been subjected to scrutiny assessments. Hence the fact that the assessee has spent money in connection with the land belonging to the Society cannot be disputed in this assessment year. Further, what the assessee received from M/s Samarth Erectors Developers is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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