9911796707
TMI Blog2014 (1) TMI 1739X X X X Extracts X X X X X X X X Extracts X X X X ..... is is a bunch of seven appeals. All these appeals are filed by the Revenue. The common assessment year is 2008-09. The respondent-assessees belong to same family and same business group. The assessees are HUFs and Individuals. The group to which all these assessees belong, carries on business mainly in fireworks under the name "Sri Kaleeswari Fire Works". By and large, "Sri Kaleeswari" is the name of the business group. In the previous year relevant to assessment year under appeal, the respondent-assessees have retired from the firm resulting in the re constitution of the firms. The retirement of the assessees did not stop the partnership business. All the firms continued to carry on the business. At the time of retirement, the respondent-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact business income. It is a case of the Revenue that the additional payments received by the respondentassessees, who retired as partners, were over and above the value of the assets of the companies and firms and therefore, such additional amounts should be held to be taxable as business income in their hands. 4. We considered this issue in a very detailed manner. It would not be proper to hold that this is a family settlement as held by the Commissioner of Income Tax (Appeals). Therefore, we find that the decision of the Hon'ble Madras High Court rendered in the case of Commissioner of Income Tax v. Kay Arr Enterprises & Others (299 ITR 348) may not have direct application to the case. 5. But, still we have to see that the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring partner is only taking money towards the value of his share, there is no case of transfer of amounts and levy of capital gains taxation. 7. In the present case, all the respondent-assessees were paid in cash in their capacity as retiring partners. What they have received in addition to the settlement of their capital accounts is their share in the value of the business. The share in the value of the business is a capital asset which may also include goodwill and as such, such receipts are capital receipts in their hands. In the light of the above judicial pronouncements, such capital receipts are not liable for capital gains taxation. 8. Now the question to be considered is whether the Assessing Officer is justified in invoking Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them, along with their profit shares. When the capital accounts are settled by paying the amounts to retiring partners, the share of the profits also have been credited. Settlement of the capital accounts takes care of such things. Moreover, even if there is an element of profit, for the sake of argument, such profits are not taxable in the hands of the partners by virtue of provisions of Section 10(2A) of Income-tax Act, 1961. 11. Therefore, the character of additional amounts paid to the retiring partners represent the share of the retiring partners in the Worth and Value of the business in which they were partners. The Worth and Value included the standing of the business, the goodwill and so many other intangible virtues. So, what is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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