TMI Blog2014 (12) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... impermissible under law. It is settled legal proposition of law that if two views are possible on an issue and Assessing Officer has taken one of the possible views then the Commissioner has no jurisdiction to revise the order of Assessing Officer on the ground that he did not agree with the view taken by the Assessing Officer. As decided in Tribhuvandas G. Patel Versus Commissioner of Income-Tax [1996 (2) TMI 16 - SUPREME Court] even where a partner retires and some amount is paid to him towards his share in the assets, it should be treated as falling under clause (ii) of section 47. The view taken by the Assessing Officer on this question of taxability of the amount received by the assessee on retirement from the partnership firm is certainly not an impermissible or impossible view rather the view taken by the Assessing Officer is a proper and more logical view as it is fortified by the series of decisions of Hon'ble Supreme Court, Hon'ble High Court as well as of this Tribunal. There is no quarrel on the point that if the Assessing Officer has failed to apply his mind and taken a view which is not permissible under the law then the order will be considered as erroneous s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same as lumpsum consideration received by the assessee on transfer of its rights in capital assets of the firm in favour of the continuing partners. 2. Both the assesses before us, were the partner along with three other persons in M/s Fine Developers with 12.5% capital contribution and 10% of share of profit each. The details of partners and their share of profit and loss are as under:- Sr. No. Name of the Partner Share of profit/loss vide Deed of Partnership dated 25.11.2005 Deed of partnership dated 6.7.2007 (i) The appellant 10% 10% (ii) Sapphire Land Developers 60% 10% (iii) Vision Finstock P. Ltd. 20% 20% (iv) Suraksha Developers P. Ltd. 10% 10% (v) Housing Development and infrastructure Ltd. (HDIL) - 50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew is possible, therefore, the CIT cannot seek revision of order u/s 263 of the Act. The CIT did not accept the contention of the assessee and held while passing the impugned order that the amount received by the assessee from the partnership firms on account of revaluation of assets is chargeable to tax on the reasoning that it being a compensation in lieu of relinquishment of the assessee s right in the asset and business of the partnership firm. The CIT supported its finding by citing various decisions which we will discuss while considering the contention of the parties at appropriate stage of our finding. 4. Before us, the Ld. Authorized Representative of the assessee submitted that in the computation of income, the assessee has not offered this amount to tax and it was taken to the reserve and surplus in the balance sheet. He referred the schedule-B giving details of reserve and surplus and submitted that this amount was added during the year. Further in the notes on accounts, the assessee has made clear and explained that during the year, the assessee has retired from the partnership firms in question w.e.f 25.07.2008 and the addition to the capital reserve consist of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ik Associates (265 ITR 346) as well as the decision of Hon ble Karnataka High Court in the case of CIT Vs. Gurunath Talkies26 DTR 214) . The Assessing Officer after considering the relevant details and documents/evidences filed by the assessee as well as the contentions and case laws relied upon by the assessee accepted the claim that the amount received from the partnership firms is not taxable. Thus the Ld. Authorized Representative has submitted that the issue was duly examined by the Assessing Officer and thereafter he took a view which is fully justified as per the decisions relied upon by the assessee. When the Assessing Officer has taken a view after conducting a proper enquiry and the view taken by the Assessing Officer is a possible view, then the CIT is not permitted to take a difference view merely on the reason that he did not agree with the view taken by the Assessing Officer. The Ld. Authorized Representative has further contended that there was no other issue which was to be examined by the Assessing Officer except the compensation received by the assessee from partnership firms. Therefore, it is clear that the Assessing Officer has conducted exhaustive enquiries and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts. 6. As regards the decision of Pune Benches of this Tribunal in the case of Shevantibhai C. Mehta Vs. ITO (83 TTJ 542), which was based on the Judgment of Hon'ble High Court in the case of N.A. Modi Vs. CIT (supra). The said decision was prior to the judgment of the Hon'ble High Court in the case of Prashant S. Joshi (supra). He has further submitted that in the case of Riyaz Shaikh Vs. ITO, the Pune Benches of the Tribunal has decided the issue in favour of the assessee by holding that the compensations received by the assessee on retirement from the partnership firm is not taxable. Said decision of the Tribunal has been upheld by the Hon'ble High Court vide order dated 26.02.2013 in ITA no. 1969 of 2011. Therefore, the view of the Assessing Officer in accepting the claim of the assessee is proper and in accordance with law as supported by the various judgments referred above. The Ld. Authorized Representative has further contended that even, otherwise, the view taken by the Assessing Officer is not absolutely contrary to law or invalid, therefore, even on a debatable issue if the Assessing Officer has taken a possible view then the CIT has no jurisdiction to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Hon ble Kerala High Court in the case of P.V. Sreenijin Vs. CIT [2014] 47 taxmann.com 61 (Kerala) and submitted that when the entire material available with the department was not considered by the Assessing Officer then it was erroneous approach on the part of the Assessing Officer resulting in prejudice to the revenue. Consequently, the CIT has the power to revise such erroneous orders. She has further contended that right of the partners in the partnership firm is a capital asset and on his retirement the partner is transferring the capital asset in favour of the continuing partners. The Assessing Officer has failed to examine the mode of retirement in the case of the assessee. She has referred para 2 of the deed of retirement and submitted that the retiring partner conveyed that the continuing partner shall forever be entitled in share, right, title and interest of the said business of the erstwhile partnership firm together with the benefits of all contracts, licenses , agreements etc., The Assessing Officer allowed the claim of the assessee without applying his mind on the crucial facts of the case, therefore, the CIT is justified in invoking the revisionary powers u/s 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with documentary evidence. d) Details of loan and advances along with the Names addresses of parties. e) Copy of partnership deed, Retirement deed amended partnership deed with all the firms. f) Loan confirmations including squared up loans. g) Details of exempt income and disallowable expenses u/s 14A r.w.r 8D. h) Copy of ledger A/c in the books of all subsidiary companies for F.Y. 2008/09/ i) Details of movable immovable assets, bank A/c etc. 11. In response to the notice, the assessee filed its reply dated 11.7.2011 and furnished all the requisite details and records as well as the submissions. The assessee has submitted a detailed note on the background of the assessee as a partner of the partnership firm in question as under:- Background [1] The Company was incorporated in the year 1996. The registered office is at 3, Narayan Building, 23, LN. Road, Dadar (E), Murnbai -400 014. and the present directors are Sudhir Valia, Raksha Valia and Gaurang Parekh. [2] During the financial year 2005-06, the Company entered into partnership in the firms namely M/s Mahul Construction Corporation, M/s J. P. Corporation and Developers. Facts relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Assessing Officer has not conducted any enquiry. Once the case does not fall under the category of lack of enquiry then the revisionary powers u/s 263 can be invoked by the CIT only when the claim of assessee allowed by the Assessing Officer is impermissible under law. It is settled legal proposition of law that if two views are possible on an issue and Assessing Officer has taken one of the possible views then the Commissioner has no jurisdiction to revise the order of Assessing Officer on the ground that he did not agree with the view taken by the Assessing Officer. The Commissioner has relied upon the decision of this Tribunal in the case of Sudhakar Shetty Vs. Asst. CIT (supra) and held that if the retiring partner has been paid lump sump in consideration, the retiring partner assigned or relinquished his share of right in the partnership and its asset in favour of the continuing partners, then such a transaction would amount to transfer within the meaning of section 2(47) of Income Tax Act., giving rise to capital gain exigible to tax. The Commissioner has also placed reliance on the judgment of Hon'ble High Court Tribhuvandas G. Patel ( supra), CIT Vs. H.R. Asl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). In the case of Mohanbhai Pamabhai (supra), the Hon ble Gujarat High Court in (91 ITR 393) held that interest of a partner in a partnership firm has no interest in any specific item of partnership firm. It is the right to obtain his share or profit from time to time during the subsistence of the partnership and dissolution of the partnership or towards retirement from partnership to get the value of share in the net partnership asset which remain after satisfying the due debts and liabilities of the partnership. The said amount received by the retiring partner is his share in the partnership and not any consideration for transferring all his interest to the continuing partners. In the case of N.A. Modi Vs. CIT (supra), the Hon ble Jurisdictional High Court has followed the Judgment in the case of Tribhuvandas G. Patel ( supra). As we have already mentioned that the judgment in the case of Tribhuvandas G. Patel (supra) was reversed by the Hon'ble Supreme Court. Therefore, following the decision in the case of N.A. Modi Vs. CIT (Supra) without considering the judgment of Hon'ble Supreme Court in the case of Tribhuvandas G. Patel ( supra) made out a case that the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of partnership, the assessee retired from the partnership firm and was inter alia paid an amount of ₹ 4,77,941 as his share in the remaining assets of the firm. The Division Bench of this Court had held that the transaction would have to be regarded as amounting to a transfer within the meaning of section 2(47) inasmuch as the assessee had assigned, released and relinquished his share in the partnership and its assets in favour of the continuing partners. This part of the judgment was reversed in appeal by the Supreme Court inTribhuvandas G. Patel v. CIT [1999] 236 ITR 515. Following the judgment of the Supreme Court in Sunil Siddharthbhai s case (supra), the Supreme Court held that even when a partner retires and some amount is paid to him towards his share in the assets, it should be treated as falling under clause (ii) of section 47. Therefore, the question was answered in favour of the assessee and against the revenue. Section 47(ii) which held the field at the material time provided that nothing contained in section 45 was applicable to certain transactions specified therein and one of the transactions specified in clause (ii) was distribution of the capital assets on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point Involved In this appeal relates to taxability of amount recelved by the assesseee on retirement from partnership firm. The Hon'ble Supreme Court in the case of Mohanbhai Pamabhai (supra) following its judgment in the case of Sunil Siddharthbhai Vs. CIT 156 ITR 509 (SC) held that when a partner retired from the firm and received his share of an amount calculated on the value of the net partnership assets including goodwill of the firm, there is no transfer of interest of the partner in the goodwill, and no part of the amount received is assessable as capital gain u/s 45 of the Act. The judgment of the Hon'ble Gujarat High Court ITR 801(SC), the Supreme Court held, while affirming the principle laid down in the case of Mohanbhai Pamabhai (supra) that when a partner retires from the partnership firm and the amount of hrs share in net partnership assets after deduction of liabilities is determined, there is no element of transfer of Interest in the partnership assets by the retired partner to the continuing partners and the amount received by the retiring partner is not capital gain under section 4S of the Act. Further, the Learned Counsel for the appellant has correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is a proper and more logical view as it is fortified by the series of decisions of Hon'ble Supreme Court, Hon'ble High Court as well as of this Tribunal. There is no quarrel on the point that if the Assessing Officer has failed to apply his mind and taken a view which is not permissible under the law then the order will be considered as erroneous so far as prejudicial to the interest of revenue. However, when the Assessing Officer has conducted an enquiry and taken a possible and rather a proper view then the Commissioner is not permitted to exercise the revisionary powers u/s 263 merely on the ground that he does not agree with the view taken by the Assessing Officer or even on the ground that there are divergent view on the issue. Therefore, in the view of the judgment of Hon'ble Supreme Court in the case of Mohanbhai Pamabhai (supra), Tribhuvandas G. Patel (supra), judgment in the case of CIT Vs. R. Lingmallu Raghukumar (supra), as well as the Judgment in the case of Prashant S. Joshi (supra), the view of the Assessing Officer cannot be said impermissible under law. 20. The decisions relied upon by the Ld. DR in the case of P.V. Sreenijin Vs. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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