TMI Blog2018 (5) TMI 1594X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The issue raised in both the appeals are similar on same set of facts, and, therefore, we proceed to hear both the appeals together and pass a consolidated order for the sake of convenience. 3. The only issue is to be decided as to whether the CIT-A is justified in confirming the orders of the AO by holding that goodwill created in the books of account is liable to be taxed in the hands of assessee as short term capital gain in the facts and circumstances of the case. 4. After hearing both the parties and perusing the record, we find that this Tribunal on an identical issue in ITA No. 1357/Kol/2015 for the A.Y 2009-10 vide its order dt. 19-02-2018, copy of the said order is on record, in the case of Amit Kumar Choudhury, where an amount received on account of share of goodwill is held to be not chargeable to tax as capital gain. The Co-ordinate Bench came to such conclusion by following the order dt. 11-12-2015 of another Co-ordinate Bench of this Tribunal in the case of Ajay Kr. Doshi in ITA No. 1866/Kol/2012, wherein similar issue was decided by holding the amount received by assessee therein as a share of goodwill on retirement from the firm is not chargeable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y vs.- ITO [52 SOT 113], wherein it was held that where a lumpsum payment was made to a retiring partner for consideration of assigning or relinquishing her share over assets of partnership firm in favour of continuing partners, it was a case of transfer and the assessee thus was liable to pay tax on account of capital gain. At the time of hearing before the Tribunal, the ld. counsel for the assessee has contended that the said decision of the Hyderabad Bench of this Tribunal is distinguishable on facts. He has also relied on the subsequent decision of the Hyderabad Bench of this Tribunal in the case of ACIT vs.- N. Prasad [153 ITD 257], wherein the assessee on his retirement as a partner from the partnership firm had received a surplus amount of ₹ 25,00 000/- in addition to his capital account balance. The said amount was brought to tax by the Assessing Officer in the hands of the assessee under the head capital gains being the amount received on transfer of goodwill. The ld. CIT(Appeals), however, deleted the addition made by the Assessing Officer on this issue and the decision of the ld. CIT(Appeals) was upheld by the Tribunal holding that there was no transfer of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a firm, and brings to tax the capital gains in the hands of the firm. However, we are dealing with a case of the partner here. The firm a quired goodwill over a period of time, which was brought into the books and distributed amongst existing partners before the new partners were taken in and some existing partners retired. The asset of the firm already existed and it was quantified and credited to the accounts of existing partners. Similarly, when the assessee retired from the firm, he did not transfer any goodwill to the film as he did not have any individual goodwill. The goodwill belonged to the firm and continued to remain with the firm. As clarified by the ld. Counsel, nothing was charged from the incoming partners by way of goodwill and, thus, there is no question of even indirect realization of the value of goodwill by the assessee from the incoming partner through the firm in a number of cases, referred to above, it has been held that what a partner gets at the time of retirement is nothing but his own share in the assets of the firm. In such a scenario, there cannot be any transfer of an asset and such has been the decision of Hon'ble Supreme Coon in the case of Moh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision cited by the Ld. Authorised Representative including the decision .of Apex Court in the case of Sunil Siddharthhbhai vs. CIT (supra). 9.1. In the instant case, the firms have not realized any amount on account of goodwill hence the question of any assessment being made in their hands does not arise. The notional valuation of the goodwill in its accounts by the firm does not result in any transfer which can attract capital gains as has also been clarified by the Board in its Circular No.495 dated September 27. 1987. Even the amendment made in Section 55(2) of the Act is of no help to the case of the Department in view of the clarification made by the Board. We fail to appreciate how the amount could be assessed in the hands of the partners and that too under the head Income from other sources. Goodwill is an intangible asset and transfer/surrender of which would attract Section 45 so that the value received would be a capital receipt and assessable if at all only under item 'E' of Section 14. It cannot be treated as a casual receipt and be subjected to tax under Section 56. The argument that even if the income cannot be chargeable u/s. 45, because of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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