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TMI Blog2018 (6) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in deleting of Rs. 6,72,30,150/-assessed as capital gain. 1.2 "On the facts and in the circumstances of the case and in Law, the CIT(A) erred in holding that the decision of the Hon'ble ITAT in the case of Sudhakar Shetty (130 ITD 197(Mum) and thereby treating the amount of Rs. 10,48,51,708/- as capital receipt not chargeable to tax u/s.45. 2.1 "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the deduction of Rs. 10,45,51,708/- while computation of book profit u/s.115JB. 3. The grounds of appeal raised in assessee's appeal reads as under: Exemption under section 10(2A) (1) The learned Commissioner (Appeals) erred in confirming the disallowance of the exemption under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the partnership firm the sums outstanding upon retirement with the firm as reflected by the assessee company's account. The assessee company also received an amount of Rs. 10,48,51,708/- over and above the amount outstanding to the credit of its capital and current account in the firm as on the date of retirement as per assesses company's book. In explanation of the source of this receipt, the assessee gave explanation that in the said firm there was a revaluation as well as the devaluation of property in the past. That assessee company had not accounted for the increase in the value of property in its capital account in the said firm as resulting from the revaluation. Hence, when the assessee received the sum of Rs. 10,48,51,708/-, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omething over and above the sum standing to the credit of its capital account and, therefore, this is the case where the capital gain tax liability is attracted in the hands of assessee. 20. In the case of the assessee the clauses in the retirement deed more particularly clause 1 & 2, did convey interest in immovable property and further referred to the fact that the assessee would not have any interest over the assets of the firm. Thus, it was a case of lump sum payment in consideration of the retiring partner assigning or relinquishing his share or right in the partnership and its assets in favour of the continuing partners. The manner of retirement in the case of the assessee was such that it could be regarded as assigning or relinquis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion reserve does not come under the purview of sec.10(2A). Hence, A.O. was fully justified in disallowing this amount from exemption u/s. 10(2A) as it is not a part of total income. Now we have to examine whether revaluation amount can be considered as income taxable under I. T. Act. 7. Thereafter, the ld. Commissioner of Income Tax (Appeals) granted relief to the assessee by holding that the amount was received by the assessee company from the partnership firm on account of its dues upon retirement of the firm. He held that the accounting entry done by the assessee in this regard did not amount to profit in the hands of the assessee. He also held that the revaluation is not taxable under Income Tax Act. In this regard, the ld. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the asset of the company/firm are valued during the year. It is clear that there was no revaluation of any asset of the company. Hence by no stretch of imagination, assessee can make any credit entry to the revaluation reserve, during the year, and that also for other assessee's assets. 10. As regards the claim of the assessee that the sum received was exempt u/s.10(2A), a reading of the said section makes it clear that the said section makes the profit of a firm assessed as such exempt in the hands of its partners. In the present case, the assessee company was not at all partner in the said firm. It had retired from the firm with effect from 01.04.2009. Hence, the amount received by a retired partner from its earstwhile partnership fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot claim that the receipt in the present year relates to the above said revaluation despite the fact that assessee had retired duly relinquishing its rights and properties in the said firm. Hence, in our considered opinion, the ld. Commissioner of Income Tax (Appeals) has clearly erred in holding that this sum has been received upon retirement from the firm and it is a capital receipt. 12. Accordingly, we uphold the order of the Assessing Officer and the ld. Commissioner of Income Tax (Appeals) denying the assessee's claim of deduction u/s. 10(2A). We also set aside the order of the ld. Commissioner of Income Tax (Appeals) that the amount received is a capital gain. Hence, this issue is decided in favour of the Revenue. The other groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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