TMI Blog2020 (2) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding credit to current account of the partners of the assessee firm. The assessee passed this entry belatedly only in the year of receipt of actual money from Pranik Landmark Associates i.e. during the F.Y.2009-10 relevant to A.Y.2010-11 in which year, it retired from Pranik Landmark Associates. Pursuant to assessee passing this entry during A.Y.2010-11 in its books for the revaluation, the amounts ultimately received by the assessee from the partnership firm exactly matched with the investments made in the partnership firm. In other words, the assessee did not receive any sum over and above the value of its investments from Pranik Landmark Associates. Hence, there cannot be any levy of capital gains or any levy in the nature of income within the meaning of Section 2(24) of the Income Tax Act in the hands of the assessee. There was no transfer of relinquishment of rights in favour of the continuing partners. We find that in the instant case the firm i.e. Pranik Landmark Associates had only paid the amounts lying to the credit of the partner i.e. the assessee and had not paid even a penny more than the amount lying in the credit of the partner s current account - Deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicate the grounds raised by the revenue in its appeal for the A.Y.2010-11. 2.1. The revenue has raised the following grounds in its appeal:- 1.1 On the facts and in the circumstances of the case and in law , the Ld.CIT(A) erred in deleting of ₹ 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 (130ITD197(Mum) and thereby treating the amount of ₹ 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 ₹ 10,45,51,708/-while computation of book profit U/S.115JB. 3. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal. 4. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored. 3. The brief facts of this issue are that the assessee was a partner in the firm Pranik Landmark Associates ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was disposed off by the ld. CIT(A) vide order dated 28/02/2014 wherein it was held that:- Revaluation reserve does not come under purview of Section 10(2A) and upheld the ld AO's order on the same; Deleted leviability of capital gains by relying on various judicial precedents and the decision of CIT vs Riyaz A. Sheikh (2014) 41 taxmann.com 455/221 Taxman 118 (Mag) (Bom.) which overruled the decision in the case of Sudhakar M Shetty (supra); Deleted the addition made by the ld AO under MAT provisions as pure capital receipt is not taxable under MAT. Proceedings before Income Tax Appellate Tribunal 6. Aggrieved by the order of the ld. CIT(A), the grounds raised by the revenue were disposed off by this Tribunal vide order dated 01/06/2018 wherein it was held that:- Amount received by the assessee from the partnership firm in the current year could not be related with the revaluation done in the past; Amount that was received by the Appellant upon retirement, was over and above the amounts due to him upon retirement: Assessee had relinquished its rights in the assets of partnership firm in lieu of amount outstanding as on the date of retirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in case of CIT Vs. Mohanbhai Pamabhai [165 ITR 166 (SC)], the decision of the Supreme Court in case of Sunil Siddharthbhai Vs. CIT [156 ITR 509 (SC)], as also the decision of the Supreme Court in case of CIT Vs. R. Lingmallu Raghukumar [247 ITR 801 (SC)] would have to be examined. Since this has not been done at the level of the Tribunal, we are of the opinion that it would be a better option that the Tribunal at first instance undertakes such exercise. Only on this around, the impugned judgment of the Tribunal is set aside. The Tribunal is requested to decide the appeals afresh on merits after considering the contentions of both sides. ... (emphasis supplied) 8.1 Hence, the present proceedings had emanated pursuant to the directions of the Hon ble High Court restoring the matter to the file of this Tribunal for fresh adjudication as stated supra. 9. We have heard rival submissions and perused the materials available on record. The primary facts stated hereinabove remain undisputed and hence, the same are not reiterated herein for the sake of brevity. Accordingly, we proceed directly to adjudicate the issue in dispute before us in the appeal of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the taxability of amount received by retiring partner of retirement from the firm was subject matter of adjudication. The Court held that when the partner retires from the firm, there is no transfer of interest to the existing partners by the retiring partner and it is not a transfer u/s 2(47) of the Act. Further, the Hon'ble Gujarat HC held that capital gains should not be levied on any amount paid to the partners for their net partnership assets and goodwill. We find reliance was also placed on the earlier decision of Hon ble Supreme Court in the case of Tribhuvandas G. Patel vs. CIT reported in 236 ITR 515 (SC) wherein the Hon ble Supreme Court over ruled the decision of Hon ble Bombay High Court in the same case reported in 115 ITR 95(Bom). 11.1. Decision of Hon ble Supreme Court in the case of Sunil Siddharthbhai vs. CIT reported in 156 ITR 509(SC) The Hon ble Supreme Court in the said case was considering the question of taxability of transfer when a capital asset has been introduced as capital contribution by the partner into the partnership firm. The Court held that when the individual partner parts with his absolute right over the property by offering the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by this Tribunal in the case of Shri Sudhakar Shetty was reversed by the decision of Ms. Hemalata S Shetty (wife of Shri Sudhakar Shetty) by following the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Riyaz A Sheikh reported in 41 Taxmann.com 455(Bom). 12.2. We also find further that the decision rendered by this Tribunal in the case of Ms. Hemalata Shetty supra has been subsequently upheld by the Hon ble Jurisdictional High Court in ITA No.1755 of 2016 dated 05/03/2019 wherein it was held that the amount received by a partner on retirement is not subject to tax in the hands of retiring partner in view of Section 45(4) of the Act and liability, if any, to pay the tax is of the partnership firm. 12.3. We also find that the Co-ordinate Bench of this Tribunal in the case of DCIT vs. Thakur Estate in ITA No.4651/Mum/2016 and CO No.311/Mum/2017 dated 09/05/2019 and also in the case of ITO vs. Ramal P Advani in ITA Nos.6491 and 6963/Mum/2016 dated 27/08/2018 had held that excess amount received by a partner on retirement from partnership firm is not liable to capital gain tax as there is no transfer of any asset u/s.2(47) of the Act. 12.4. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case also the firm i.e. Pranik Landmark Associates had only paid the amounts lying to the credit of the partner i.e. the assessee and had not paid even a penny more than the amount lying in the credit of the partner s current account. Hence, the reliance placed by the ld. DR on the decision of Bangalore Tribunal actually supports the case of the assessee herein. 12.7. In view of the aforesaid observations and respectfully following the various judicial precedents, relied upon hereinabove, the ground Nos.1.1 and 1.2 raised by the revenue are dismissed. 13. The ground No.2.1 raised by the revenue is challenging the action of the ld. CIT(A) wherein the sum of ₹ 10,48,51,708/- being the share of profit from the partnership firm was sought to be excluded while computing the book profits u/s.115JB of the Act by treating it as capital receipt. 13.1. We have heard rival submissions and perused the materials available on record. We find that the ld. CIT(A) had deleted the addition made by the AO while computing book profits under Section 115JB of the Act by stating that since the amount received by retiring partner is a pure capital receipt and is not taxable u/s 115JB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the real working results ot the company. Inclusion of receipt in the computation of MAT would defeat two fundamental principles, it would levy tax on receipt which is not in the nature of income at all and secondly it would not result in arriving at real working results of the company. The real working result can be arrived at only after excluding this receipt which has been credited to P L a/c and not otherwise. The case of the assessee is supported by the following decisions: In the case of Shivalik Venture Pvt. Ltd. V/s. Dy. CIT, 43 ITR(Mum Trib) 187 In the case of DCIT Circle-1 V/s. McNally Bharat Engineering Co. Ltd., ITA No.100/Kol/2011, Dated 01/03/2017(Kol Trib). In the case of ACIT, Range-2, V/s. M/s. L. H. Sugar Factory Ltd., ITA NO.417 418/LKW/2013 (Lucknow Trib). In the case of DCIT, c.c-XXVIII V/s. Binani Industries Ltd., 178 TTJ 658(Kol) In the case of ACIT, Circle-2 V/s. Shree Cement Ltd., ITA NO.614, 615 635/JP/2010 (Jaipur ITAT) the issue is as to whether sales tax subsidy received which was admittedly capital in nature can be subjected to MAT. The ITAT held that there was never any intention behind introduction of se ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
