TMI Blog1978 (4) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... r minor brothers of the assessee were admitted to the benefits of the partnership. This partnership was constituted by a partnership deed executed on 24th October, 1957. The assessee's share in the partnership was 15 per cent. On 16th April, 1961, a deed was executed between the assessee, the three major brothers who were partners and the guardian of the minors. The effect of this deed was that the assessee retired from the partnership with effect from 15th April, 1961. The goodwill of the partnership was valued at Rs. 6 lakhs. The assessee's share in the goodwill, therefore, worked out to Rs. 90,000. The guardian of the minors consented to pay off the assessee the value of his interest in the goodwill by debit of the proportionate amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. The word " transfer ", as defined in section 2(47), in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights or the compulsory acquisition thereof under any law. It may be assumed, although it is disputed by the assessee, that the transaction under which the assessee received Rs. 90,000 and retired from partnership involved a transfer of his interest in the goodwill for Rs. 90,000. Section 45, which is the charging section, in so far as relevant, provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head " Capital gains " and shall be deemed to be the income of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only by the Gujarat High Court in Commissioner of Income-tax v. Mohanbhai Pamabhai [1973] 91 ITR 393. Learned counsel for the department has argued that the Gujarat view should be accepted by us. He has submitted that section 45 should not be construed with reference to section 48 which is a machinery provision and that if the capital asset is such that the assessee had to spend nothing for its acquisition, the entire sale proceeds would be taxable as capital gains under section 45. Having given our anxious consideration to the submissions made before us, we have reached the conclusion that the view taken by the majority of the High Courts must be accepted. There are various reasons for this conclusion. Firstly, section 45, which is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department contends is also open, the rule of construction applicable to a taxing statute is that the benefit of construction, when two constructions are equally open, should be given to, the assessee. This rule requires that the construction adopted by the majority of the High Courts, which is certainly a reasonable construction of section 45, should be accepted as it is favourable to the taxpayer. Fourthly, when the Madras High Court in Commissioner of Income-tax v. Rathnam Nadar [1969] 71 ITR 433, decided against the department, an appeal was taken to the Supreme Court, but the appeal was not pressed, although at the time when the matter came up before the Supreme Court the department could have relied upon the decision of the Gujara ..... X X X X Extracts X X X X X X X X Extracts X X X X
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