Smt. Vasumati Prafullachand Sanghavi, Jalgaon V. Deputy Commissioner of Income-tax,

ITA 161/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6964 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-12-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Capital asset; Gift; Question of law; Capital receipt; Reassessment proceedings
• Section: 143(3); 56(2); 147; 148; 56

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 161/PUN/2015 / ASSESSMENT YEAR : 2008-09 SMT. VASUMATI PRAFULLACHAND SANGHAVI, AT POST UTRAN, TALUKA ERANDOL, JALGAON 425 109 PAN : AMFPS2502J . /APPELLANT VS. DCIT, CIRCLE-1, JALGAON . / RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI RAJEEV KUMAR, CIT / DATE OF HEARING : 07.12.2017 / DATE OF PRONOUNCEMENT: 13.12.2017 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-2, NASHIK, DATED 29-12-2014 FOR THE ASSESSME NT YEAR 2008-09. 2. GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL ARE EX TRACTED AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER- ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE VALID ITY OF REASST. PROCEEDINGS WITHOUT APPRECIATING THAT THE REOPENING U/S 148 WAS BAD IN LAW AND CONSEQUENTLY, THE REASST. U/S 147 BE DEC LARED NULL AND VOID. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMO UNT RECEIVED OF RS.21,52,73,777/- AT THE OF RETIREMENT FROM THE FIR M IS TAXABLE AS INCOME FROM OTHER SOURCES U/S 56(2)(VI). ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 2 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMO UNT RECEIVED OF RS.21,52,73,777/- BY THE ASSESSEE AT THE TIME OF HE R RETIREMENT FROM THE PARTNERSHIP FIRM M/S. DEEPAK FOODS WAS WITHOUT CONSIDERATION AND ACCORDINGLY, THE SAID AMOUNT OUGHT TO HAVE BEEN TAXED AS INCOME FROM OTHER SOURCES U/S 56(2)(VI). 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS IN CONSIDERATION OF HER RETIREM ENT FROM THE PARTNERSHIP FIRM M/S. DEEPAK FOODS AND THEREFORE, I T WAS INCORRECT TO HOLD THAT THE AMOUNT OF RS.21,52,73,777/- WAS RECEI VED BY THE ASSESSEE WITHOUT CONSIDERATION AND HENCE, THERE WAS NO QUESTION OF MAKING ANY ADDITION OF THE SAID AMOUNT U/S 56(2)(VI ). 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE PARTNERSHIP FIRM M/S, DEEPAK FOODS HAD CREATED GOOD WILL IN ITS BALANCE SHEET AND THE CORRESPONDING AMOUNT OF THE G OODWILL CREATED WAS CREDITED TO THE ACCOUNT OF THE ASSESSEE AND OTH ER PARTNER AND THEREFORE, THE CONCLUSION OF THE LEARNED CIT(A) THA T THE AMOUNT RECEIVED BY THE ASSESSEE WAS WITHOUT CONSIDERATION IS TOTALLY INCORRECT AND THE ADDITION CONFIRMED U/S 56(2)(VI) MAY KINDLY BE DELETED. 6. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE DECISION OF HON'BLE ITAT IN THE CASE OF M/S. SHAKUNTALA S. SANG HAVI WHEREIN ON IDENTICAL SET OF FACTS, HON'BLE ITAT HAD HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE AT THE TIME OF HER RETIREMENT FROM THE PARTNERSHIP FIRM M/S. DEEPAK FOODS WAS NOT TAXABLE AS AN INCOME OF THE ASSESSEE. 7. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.21,52,73,777/- WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE AND THE ADDITION MAY KINDLY BE DELETED. 8. THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234A WITHOUT APPRECIATING THAT THE ASSESSEE HAD FIL ED HER ORIGINAL RETURN OF INCOME AND HENCE, THERE WAS NO REASON TO LEVY THE INTEREST U/S. 234A. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND AN EX-PARTNER IN M/S. DEEPAK FOODS, A PA RTNERSHIP FIRM OF JALGAON. ASSESSEE FILED THE RETURN OF INCOME ON 30-09 -2008 DECLARING TOTAL INCOME OF RS.88,330/-. AO NOTICED THAT THE AMOUNT OF RECEIVED BY THE ASSESSEE FROM M/S. DEEPAK FOODS ON ACC OUNT OF RELINQUISHING HER SHARE IN FAVOUR OF SANGHAVI FOODS PVT. LTD . HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF T HE I.T. ACT. IN THE REASSESSMENT, THE AO DETERMINED THE ASSESSED IN COME AT RS.21,52,73,777/-. ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 3 4. AT THE RELEVANT POINT OF TIME, THE ASSESSEE HAS CAPITA L BALANCE OF RS.13,78,223/- WITH THE SAID M/S. DEEPAK FOODS AND ON THE EVE OF RETIREMENT, ASSESSEE AND ANOTHER PARTNER (SMT. SHAKUNT ALA S. SANGHAVI), RECEIVED AN EQUAL AMOUNTS OF RS.21,53,73,777/- EAC H FOR RELINQUISHING THEIR RIGHTS IN THE FIRM. THE TAXATION OF THE SAID AMOUNT RECEIVED BY THE ASSESSEE IS THE SUBJECT MATTER OF THE PRESENT DISPUTE. AO HELD THE SAME AS TAXABLE UNDER THE INCOME FROM CAPIT AL GAINS. ALTERNATIVELY, THE SAID AMOUNT WAS TAXED AS INCOME FROM OTHER SOURCES. CONTENTS OF PARA NOS. 8 TO 16 OF THE ASSESSM ENT ORDER ARE RELEVANT. 5. SIMILAR ADDITION WAS MADE IN THE ASSESSMENT OF SMT. SHAKUNTALA S. SANGHAVI, WHO IS THE OTHER RETIRING PARTNER OF M/S. DEEPAK FOODS IN RESPECT OF HER RECEIPT OF RS.21,53,73,777/- . OTHER RELEVANT FACTS RELATING TO THE TAXATION OF THE SAID AMOUNT IN THE HANDS OF SMT. SHAKUNTALA S. SANGHAVI AND THE SUBSEQUENT LEGAL DEVELOPMENTS INCLUDE THAT ASSESSEE IS AN INDIVIDUAL AND W AS A PARTNER ALONG WITH SMT. SHAKUNTALA S. SANGHAVI IN M/S. DEEP AK FOODS. IN THE RETURN OF INCOME, BOTH THE PARTNERS FURNIS HED A NOTE STATING THAT THE CREDIT BALANCE IN CAPITAL ACCOUNT OF THE ASSESSEE INCLUDES SHARE OF GOODWILL RECEIVED FROM M/S. DEEPAK FOODS O N RETIREMENT FROM THE FIRM. ASSESSMENT IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI WAS COMPLETED. SUBSEQUENTLY, THE ASSESSMENT WAS SET ASIDE BY THE CIT-II, NASHIK ON 30-03-2013 BY THE REVIS ION PROCEEDINGS U/S.263 OF THE ACT; WHEREAS IN THE CASE OF T HE ASSESSEE, THE PROCEEDINGS U/S.148 OF THE ACT WERE INITIATED BY TH E AO FOR TAXING THE AMOUNT OF RS.21,53,62,107/-. AO REOPENED THE ASSESS MENT OF THE ASSESSEE ON THE GROUND THAT AMOUNT OF RS.21,52,73,77 7/- ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 4 RECEIVED BY THE ASSESSEE ON HER RETIREMENT AS A PARTN ER FROM THE PARTNERSHIP FIRM M/S. DEEPAK FOODS IS TAXABLE AS CAPITAL GAINS. 6. DURING THE REASSESSMENT PROCEEDINGS, THE ASSESSEE M ADE HIS SUBMISSIONS BEFORE THE AO STATING THAT REOPENING OF THE A SSESSEE IS BAD IN LAW. ASSESSEE RELIED ON THE APEX COURTS JUDGMEN T IN THE CASE OF ACIT VS. MOHANBHAI PAMABHAI AND OTHERS 165 ITR 166 FO R THE LEGAL PROPOSITION THAT WHEN A PARTNER RETIRES FROM THE PA RTNERSHIP FIRM AND IS PAID AN AMOUNT, SUCH PAYMENT IS TOWARDS SETTLE MENT OF HIS INTEREST IN THE PARTNERSHIP FIRM AND IS NOT TOWARDS TR ANSFER OF ANY CAPITAL ASSET. HOWEVER, AO REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE. 7. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE RETIRED AS A PARTNER FROM M/S. DEEPAK FOODS AND UNDISPUTEDLY RECEIVE D AN AMOUNT OF RS.21,66,52,000/-. THE SAID AMOUNT WAS CLAIMED IN THE RETURN OF INCOME AND THE CLAIM WAS ACCEPTED BY THE AO IN THE REGULAR ASSESSMENT AS EXEMPT. HOWEVER, IN THE REASSESSMENT PR OCEEDINGS U/S.147 OF THE ACT, THE AO TAXED THE AMOUNT OF RS.21,52,7 3,777/- AS INCOME FROM LONG TERM CAPITAL GAINS. AO RELIED UPON THE DEC ISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHEVANTIBHAI C.M EHTA S. ITO (2004) 83 TTJ 542. FURTHER, THE AO ALTERNATIVELY ASSE SSED THE SAID AMOUNT OF RS.21,52,73,777/- AS INCOME FROM OTHER SOURC ES. AO COMPUTED THE AMOUNT OF GOODWILL AMOUNTING TO RS.16,13,514/- AND TAXED THE SAME AS INCOME FROM CAPITAL GAINS. 8. MEANWHILE, IN THE CONTEXT OF THE REVISION ORDER OF THE C IT IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI, THE SAID ORDER PASSE D U/S.263 WAS QUASHED BY THE HONBLE TRIBUNAL BOTH ON FACTS AND MERITS OF THE CASE. FURTHER, CONSEQUENTIAL ORDER PASSED BY THE AO U/ S.143(3)(II) ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 5 R.W.S. 263 OF THE ACT WAS ALSO DISMISSED AND THE ORIGINAL OR DER OF THE AO WAS RESTORED BY THE DECISION OF THE TRIBUNAL IN THE CA SE OF SMT. SHAKUNTALA S. SANGHAVI. 9. THUS, AS THE THINGS STAND, THE RECEIPTS RECEIVED BY T HE RETIRING PARTNER, SMT. SHAKUNTALA S. SANGHAVI WAS THE SUBJECT MA TTER OF REVISION PROCEEDINGS BY THE CIT AS WELL AS THE FRESH ASSE SSMENT PROCEEDINGS AND THE TRIBUNAL DECIDED THE ISSUE AGAINST TH E REVENUE. THE DECISION OF THE TRIBUNAL IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI VS. ACIT IN ITA NO. 956/PN/2013 RELATING TO A.Y . 2008-09, ORDER DATED 21-03-2014 IS RELEVANT. FURTHER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID ORDER OF THE TRIBUNAL WAS NOT AVAILABLE AT THE TIME OF REASSESSMENT PROCEEDINGS IN THE C ASE OF THE PRESENT ASSESSEE. 10. DURING THE FIRST APPELLATE PROCEEDINGS, ON THE APPEAL AGAINST THE REASSESSMENT ORDER IN THE PRESENT ASSESSEES CAS E, THE FACTS ABOUT THE FINALITY OF THE ISSUE BY THE TRIBUNAL ON THE TAX ABILITY OF THE SAID RECEIPTS WAS PLACED BEFORE THE FIRST APPELLATE AUTHOR ITY. THE CIT(A) CONSIDERED THE SAID DECISION OF THE TRIBUNAL IN THE CA SE OF SMT. SHAKUNTALA S. SANGHAVI VS. ACIT (SUPRA) AND OBSERVED TH AT THE TRIBUNAL DID NOT GO INTO VARIOUS ASPECTS RELATING TO THE A PPLICATION OF PROVISIONS OF SECTION 56(2)(VI) OF THE ACT. ACCORDINGLY, THE CI T(A) HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S. DEE PAK FOODS CONSTITUTES A GIFT TAXABLE UNDER THE ABOVE SAID PROVISIONS OF SECTION 56 OF THE ACT. CONTENTS OF PARA 9 TO 9.3 OF THE ORDER O F THE CIT(A) ARE RELEVANT. FOR THE SAKE OF COMPLETENESS, RELEVANT LINES FROM PARA 9.1 TO 9.3 ARE REPRODUCED HEREUNDER : 9.1 . . . . . . . . .THIS BEING THE CASE, THE HON BLE TRIBUNAL ALSO HAS NOT EXAMINED THE APPLICABILITY OF SECTION 56(2)(VI) OF THE ACT AS THE CIT HAS NOT ARGUED FROM THE POINT OF VIEW OF SECTION 56(2)( VI). THEREFORE, WITH ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 6 DUE RESPECT, IT CAN BE SAID THAT THIS ISSUE HAS NOT BEEN CONSIDERED BY THE HONBLE TRIBUNAL WITH REFERENCE TO THE NEW FACT S AND TO SECTION 56(2)(VI) OF THE I.T. ACT. 9.2 IN MY CONSIDERED VIEW, THE SAID AMOUNTS RECEIVE D BY THE RETIRED PARTNERS ARE WITHOUT CONSIDERATION AND THEREFORE, T HE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT ARE ATTRACTED. 9.3 TO SUM UP, THE AMOUNT OF RS.21,52,73,777/- CAN NOT BE TAXED AS LONG TERM CAPITAL GAINS. HOWEVER, THE AMOUNT OF RS.21,52,73,777/- [RS.21,66,52,000/- - RS.13,78,223/- (CAPITAL ACCOUN T BALANCE)] IS TO BE TAXED AS INCOME FROM OTHER SOURCES U/S.56(2)(VI) OF THE I.T. ACT. THE AO IS DIRECTED ACCORDINGLY. 11. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 12. LD. COUNSEL FOR THE ASSESSEE EXPLAINED THE ABOVE FACTS OF THE CASE AND THE FACT RELATING TO THE SURRENDERING OF ALL RIG HTS IN THE FIRM BY THE ASSESSEE IN ORDER TO RECEIVE THE SAID RECEIPTS O F RS.21,52,73,777/- FROM THE FIRM. AS PER THE LD. COUNSEL, CONSIDERING THE DECISION OF THE TRIBUNAL IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI (SUPRA) THE PRESENT GROUNDS STAND COVERED IN FA VOUR OF THE ASSESSEE. FURTHER, AS PER LD. COUNSEL FOR THE ASSESSEE, THE ISSUE OF TAXATION OF THE SAID RECEIPT UNDER THE HEAD INCOME FROM OTHER SOURCES ALSO COVERS THE TAXABILITY OF THE RECEIPTS UNDER THE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT. LD. COUNSEL ARGUED THAT THE SAID PROVISIONS OF SECTION 56(2)(VI) OF THE ACT ARE PRESSED INTO SE RVICE ONLY WHEN THE SAID SERVICE IS RECEIVED WITHOUT CONSIDERATION. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE SURRENDERED ALL RIGHTS IN THE FIRM AND THE SAME CONSTITUTES CONSIDERATION. 13. REFERRING TO ABOVE POINTS, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE RECEIVED RS.21,52,73,777/- FROM M/ S. DEEPAK FOODS. SIMILAR AMOUNT WAS RECEIVED FROM THE SAID C OMPANY BY SMT. SHAKUNTALA S. SANGHAVI. THIS ISSUE OF TAXATION OF TH E SAID AMOUNT U/S. 48 AND ALTERNATIVELY U/S.56 OF THE ACT WAS S UBJECT ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 7 MATTER OF THE PROCEEDINGS U/S.263 R.W.S. 143(3) OF THE ACT AND THE TRIBUNAL DELETED THE ADDITION. THEREFORE, ATTEMPTING TO TAX THE SIMILAR AMOUNT IN THE HANDS OF THE PRESENT ASSESSEE IS DU PLICATION OF THE SAME FUTILE EXERCISE BY THE REVENUE. IN THIS REGARD , LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI (SUPRA) IN GENERAL AND THE CONTENTS OF PARA NOS. 6.5 AND 6.8 IN PARTICULAR FOR DEMONST RATING THE REASONS FOR NOT TAXING THE SAID AMOUNT IN THE SAID SECTIO N 48 AND 56 OF THE ACT RESPECTIVELY. FOR THE SAKE OF COMPLETENESS, W E PROCEED TO EXTRACT THE SAID PARAGRAPHS AS UNDER : 6.5 WITH REGARD TO THE ISSUE WHETHER THE AMOUNT RE CEIVED IS TAXABLE AS LONG TERM CAPITAL GAINS. WE FIND THAT ITAT, PUN E IN THE CASE OF RAJNISH BHANDARI [ITA NO. 469/PN/11] HAS HELD THAT THE AMOUNT RECEIVED OVER AND ABOVE THE CAPITAL ACCOUNT BALANCE AT THE TIME OF RETIREMENT IS NOT TAXABLE. WHILE ARRIVING AT ABOVE DECISION, ITAT HAD RELIED UPON ANOTHER DECISION OF ITAT, PUNE IN THE C ASE OF RIYAZ SHAIKH [ITA NO.352/PN/06]. THE RELEVANT PORTION OF THE RAJ NISH BHANDARI IS AS UNDER: '2. THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS AS TO WHETHER THE AMOUNT OF RS 54,59,083/- RECEIVED BY TH E ASSESSEE ON RETIREMENT FROM THE PARTNERSHIP FIRM IS LIABLE T O BE TAXED AS LONG TERM CAPITAL GAIN ARISING ON TRANSFER OF PARTN ERSHIP RIGHTS. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE, A PARTN ER IN VARIOUS PARTNERSHIP FIRMS , RETIRED FROM THE PARTNERSHIP FI RM M/S RAVIRAJ ASSOCIATES W.E.F. 31.3.2007, RELEVANT TO THE ASSESS MENT YEAR 2007-08, VIDE DEED OF RETIREMENT OF THE SAME DATE. H E WAS A PARTNER TO THE EXTENT OF 37.5% OF THE SHARES AND WA S PAID RS 54,59,083/- OVER AND ABOVE THE BALANCE IN HIS CAPIT AL ACCOUNT. THE ASSESSEE CLAIMED THIS AMOUNT AS CAPITAL RECEIPT S NOT LIABLE TO TAX. THE ASSESSING OFFICER, HOWEVER, TAXED THE S AID AMOUNT AS LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER DE RIVED SUPPORT FROM A DECISION OF THE PUNE BENCH OF THE TRIBUNAL I N THE CASE OF SHEVANTIBHAI C. MEHTA V. ITO 83 TTJ 542 (PUNE). THE ASSESSEE TOOK UP THE MATTER IN APPEAL BEFORE THE COMMISSIONE R OF INCOME- TAX (APPEALS). 3. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), ASSESSEE RELIED ON A SUBSEQUENT DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF MR RIYAZ A SHAIKH V. ITO VIDE ITA NO 352/PN /06 DATED 29.10.2010, WHEREIN THE TRIBUNAL HELD THAT AMOUNTS RECEIVED BY THE PARTNER ON HIS RETIREMENT ARE EXEMPT FROM CA PITAL GAINS TAX. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS S INCE DELETED THE IMPUGNED ADDITION AND AGAINST THIS DECI SION, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE ASSESSING OFFICER. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ADDITIONAL C ONSIDERATION RECEIVED BY THE ASSESSEE WAS ON ACCOUNT OF RELINQUI SHMENT OF ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 8 HIS PRE EXISTING RIGHTS IN THE PARTNERSHIP FIRM, AN D THEREFORE, THE SAME WAS IN THE NATURE OF CAPITAL GAIN LIABLE TO TA X AS PER THE PROVISIONS OF SECTIONS 45 READ WITH SECTION 2 (47) FT) & (II) OF THE ACT. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE RESPONDENT- ASSESSEE DEFENDED THE ORDER OF THE COMM ISSIONER OF INCOME-TAX (APPEALS) AND FILED A COPY OF THE ORD ER OF OUR CO- ORDINATE BENCH IN THE CASE OF MR RIYAZ A SHAIKH (SU PRA) IN SUPPORT OF THE STAND OF THE ASSESSEE. 6.8 THE CIT ON AN ALTERNATE BASIS HELD THAT THE AMO UNT OF 21.52 CRS. IS TAXABLE AS INCOME FROM OTHER SOURCES, SIMPL Y IN CASE THE AMOUNT RECEIVED ON RETIREMENT IS NOT TAXABLE AS CAP ITAL GAIN. THE AMOUNT RECEIVED COULD NOT BE TAXED AS INCOME FROM O THER SOURCES, SIMPLY BECAUSE A RECEIPT IS NOT A CAPITAL GAIN CHAR GEABLE TO TAX U/S.45. ONE SHOULD NOT JUMP TO THE CONCLUSION THAT THE RECE IPT IN QUESTION IS NOT A CAPITAL RECEIPT AT ALL. THERE CAN BE CAPITAL RECEIPTS WHICH ARE NOT CHARGEABLE TO TAX U/S.45 OF ACT. MERELY BECAUSE THE RECEIPT IN QUESTION IS NOT TAXABLE AS A CAPITAL GAIN IT COULD NOT BE CO NCLUDED THAT THE IMPUGNED RECEIPT IS A REVENUE RECEIPT CHARGEABLE TO TAX AS INCOME FROM OTHER SOURCES. THIS VIEW IS FORTIFIED BY THE DECISI ONS MUMBAI BENCH IN THE CASE OF NIYATI B YODH [4 SOT 941 (MUM)], WHEREI N, THE PAYMENT RECEIVED BY LEGAL HEIR OF TENANT UNDER A TRIPARTITE AGREEMENT BETWEEN SUCH LEGAL HEIRS, LANDLORD AND PURCHASER FOR HANDIN G OVER PEACEFUL POSSESSION TO THE PURCHASER BEING CAPITAL RECEIPT C OULD NOT BE BROUGHT TO TAX AS INCOME FROM OTHER SOURCES. THE SIMILAR V IEW HAS BEEN EXPRESSED IN THE CASE OF CIT VS. SMT. T.P. SIDHWA ( 1982) 133 ITR 840 (BOM), WHEREIN IT WAS HELD THAT THE INCOME FROM HOU SE PROPERTY EARNED BY ONE WHO WAS NOT OWNER WAS HELD NOT ASSESSABLE UN DER THE HEAD INCOME FROM OTHER SOURCES. THE MERE FACT THAT RENT RECEIVED IN THE ABSENCE OF OWNERSHIP COULD NOT BE BROUGHT TO CHARGE U/S.9 WOULD NOT ENABLE THE REVENUE TO BRING IT UNDER THE RESIDUARY HEAD I.E. INCOME FROM OTHER SOURCES. 14. ON PERUSAL OF THE SAID PARA 6.5, WE FIND THE TRIBUNAL RE LIED HEAVILY ON THE DECISION OF COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF RAJNISH BHANDARI IN ITA NO.469/PN/11 AND ANOTHER DECISION OF THE TRIBUNAL IN THE CASE OF RIYAZ SHAIKH IN ITA NO.352/P N/2006. WE FIND THE DECISION OF THE TRIBUNAL IN THE CASE OF RIYAZ SH AIKH (SUPRA) HAS BEEN CONFIRMED BY THE JURISDICTIONAL HIGH COURT WHEREIN INTER ALIA IT IS HELD THAT THE AMOUNT RECEIVED AT THE TIME OF RETIREMENT IS EXEMPT FROM TAX. CONTENTS OF RELEVANT LINES ARE EXTRA CTED HERE AS UNDER : 6. WE HAVE CAREFULLY CONSIDERED THE RIVA L CONTENTIONS. WE FIND THAT THE COMMISSIONER OF INCOME-TAX (APPEAL S) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE OR DER OF OUR CO- ORDINATE BENCH IN THE CASE OF MR RIYAZ A SHAIKH (SU PRA), WHEREIN ON IDENTICAL ISSUE, THE TRIBUNAL HAS HELD AS UNDER: ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 9 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS NOT ED EARLIER, THE SHORT POINT INVOLVED IN THIS APPEAL RELATES TO TAXABILITY OF AMOUNT RECEIVED BY THE ASSESSEE ON RETIREMENT FROM PARTNERSHIP FIRM. THE HON 'BLE SUPREME COURT IN THE CASE OF MOHANBHAI PAMABHAI (SUPRA) FOLLOWING ITS JUDGMENT I N THE CASE OF SUNIL SIDDHARTHBHAI V. CIT156ITR 509 (SC) HELD T HAT WHEN A PARTNER RETIRED FROM THE FIRM AND RECEIVED HIS SHAR E OF AN AMOUNT CALCULATED ON THE VALUE OF THE NET PARTNERSH IP ASSETS INCLUDING GOODWILL OF THE FIRM, THERE IS NO TRANSFE R OF INTEREST OF THE PARTNER IN THE GOODWILL, AND NO PART OF THE AMO UNT RECEIVED IS ASSESSABLE AS CAPITAL GAIN UNDER SECTION 45 OF T HE ACT. THE JUDGMENT OF THE HUMBLE GUJARAT HIGH COURT IN THE CA SE OF MOHANBHAI PAMABHAI (SUPRA) REPORTED AS 91 ITR 393 ( GUJ) WAS AFFIRMED. SUBSEQUENTLY, IN THE CASE OF CIT V R LING MALLU RAGHUKUMAR, 247 ITR 801 (SC), THE SUPREME COURT HEL D, WHILE AFFIRMING THE PRINCIPLE LAID DOWN IN THE CASE OF MO HANBHAI PAMABHAI (SUPRA) THAT WHEN A PARTNER RETIRES FROM T HE PARTNERSHIP FIRM AND THE AMOUNT OF HIS 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 GA IN' UNDER SECTION 45 OF THE ACT. FURTHER, THE LEARNED COUNSEL FOR THE APPELLANT HAS CORRECTLY POINTED OUT THAT THE DECISION OF THE HON' BLE BOMBAY HIGH COURT IN TRIBHUVANDAS G PATIL (SUPRA) FOLLOWED IN THE CASE OF NA MODY (SUPRA) HAS BEEN REVERSED BY THE HON 'BL E SUPREME COURT IN THE CASE OF TRIBHUVANDAS G PATEL REPORTED IN 236 ITR 515 (SC) ON THIS ASPECT OF THE MATTER. IN FACT, THE HON'BLE BOMBAY HIGH COURT IN A RECENT DECISION IN THE CASE OF PRASHANT S JOSHI (SUPRA) HAS NOTED THE AFORESAID LEGAL POSIT ION. IN THIS CIRCUMSTANCES THE RELIANCE PLACED BY THE AUTHORITIE S BELOW ON THE JUDGMENT OF THE HON 'BLE BOMBAY HIGH COURT IN T HE CASE OF PRASHANT S JOSHI (SUPRA) HAS ALSO NOTED THE OMISSIO N OF SECTION 47(II) OF THE ACT AND INSERTION OF SECTION 45(4) OF THE ACT WITH EFFECT FROM 1.4.1988. CONSIDERING THE ENTIRETY OF T HE LEGAL POSITION, IT HAS BEEN AFFIRMED BY THE HON'BLE HIGH COURT THAT AMOUNTS RECEIVED BY THE PARTNER ON HIS RETIREMENT, ARE EXEMPT FROM CAPITAL GAINS TAX. IN THIS VIEW OF THE MATTER, WE FIND IT APPROPRIATE TO ALLOW THE CLAIM OF THE ASSESSEE AND ACCORDINGLY THE ORDER OF THE CIT(A) IS SET ASIDE. THE AO IS DIR ECTED TO DELETE THE IMPUGNED ADDITION. THUS, IN GROUND NOS 2 & 3, A SSESSEE SUCCEEDS AS ABOVE.' THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND ACCORDINGLY , AFFIRM HIS ORDER. THE REVENUE FAILS ON THIS GROUND OF APP EAL.' NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BE HALF OF REVENUE WITH REGARD TO ABOVE LEGAL PREPOSITION. THE ASSESS EE FURTHER CLARIFIED THAT THE DECISION OF ITAT, PUNE IN THE CASE OF RIYA Z SHAIKH HAS BEEN CONFIRMED BY HON'BLE JURISDICTIONAL OF BOMBAY HIGH COURT, INTER ALIA HELD THAT THE AMOUNT RECEIVED AT THE TIME OF RETIRE MENT IS EXEMPT FROM TAX. THE RELEVANT OPERATIVE PARA OF THE SAID ORDER IS AS UNDER: '2. WE FIND THAT BY THE IMPUGNED ORDER, THE TRIBUNA L WHILE HOLDING THAT AMOUNTS RECEIVED BY A PARTNER ON HIS R ETIREMENT FROM PARTNERSHIP FIRM ARE EXEMPT FROM CAPITAL GAINS TAX RELIED UPON THE DECISION OF THIS COURT IN THE MATTER OF PR ASHANT S. JOSHI V/S. INCOME TAX OFFICER & ANR. REPORTED IN [2 010] 324 ITR 154 (BOM). COUNSEL FOR THE REVENUE IS UNABLE TO POI NT OUT AS TO ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 10 HOW THE DECISION IN THE MATTER OF PRASHANT S. JOSHI (SUPRA) INTER ALIA HOLDING THAT NO CAPITAL GAINS ARE PAYABLE BY A N ERSTWHILE PARTNER ON AMOUNTS RECEIVED ON RETIREMENT WOULD NOT BE APPLICABLE TO THE PRESENT CASE. THE ONLY SUBMISSION ON BEHALF OF THE REVENUE IS THAT THERE WAS AN EARLIER DECISION O F THIS COURT IN THE MATTER OF N.A. MODY V/S. CIT REPORTED IN [1986] 162 ITR 420 AND IT HAS NOT BEEN CONSIDERED IN THE DECISION REND ERED IN THE MATTER OF PRASHANT S. JOHSI (SUPRA). 3. IN THE IMPUGNED ORDER, THE TRIBUNAL DOES REFER T O THE DECISION OF THIS COURT IN THE MATTER OF N.A. MODY (SUPRA) AN D STATES THAT IT FOLLOWS THE DECISION OF THIS COURT IN THE MATTER OF CIT V/S. TRIBHUVANDAS G. PATEL REPORTED IN 115 ITR 95 AND TH E SAME HAS BEEN REVERSED BY THE APEX COURT IN TRIBHUVANDAS G. PATEL V/S. CIT REPORTED IN 263 ITR 515. THIS COURT IN THE MATT ER OF PRASHANT S. JOSHI (SUPRA) HAS ALSO REFERRED TO THE DECISION OF TRIBUVANDAS G. PATEL (SUPRA) RENDERED BY THIS COURT AND ITS REVERSAL BY THE APEX COURT. MOREOVER, THE DECISION OF THIS COURT IN THE CASE OF PRASHANT S. JOSHI (SUPRA) PLACED REL IANCE UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V/ S. R. LINGAMALLU RAJKUMAR REPORTED IN [2001] 247 ITR 801, WHEREIN IT HAS BEEN HELD THAT AMOUNTS RECEIVED ON RETIREMENT B Y A PARNTER IS NOT SUBJECT TO CAPITAL GAINS TAX. IN THE ABOVE C IRCUMSTANCES, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION OF LAW'' AGAIN, NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDG E ON BEHALF OF REVENUE WITH REGARD TO DEVELOPMENT ON THE ISSUE. W E FIND THAT THE CLAIM MADE BY THE ASSESSEE IS CORRECT. THE CIT HAS RELIED UPON THE DECISION IN THE CASE OF SHEVANTIBHAI C. MEHTA (SUPR A) WHICH WAS CONSIDERED IN THE CASE OF RAJNISH BHANDARI (SUPRA) INTER ALIA HELD THAT THE AMOUNT RECEIVED ON RETIREMENT FROM PARTNERSHIP IS NOT TAXABLE. SECONDLY, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RIYAZ SHAIKH (SUPRA) HAS ALSO AFFIRMED THAT THE AMOUNT RECEIVED BY A PARTNER AT THE TIME OF RETIREMENT IS NOT TAXABLE. THUS, CONSIDERIN G THE RECENT DECISIONS OF JURISDICTIONAL BOMBAY HIGH COURT AND ITAT, PUNE A S DISCUSSED ABOVE, THE ORDER OF ASSESSING OFFICER CANNOT BE SAI D TO BE ERRONEOUS AS TO BE PREJUDICIAL TO THE INTEREST OF REVENUE TO INV OKE THE PROVISIONS OF SECTION 263 OF ACT. 6.7 REGARDING THE CONTENTION OF CIT THAT THE ENTIRE TRANSACTION WAS AN ARRANGED TRANSACTION. ACCORDING TO HIM, THE AMOU NT RECEIVED BY THE ASSESSEE AS GOODWILL WAS NOT CORRECT SINCE THE GOOD WILL OF M/S. DEEPAK FOODS WAS MUCH LESS. THE COPY OF THE BALANCE SHEET OF DEEPAK FOODS FOR F.Y. 2007-08 HAS BEEN PLACED ON PA GES 123 TO 129 OF THE PAPER BOOK FILED BY ASSESSEE REVEALS THAT TH E TOTAL REVENUE WAS 9.19 CRS. AND THE NET PROFIT WAS RS.85.49 LAKHS. THE CONCERNED CIT IN HIS ORDER HAS CONSIDERED THE TURNOVER AND PROFIT OF M/S. DEEPAK FOODS FOR THE EARLIER YEARS AND HAS HELD THAT THE G OODWILL SHOULD BE COMPUTED AS PER THE SUPER PROFIT METHOD. ACCORDING TO THE CIT, THE GOODWILL AS PER THE SUPER PROFIT METHOD WOULD BE WO RKED OUT AT A MUCH LOWER FIGURE. IN THIS REGARD, WE FIND THAT TH E CIT HAS NOT APPRECIATED THE FACT THAT LESMA LTD. HAD ACQUIRED 1.33 CRS. SHARE CAPITAL IN M/S. SANGHAVI FOODS PVT. LTD. AT A PREMI UM OF RS.67.09 CRS AND THE SANGHAVI FOODS IS A RELATED CONCERN. NOW, F OR F.Y. 2007-08, THE TURNOVER OF SANGHAVI FOODS WAS 6.02 CRS AND IT HAD INCURRED A LOSS OF 55 LACS. THUS, GOING BY THE LOGIC OF THE CIT, THER E WAS NO REASON AS TO WHY LESMA LTD. PAID 67.04 CRS. FOR ACQUISITION OF SHARES OF SANGHAVI FOODS WHEN ITS GOODWILL AS PER T HE SUPER PROFIT METHOD WORKED OUT TO MUCH LOWER A FIGURE. THIS DEMO NSTRATES THAT IN THE COMMERCIAL WORLD, THE SALE AND PURCHASE TRANSAC TIONS ARE NOT ENTERED INTO AS PER THE BOOK RESULTS BUT THEY ARE E NTERED INTO CONSIDERING THE FUTURE POTENTIAL OF A BUSINESS WHIC H A PURCHASER ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 11 ANTICIPATES. IN ITS FACTS AND CIRCUMSTANCES, M/S. DEEPAK FOODS HAD A MUCH STRONGER FINANCIAL POTENTIAL AS COMPARED TO M/ S. SANGHAVI FOODS. THE CIT HAS NOT APPRECIATED THAT M/S. DEEPAK FOODS HAD A BRAND NAME AND ITS PRODUCT WAS HAVING GOOD MARKET A T THE RELEVANT POINT OF TIME. THUS, THE AMOUNT INVESTED IN M/S. DE EPAK FOODS AND M/S. SANGHAVI FOODS IS ON ACCOUNT OF THE BRAND NAME 'NILONS', DEALER NETWORK, CUSTOMER LOYALTY, ETC. THE CIT HAS NOT ADO PTED PRACTICAL APPROACH WHILE DETERMINING GOODWILL. HE FAILED TO A PPRECIATE THE OTHER FACTORS LIKE BRAND NAME AND CUSTOMER BASE, WHICH PL AY A VERY VITAL ROLE IN DETERMINING THE QUANTUM OF GOODWILL. CONSID ERING THESE FACTORS, THE AMOUNT RECEIVED IS REASONABLE. THE CIT HAS NOT PROPERLY APPRECIATED THE UNDER CURRENT FACTORS IN ITS COMMER CIAL BACKGROUND, WHICH IS NOT JUSTIFIED. IN VIEW OF ABOVE LEGAL DIS CUSSION, THE AMOUNT RECEIVED BY ASSESSEE IS EXEMPT FROM TAX. 15. THE ABOVE EXTRACTS FROM THE ORDER OF THE PUNE BENC H OF THE TRIBUNAL IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI (SUPRA), AND THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. SHRI RAJNISH M . BHANDARI IN ITA NO.469/PN/11, ORDER DATED 17-07-2012 AND THE JU DGMENT OF HONBLE BOMBAY HIGH COURT CIT VS. MR. RIYAZ SHEIKH VIDE INCOME TAX APPEAL NO.1909 OF 2011 JUDGMENT DATED 26-02-2013 GOES TO SUGGEST THAT THE RECEIPTS OF THIS KIND ARE NOT TO BE TA XED UNDER THE HEAD INCOME FROM CAPITAL GAINS AS WELL AS UNDER THE HEA D INCOME FROM OTHER SOURCES IN GENERAL. 16. SO FAR WE HAVE DISCUSSED THE BACKGROUND FACTS BY WHICH ASSESSEE AS WELL AS SMT. SHAKUNTALA S. SANGHAVI RECEIVED IDENTICAL AMOUNTS OF RS.21,52,73,777/-. THE FACTS RELATING TO TAXATION OF THE SAME IN THE HANDS OF SMT. SHAKUNTALA S. SANGHAVI BY VIRT UE OF THE PROVISIONS OF SECTION 263 R.W.S. 143(3) OF THE ACT WERE ALS O DISCUSSED. THE SAID ORDERS OF THE REVENUE WERE NOT APPROVED BY T HE ORDER OF THE TRIBUNAL WHICH IS EVIDENT FROM THE ORDERS OF THE TRIBUNAL IN THE CASE OF SMT. SHAKUNTALA S. SANGHAVI (SUPRA). THUS, THE NON-TAXAB ILITY OF THE SAID RECEIPT UNDER THE HEAD CAPITAL GAINS AS WELL AS UNDER THE PROVISIONS OF SECTION 56 OF THE ACT, I.E. UNDER THE HEAD INC OME FROM OTHER SOURCES HAS ALSO REACHED FINALITY. ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 12 17. THAT LEAVES, ANOTHER ASPECT OF TAXABILITY OF THE SAID RECEIPT UNDER THE SPECIFIC PROVISIONS OF SECTION 56(2)(VI) OF THE ACT WH ICH CAME UP FOR THE FIRST TIME IN THIS CASE, AS RAISED BY THE CIT(A). AGGRIEVED WITH THIS SPECIFIC ISSUE WHICH IS CENTRIC TO SECTION 56(2)(VI) OF THE ACT, ASSESSEE RAISED VARIOUS GROUNDS IN THE APPEA L (GROUND NOS. 2 TO 7 IN THE APPEAL OF THE ASSESSEE). WE NEED TO ADJUDICATE THIS ASPECT. THE GROUND-WISE ADJUDICATION IS GIVEN IN THE FOLLOWIN G PARAGRAPHS. 18. GROUND NO. 1 RAISED BY THE ASSESSEE RELATES TO REO PENING OF THE ASSESSMENT U/S.148 R.W.S. 147 OF THE ACT. 19. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE SAME IS NOT PRESSED IN VIEW OF THE COVERED NATURE OF TH E ISSUE ON MERITS. ON HEARING BOTH THE PARTIES ON THIS LEGAL ISSUE A ND CONSIDERING THE CONCESSION GIVEN BY THE LD. COUNSEL FOR TH E ASSESSEE, WE DISMISS THE SAME AS NOT PRESSED. 20. GROUND NO.2 RELATES TO THE DECISION OF THE CIT(A) IN H OLDING THAT THE AMOUNT RECEIVED OF RS.21,52,73,777/- ON THE RETIR EMENT OF THE PARTNER FROM THE FIRM IS TAXABLE U/S.56(2)(VI) OF THE ACT. GROUND NOS. 3 TO 7 SUPPORTS THE ABOVE ISSUE RAISED IN GROUND N O.2 OF THE APPEAL OF THE ASSESSEE. 21. IN THE SAID GROUNDS NO. 3 TO 7, IT IS THE ARGUMENT O F THE ASSESSEE THAT THE CIT(A) IGNORED THE FACT THAT THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE FROM THE FIRM WITHOUT CONSIDERAT ION AND THEREFORE, THE PROVISIONS OF SECTION 56(2)(VI) ARE NOT TO BE INVOKED ON THE FACTS OF THE CASE. OTHERWISE, THE CIT(A) HELD THAT THE SAID AMOUNT RECEIVED BY THE ASSESSEE AT THE TIME OF RETIREMENT FROM THE FIRM WAS WITHOUT ANY CONSIDERATION. THEREFORE, WE HAVE TO NOW AD JUDICATE ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 13 HERE IF THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE AN D OTHER CO- PARTNER SMT. SHAKUNTALA S. SANGHAVI WITHOUT ANY CONSIDER ATION OR WITH CONSIDERATION. 22. ON THIS ISSUE, PARTIES HAVE MADE THEIR SUBMISSIONS. W RITTEN SUBMISSIONS BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS RE GARD IN THE FORM OF NOTE ARE EXTRACTED AS UNDER : 1. THIS IS AN APPEAL PASSED AGAINST THE ORDER PASS ED BY THE LEARNED CIT (A). THE ASSESSEE WAS A PARTNER IN THE FIRM M/S. DEEPAK FOODS WHICH WAS ENGAGED IN THE BUSINESS OF PRODUCIN G TUTIFRUTI. M/S. DEEPAK FOODS USED TO SELL THE PRODUCT UNDER THE BRA ND NAME NILONS. THE ASSESSEE RETIRED AS A PARTNER IN M/S. DEEPAK FO ODS ON 17.03.2008. AT THE TIME OF RETIREMENT, THE ASSESSEE RECEIVED TOTAL AMOUNT OF RS.21,66,52,000/-. IN THE RETURN FILED BY THE ASSESSEE FOR A.Y. 2008 - 09, THE ASSESSEE DID NOT OFFER ANY AMOU NT TO TAX WHICH WAS RECEIVED BY HER AT THE TIME OF RETIREMENT FROM THE PARTNERSHIP FIRM. 2. THE ASSESSEE AND MRS. SHAKUNTALA SANGHAVI WERE P ARTNERS IN M/S. DEEPAK FOODS HAVING SHARE OF 49.8% EACH IN THE PROFITS AND LOSSES OF THE FIRM. ONE FOREIGN COMPANY CALLED LESM A LTD. ACQUIRED 50% OF THE INTEREST IN SANGHAVI GROUP WHICH IS MANU FACTURING PICKLES, SAUCES, TUTIFRUTI, ETC. UNDER THE BRAND NAME 'NILON '. ACCORDINGLY, M/S. LESMA LTD., INVESTED RS.67.09 CRS. IN A COMPANY OF THE ASSESSEE GROUP CALLED SANGHAVI FOODS PVT. LTD. WITH THE UNDE RSTANDING THAT THEY WOULD HAVE 50% OF THE SHARE IN THE ASSESSEE GR OUP. LATER ON, SANGHAVI FOODS PVT. LTD. INVESTED RS.52.42 CRS. IN DEEPAK FOODS AND OUT OF THE SAID AMOUNT RS.21.52 CRS. WAS PAID TO TH E ASSESSEE ON HER RETIREMENT FROM M/S. DEEPAK FOODS. SIMILARLY, AN EQ UAL AMOUNT WAS PAID TO MRS. SHAKUNTALA SANGHAVI AND SHE ALSO RETIR ED FROM THE FIRM. THUS, LESMA ACQUIRED 50% INTEREST IN SANGHAVI BUSIN ESSES. 3. THE A.O. TAXED THE AMOUNT RECEIVED BY THE ASSESS EE OF RS.16,13,514/- ON HER RETIREMENT AS LONG TERM CAPIT AL GAINS ON THE GROUND THAT THE SAME COULD PERTAIN TO THE ACTUAL GO OD WILL OF THE FIRM. HE TAXED THE BALANCE AMOUNT OF RS.21.36 CRS. AS INC OME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE. 4. THE ASSESSEE WENT IN APPEAL TO CIT(A) AND SUBMIT TED THAT ON IDENTICAL FACTS ITAT, PUNE IN THE CASE OF MRS. SHAK UNTALA SANGHAVI (PAGE 43 TO 58 OF PAPER BOOK) HAS HELD THAT IN VIEW OF BOMBAY H.C. DECISION IN THE CASE OF RIYAZ SHAIKH AND ITAT PUNE DECISIONS IN THE CASES OF RAJANISH BHANDARI AND RIYAZ SHAIKH, THE AD DITIONAL AMOUNT RECEIVABLE BY A PARTNER ON RETIREMENT FROM A FIRM I S NOT TO BE TAXED AS CAPITAL GAINS. FURTHER, IN PARAS 6.8 TO 6.10 OF ITS ORDER, ITAT, PUNE HAS HELD THAT SUCH A RECEIPT CANNOT BE TAXED AS INCOME FROM OTHER SOURCES. 5. THE CIT(A) HELD THAT IN VIEW OF THE ITAT ORDER THE ADDITIONAL AMOUNT RECEIVED BY THE ASSESSEE ON HER RETIREMENT C ANNOT BE TAXED AS CAPITAL GAINS BUT HE HELD THAT THE AMOUNT CAN BE TA XED U/S 56(2)(VI) AS INCOME FROM OTHER SOURCES IN HER HANDS. THIS SECTIO N IS APPLICABLE IN A CASE WHERE AN ASSESSEE RECEIVES A SUM OF MONEY WITH OUT ANY CONSIDERATION. ACCORDING TO HIM, THIS PROVISION WAS NOT CONSIDERED BY ITA T, PUNE IN THE CASE OF SHAKUNTALA SANGHAVI AND HENCE, THAT DECISION IS NOT APPLICABLE IN THIS CONTEXT. ACCORDI NGLY, HE TAXED THIS ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 14 COMPENSATION OF RS.21.52 CRS. AS INCOME FROM OTHER SOURCES U/S 56(2)(VI) IN THE HANDS OF THE ASSESSEE. 6. THE ASSESSEE SUBMITS THAT THE ISSUE IN THIS CAS E IS FULLY COVERED BY ITAT DECISION IN THE CASE OF SHAKUNTALA SANGHAVI . AS THE CIT(A) HIMSELF AGREES, ITAT HAS CLEARLY HELD THAT THE ADDI TIONAL AMOUNT RECEIVED BY SHAKUNTALA SANGHAVI ON HER RETIREMENT A S A PARTNER FROM DEEPAK FOODS IS NOT TAXABLE AS CAPITAL GAINS IN VIE W OF BOMBAY H.C. DECISION. FURTHER, IT ALSO HELD VERY CLEARLY IN PAR A 6.8 THAT SUCH A CAPITAL RECEIPT CANNOT BE TAXED AS INCOME FROM OTHE R SOURCES ALSO. IN THIS CONTEXT, IT FOLLOWED BOMBAY H.C. DECISION IN T HE CASE OF T.P. SIDHVA [133 ITR 840] AND ITAT, MUMBAI BENCH DECISIO N IN THE CASE OF NIYATI YODH [4 SOT 941]. THESE DECISIONS ARE PLACED ON PAGES 9 TO 45 OF LEGAL COMPILATION. IN THESE CASES, IT IS HELD TH AT SIMPLY BECAUSE A PARTICULAR RECEIPT IS NOT TAXABLE UNDER A PARTICULA R HEAD OF INCOME, IT CANNOT BE BROUGHT TO TAX UNDER THE RESIDUARY HEAD A S INCOME FROM OTHER SOURCES. ONCE, THE NATURE OF INCOME IS CLASSI FIED UNDER A PARTICULAR HEAD, ONE HAD TO LOOK ONLY TO THE CORRES PONDING COMPUTING SECTION FOR THE PURPOSES OF CHARGEABILITY TO TAX. A CCORDINGLY, THE ASSESSEE SUBMITS THAT HON'BLE TRIBUNAL IN THE CASE OF SHAKUNTALA SANGHAVI HAS CONSIDERED THE ASPECTS AS TO WHETHER T HE INCOME COULD BE TAXED AS INCOME FROM OTHER SOURCES OR NOT AND TH E CIT(A) HAS CLEARLY ERRED IN HOLDING THAT ITAT HAS NOT CONSIDER ED THIS ASPECT. 7. AFTER ALL, THE ADDITION U/S 56(2)(VI) WOULD COM E WITHIN THE PURVIEW OF INCOME FROM OTHER SOURCES ONLY. ITAT IN THE CASE OF SHAKUNTALA SANGHAVI HAS CLEARLY HELD THAT THE ADDIT IONAL AMOUNT ON RETIREMENT CANNOT BE TAXED AS INCOME FROM OTHER SOU RCES. THUS, IT HAS CONSIDERED THE VARIOUS CLAUSES OF SECTION 56 AND TH EN ONLY IT HAS GIVEN THE ABOVE DECISION. JUST BECAUSE, ITAT HAS NOT REFE RRED TO THE SPECIFIC SUB SECTION I.E. SECTION 56(2)(VI), IT DOES NOT MEA N THAT ITAT HAS NOT CONSIDERED IT. ACCORDINGLY, CIT(A) IS NOT JUSTIFIED IN HOLDING THAT ITAT HAS NOT CONSIDERED THE TAXABILITY OF U/S 56(2)(VI). 8. FURTHER, THE CIT(A) HAS GROSSLY ERRED IN HOLDING THAT THE RECEIPT ON RETIREMENT FROM THE FIRM IN THE HANDS OF THE ASS ESSEE CAN BE TAXED AS INCOME U/S 56(2)(VI). THIS SECTION APPLIES TO A CASE WHEREIN THE ASSESSEE RECEIVES SUM OF MONEY WITHOUT CONSIDERATIO N THEN SUCH A RECEIPT IS TAXABLE AS AN INCOME. FOR EXAMPLE, A GIF T WOULD CONSTITUTE INCOME. IN OUR CASE, ASSESSEE ON HER RETIREMENT HAS SURRENDERED HER RIGHT AS A PARTNER IN THE FIRM. SHE SURRENDERED HER RIGHT, TITLE, INTEREST IN THE FIRM, M/S. DEEPAK FOODS ON HER RETI REMENT AND THEREFORE, SHE GOT THIS COMPENSATION. HENCE, IT CAN NOT BE HELD THAT SHE RECEIVED THE COMPENSATION WITHOUT ANY CONS IDERATION. ACCORDINGLY, THE CIT(A) HAS CLEARLY ERRED IN INVOKI NG THIS SECTION AND TAXED THE AMOUNT AS INCOME FROM OTHER SOURCES IN TH E HANDS OF THE ASSESSEE. 9. AS ALREADY CLARIFIED, THE ASSESSEE SUBMITS THA T HER CASE IS FULLY COVERED BY THE ITAT DECISION IN THE CASE OF SHAKUNT ALA SANGHAVI AND THE AMOUNT RECEIVED ON HER RETIREMENT FROM THE FIRM CANNOT BE TAXED AS INCOME FROM OTHER SOURCES IN HER HANDS. ACCORDIN GLY, THE ASSESSEE'S APPEAL MAY KINDLY BE ALLOWED. 23. FROM THE ABOVE, IT IS THE CASE OF THE ASSESSEE THAT THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE IN RESPONSE TO SU RRENDER OF HER RIGHT AS A PARTNER IN THE FIRM. SHE SURRENDERED HER RIGH T, TITLE, INTEREST IN THE FIRM M/S. DEEPAK FOODS ON HER RETIREMENT. IN RETURN, ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 15 SHE GOT THIS COMPENSATION OF RS.21,66,32,000/-. HENCE, IT CA NNOT BE HELD THAT SHE RECEIVED THE COMPENSATION WITHOUT ANY CONSIDERATIO N. 24. THIS BEING THE UNDISPUTED FACTS OF THE CASE, WE HAVE TO EXAMINE WHETHER THE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT APPLY TO THE FACTS OF THE PRESENT CASE. FOR THIS PURPOSE, THE SAID CLAUSE (V I) OF SECTION 56(2) IS EXTRACTED AS UNDER : (VI) WHERE ANY SUM OF MONEY, THE AGGREGATE VALUE O F WHICH EXCEEDS FIFTY THOUSAND RUPEES, IS RECEIVED WITHOUT CONSIDERATION , BY AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, IN ANY PREV IOUS YEAR FROM ANY PERSON OR PERSONS, ON OR AFTER THE 1 ST DAY OF APRIL, 2006 [BUT BEFORE THE 1 ST DAY OF OCTOBER, 2009], THE WHOLE OF THE AGGREGATE VALUE OF SUCH SUM: . . . . . . . . . . . . . 25. THE ABOVE CLAUSE (VI) INDICATES THE REQUIREMENTS OF REC EIVING OF ANY SUM AND WITHOUT CONSIDERATION. IN OTHER WORDS, THE PROVISIONS ARE VERY SPECIFIC AND THAT THE SAID CLAUSE (VI) WILL PRESS INTO SERVICE ONLY WHEN ANY SUM IS RECEIVED/AND RECEIVED WITHOUT CONS IDERATION. THESE TWO CONDITIONS NEED TO BE FULFILLED IF THE ABOVE PROVIS IONS ARE APPLIED VALIDLY. 26. IN THE LIGHT OF THE ABOVE FACTS AS WELL AS THE LEGAL P OSITION, WE HEARD THE LD. DR FOR THE REVENUE AS WELL ON THIS SPECIFIC IS SUE RELATING TO THE APPLICABILITY OF PROVISIONS OF SECTION 56(2)(VI) OF T HE ACT QUA THE WITHOUT CONSIDERATION. IT IS THE CASE OF THE L D. DR FOR THE REVENUE THAT THE ORDER OF THE CIT(A) IS HEAVILY RELIED, I.E. THE OPERATIONAL PARAS (PARA NO.9.1 TO 9.3 OF THE ORDER) WHICH AR E ALREADY EXTRACTED IN PARA NO.10 OF THIS ORDER. FURTHER, IT IS THE CASE OF THE CIT(A) THAT ASSESSEE RECEIVED THE SAID AMOUNT OF RS.21,52,7 3,777/-, AS IS THE CASE WITH SMT. SHAKUNTALA S. SANGHAVI AND THE SAME IS RECEIVED WITHOUT CONSIDERATION. AS SUCH, THE ORDER OF TH E CIT(A) IS ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 16 DEFICIENT ON REASONS FOR NOT TREATING THE RIGHTS SURRENDE RED BY THE PARTNERS, I.E. ASSESSEE AND SMT. SHAKUNTALA S. SANGHAVI TO THE FIRM, AS THE ADEQUATE CONSIDERATION FOR RECEIVING THE SAID AMOU NT. THEREFORE, IN OUR VIEW, THE SAID FINDING OF THE CIT(A) AS GIVEN IN PARA NOS. 9.1 TO 9.3 SUFFERS FROM MAJOR SETBACK ON THIS ISSUE OF SURRENDER OF RIGHTS/SHARE IN THE FIRM FOR RECEIPT OF SAID CONSIDERATION BY THE PARTNERS. AS SUCH, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE CONTINUES TO BE THE PARTNER OF THE FIRM EVEN AFTER THE R ECEIPT OF THE CONSIDERATION AND THE ASSESSEE HAS NOT SURRENDERED TH E RIGHTS OF EVERY KIND IN THE FIRM. FROM THIS PERSPECTIVE, THE ORDER O F THE CIT(A) WHICH DECIDED THE ISSUE AGAINST THE ASSESSEE RELYING ON THE SAID PROVISIONS OF SECTION 56(2)(VI) OF THE ACT, IS ERRONEOUS AND T HEREFORE, THE SAID ORDER OF CIT(A) IS REQUIRED TO BE REVERSED AND THE SAME IS IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NOS. 2 TO 7 BY THE ASSESSEE ARE ALLOWED. 27. GROUND NO.8 RAISED BY THE ASSESSEE IS CONSEQUENTIAL IN NATURE AND GROUND NO.9 IS GENERAL IN NATURE. THEREFORE, THE SAID GROUNDS ARE DISMISSED AS SUCH. 28. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF DECEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 13 TH DECEMBER, 2017. ITA NO.161/PUN/2015 SMT. VASUMATI PRAFULLACHAND SANGHAVI 17 / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) - 2, NASHIK CIT - 2, NASHIK % , , A BENCH PUNE; / GUARD FILE.