Ajay Kumar Doshi., Kolkata V. A.C.I.T.Cir - 54,KOL, Kolkata

ITA 1866/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100248 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 18-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRIDHAR BHATTACHARYA
• Assessee Lawyers: J P KHAITAN
• Keywords: Capital asset; Salary income; Opportunity of being heard; Cost of acquisition; Fair market value; Tax effect; Capital receipt
• Section: 56

Judgement Text

I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1866/KOL/ 2012 ASSESSMENT YEAR: 2003-2004 AJAY KUMAR DOSHI,.................................. ...............................APPELLANT P-130, CIT ROAD, 2 ND FLOOR, KOLKATA-700 010 [PAN : ADGPD 2041 M] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................RESPONDENT CIRCLE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 -A N D I.T.A. NO. 120/KOL/ 2013 ASSESSMENT YEAR: 2003-2004 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................APPELLANT CIRCLE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 -VS.- AJAY KUMAR DOSHI,.................................. ...............................RESPONDENT P-130, CIT ROAD, 2 ND FLOOR, KOLKATA-700 010 [PAN : ADGPD 2041 M APPEARANCES BY: SHRI J.P. KHAITAN, SR. ADVOCATE , FOR THE ASSESSEE SHRI SRIDHAR BHATTACHARYA, JCIT, FOR THE DEPARTMENT NATE OF CONCLUDING THE HEARING : DECEMBER 04, 2015 DATE OF PRONOUNCING THE ORDER : DECEMBER 11, 2015 O R D E R PER SHRI P.M. JAGTAP :- THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 1866/KOL/2012 AND OTHER FILED BY THE REVENUE BEING ITA NO. 120/KOL/2013, ARE CROSS APPEALS, WHICH ARE DIRECTED AGAINST THE ORDER OF I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 2 OF 14 LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOL KATA DATED 06.11.2012 FOR THE ASSESSMENT YEAR 2003-04. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE, GRO UND NO. 1 OF WHICH DISPUTES THE ADDITION OF RS.1,46,00,000/- MADE BY T HE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) TO THE TOTAL INCOME OF THE ASSESSEE REJECTING THE STAND OF THE ASSESESE THAT THE SAME I S CAPITAL RECEIPT. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS A CHARTERED ACCOUNTANT BY PROFESSION. THE RETURN OF I NCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 27.11.2003 DECLARING TOTAL INCOME OF RS.72,35,276/-. IN THE SAID RETURN, THE S UM OF RS.1,46,00,000/- WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE FROM TAX A ND THE FOLLOWING NOTE WAS APPENDED TO THE RETURN TO SUPPORT AND SUBSTANTI ATE THE SAID CLAIM:- INCOME EXEMPT FROM TAX- CAPITAL RECEIPTS- DURING T HE YEAR, I HAVE RECEIVED RS.1,46,00,000/- FROM EYLLP THROUGH ACCOUNTING PARTNERS TRUST UPON TERMINATION OF MY EMPLOYMENT WITH ERNST & YOUNG PVT. LIMITED. SINC E THE PAYMENT IS RECEIVED NEITHER FROM MY EMPLOYER NO R ON BEHALF OF MY EMPLOYER ( & SINCE THERE WAS NO OBLIGA TION UPON MY EMPLOYER TO PAY SUCH AMOUNT TO ME), IT IS N OT TAXABLE AS PROFITS IN LIEU OF SALARY UNDER THE INCO ME TAX ACT, 1961. FURTHER, COURTS HAVE HELD THAT CONSIDERA TION RECEIVED FOR GIVING UP EMPLOYMENT RIGHT IS A CAPITA L RECEIPT. HENCE, APPLYING THIS PRINCIPLE, THE AMOUNT RECEIVED BY ME IS NOT TAXABLE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE SUM OF RS.1,00,00,000/- (N ET OF TAX) WAS RECEIVED FROM ERNST & YOUNG LLP THROUGH ACCOUNTING PARTNERS TRUST-1 UPON HIS CESSATION OF EMPLOYMENT WITH ERNST & YOUNG. IT WAS CONTENDED THAT SINCE THE SAID AMOUNT WAS IN THE NATURE OF CAPITAL RECEIP T, IT WAS EXEMPT FROM TAX AND THE SAME, THEREFORE, WAS NOT INCLUDED AS PA RT OF TOTAL INCOME DECLARED IN THE RETURN. RELIANCE IN SUPPORT OF THIS CONTENTION WAS PLACED BY THE ASSESSEE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 3 OF 14 OF NARESH NARAYAN SAXENA VS.- CIT REPORTED IN 220 ITR 19. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESS ING OFFICER AND THE SUM OF RS.1,46,00,000/- WAS BROUGHT TO TAX BY HIM I N THE HANDS OF THE ASSESSEE AS INCOME FROM SALARY FOR THE FOLLOWING RE ASONS GIVEN IN PARAGRAPHS NO. 4.1 AND 4.2 OF THE ASSESSMENT ORDER: - 4.1. I HAVE CONSIDERED THE SUBMISSION OF THE ASSES SEE. THE DECISION OF THE HON'BLE SUPREME COURT CITED BY THE ASSESSEE IS NOT APPLICABLE HERE AS THE FACTS OF THE SAID CASE A RE NOT SIMILAR TO THE PRESENT CASE. I WANTED TO EXAMINE THE TERMS AND CONDITIONS OF THE DEED OF THE ACCOUNTING PARTNERS T RUST-1 THROUGH WHICH THE ASSESSEE CLAIMS TO HAVE RECEIVED THE SAID MONEY WHICH THE ASSESSEE CLAIMS AS COMPENSATION. TH E OFFICE OF THE TRUST IS AT NEW DELHI. THE TRUSTEE OF THE SAID TRUST HAS STATED THAT THE MONEY WAS RECEIVED FROM THE ERNST & YOUNG GLOBAL SERVICES, IN SHORT EYGS, FOR PAYMENT TO THE RETIRING PARTNERS. A COPY OF THE BALANCE SHEET OF THE TRUST AS ON 31.03.2003 SENT BY THE TRUSTEE IS ENCLOSED. UNFORTU NATELY, THE COPY OF THE TRUST DEED WAS NOT MADE AVAILABLE TO ME FOR EXAMINATION. THEY HAVE EXPRESSED INABILITY TO FURNI SH THE COPY OF THE DEED. IT HAS BEEN STATED THAT THE ASSESSEE W AS PAID THE ABOVE MONEY BY THE SAID TRUST AS PER THE BALANCE SH EET AND STATEMENT OF RECEIPTS & ITS APPLICATION (ENCLOSED A S ANNEXURE B TO THIS ORDER). IT IS NOT CLEAR WHY THE SAID TR UST WAS FORMED AND ON WHICH GROUNDS THE SAID MONEY WAS PAID TO HIM . THE ASSESSEE CLAIMS THAT HE WAS PAID THE SAME UPON HIS CESSATION OF EMPLOYMENT WITH HIS EMPLOYER ERNST & YOUNG PVT LTD. THE ASSESSEE HAS WANTED TO MAKE IT A POINT THAT HE HAS RECEIVED THE SAID AMOUNT AS COMPENSATION FOR THE LOSS OF SOURCE OF INCOME WHICH HE WOULD HAVE BEEN RECEIVING HAD HE CONTINUED AS AN EMPLOYEE. I HAVE STATED EARLIER THAT THE TERMS OF T HE DEED COULD NOT BE EXAMINED. I SHOULD MENTION HERE THAT THE ASS ESSEE WAS ALSO A PARTNER IN A FIRM NAMELY, M/S. S. R. BATLIBO I & CO. FROM WHERE HE HAD RETIRED DURING THIS YEAR. THE MONEY WA S RECEIVED BY THE ASSESSEE UPON HIS CESSATION OF EMPLOYMENT AN D RETIREMENT FROM PARTNERSHIP FIRM. IT MAY BE NOTED T HAT THE SAID AMOUNT WAS NOT PAID BY HIS EMPLOYER OR HIS FIRM DIR ECTLY. IT IS NOT CLEAR IN ABSENCE OF THE DEED OF THE TRUST OR CL ARIFICATION OF THE TRUSTEE WHETHER THE MONEY WAS PAID TO THE ASSES SEE ON CESSATION OF EMPLOYMENT OR RETIREMENT FROM PARTNERS HIP FIRM. THE SAID MONEY TERMED AS COMPENSATION WAS RECEIVED ON PREMATURE CESSATION OR RETIREMENT EITHER FROM EMPLO YER OR PARTNERSHIP. THE SALARIED PERSONS ARE BEING PAID CO MPENSATION UPON VOLUNTARY RETIREMENT PRIOR TO THE NORMAL DATE OF RETIREMENT. THE SAID COMPENSATION IS BEING TAXED AS SALARY INCOME UNDER THE ACT. THE ACT HAS NOT EXEMPTED THE COMPENSATION OF SALARY INCOME. THE PRESENT CASE IS VERY SIMILAR. THE ASSESSEE STATES THAT HE HAS RECEIVED C OMPENSATION I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 4 OF 14 UPON CESSATION OF EMPLOYMENT IN LIEU OF THE REGULAR INCOME BY WAY OF SALARY. THEREFORE, IN MY VIEW, THE COMPENSAT ION OF RS.1,46,00,000/- RECEIVED BY THE ASSESSEE UPON HIS RETIREMENT IS A SALARY INCOME CHARGEABLE TO TAX. IF THE ASSESSEE WAS PAID THE SAID COMPENSATION ON PREMATURE RETIREMENT FROM THE FIRM, THEN THE COMPENSATION WOULD BE THE PROFESSIONAL INCOME C HARGEABLE TO TAX. HERE, UPON THE VERSION OF THE ASSESSEE AND WITHOUT PREJUDICE TO MY SECOND FINDING MADE ABOVE, THE RECE IPT OF RS.1,46,000/- IS CHARGEABLE TO TAX AS SALARY INCOME OF THE ASSESSEE. 4.2. IT APPEARS THAT THE ASSESSEE HAS MISUNDERSTOOD THE MEANING OF 'LOSS OF SOURCE OF INCOME'. IN MY CONSID ERED VIEW THE LOSS OF SOURCE OF INCOME IS ONE WHICH IS BEYOND THE CONTROL OF THE EMPLOYEE. THE ASSESSEE HAS VOLUNTARILY OPTED FOR RETIREMENT. THEREFORE, THE AMOUNT RECEIVED DUE TO H IS RETIREMENT IS IN LIEU OF SALARY. IT MAKES NO DIFFER ENCE WHETHER THE RETIREMENT BENEFIT IS PAID BY THE EMPLOYER OR B Y ANY TRUST CREATED FOR PROVIDING RETIREMENT BENEFIT. IN ABSENC E OF TRUST DEED, IT IS NOT ASCERTAINABLE AS TO WHAT WERE THE O BJECTS OF THE TRUST, WHO WERE CONTRIBUTORS OF THE TRUST CORPUS AN D WHAT WERE THE TERMS AND CONDITIONS FOR PAYMENT OF RETIREMENT BENEFIT TO RETIRING PARTNER. HOWEVER, ONE FACT IS OBVIOUS THAT THE ASSSSEE HAS RECEIVED THE BENEFIT ONLY BECAUSE OF HIS CONTIN UATION IN THE EMPLOYMENT IN PAST FOR WHICH HE HAS RECEIVED SALARY . THEREFORE, IN MY VIEW, THE COMPENSATION OF RS.1,46,00,000/- RE CEIVED BY THE ASSESSEE ON HIS CESSATION OF EMPLOYMENT IS IN L IEU OF SALARY AND HENCE IT IS A SALARY INCOME CHARGEABLE TO TAX. 5. THE ADDITION OF RS.1,46,00,000/- MADE BY THE ASS ESSING OFFICER TREATING THE AMOUNT IN QUESTION AS INCOME FROM SALA RY WAS CHALLENGED BY THE ASSESSEE IN APPEAL BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY ASSESSEE THAT HE HAD GIVEN UP HIS ENTITLEMENT FOR RECEIPT OF PENSION RIGHTS LIKE OTHERS IN THE SAME CASE IN THE FIRM BECAUSE OF A CHANGE IN ITS CONSTITUTION AND SINCE ERNST & YOUNG GLOBAL HAD MADE THE PAYMENT FOR GIVING UP RIG HT OF PENSION, THE AMOUNT IN QUESTION WAS CLAIMED TO BE EXEMPT FROM TA X BEING RECEIPT OF CAPITAL NATURE. IT WAS ALSO CONTENDED THAT THE ASSE SSEE BEING A PARTNER OF THE FIRM OF M/S. S.R. BATLIBOI & M/S. S.R. BATLIBOI ASSOCIATES, THERE WAS NO EMPLOYER AND EMPLOYEE RELATION BETWEEN THE ASSESSEE AND THE FIRM, WHICH HAD PAID THE AMOUNT IN QUESTION AND, THEREFOR E, THE SAID AMOUNT COULD NOT BE CONSIDERED AS PROFIT IN LIEU OF SALARY CHARGEABLE TO TAX UNDER I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 5 OF 14 THE PROVISION OF SECTION 17(3) OF THE ACT. THIS CON TENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LD. CIT(APPEALS), W HO PROCEEDED TO CONFIRM THE ADDITION OF RS.1,46,00,000/- MADE TO TH E TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE AFTER DISCUSSING ALL THE REL EVANT ASPECTS OF THE MATTER IN PARAGRAPHS NO. 4.2 TO 4.5 OF HIS IMPUGNED ORDER, WHICH ARE EXTRACTED BELOW:- 4.2. THE ASSESSING OFFICER OBSERVED IN THE ASSESS MENT ORDER THAT THE APPELLANT WHO WAS DUE TO RETIRE IN L ATER YEARS WOULD HAVE RECEIVED PENSION IN ACCORDANCE WITH THE PARTNERSHIP DEED. HE COMPARED THE APPELLANT'S CASE WITH THAT OF A PERSON WHO RETIRES PREMATURELY AND RECEIV ES PAYMENTS ON THAT ACCOUNT. THE LD. AR ARGUED THAT SE CTION 17 OF THE INCOME TAX ACT COULD NOT APPLY IN THE APPELL ANT'S CASE. THE APPELLANT BEING PARTNER OF A FIRM OF M/S. S. R. BATLIBOI & M/S S. R. BATLIBOI ASSOCIATES THERE WAS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE APPELLANT AND THE FIRM. IT WAS HIS POSITION THAT THE APPELLANT COULD NOT BE SA ID TO HAVE RECEIVED THE PAYMENT UNDER ANY CONSIDERATION FROM H IS EMPLOYER OR FORMER EMPLOYER. HE VEHEMENTLY SUBMITTE D THAT THE PROVISIONS OF SECTION 17(3) DID NOT APPLY AND T HE AMOUNT RECEIVED CANNOT BE CONSIDERED AS PROFIT IN LIEU SAL ARY. IT IS CORRECT THAT THERE WAS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE APPELLANT AND THE FIRMS OF WHICH HE WAS A PARTNER. IT IS HOWEVER A FACT THAT THE LUM PSUM PAYMENT WAS RECEIVED IN CONSIDERATION FOR GIVING UP PENSION RIGHTS. WHERE ANY THE TERMS OF AN AGREEMENT GOVERNI NG PROFESSIONAL RELATIONSHIP AND MATTERS INCIDENTAL TH ERETO UNDERGO CHANGES AS IN THE IMPUGNED CASE ANY PAYMENT RECEIVED AS A RESULT BECOMES A PROFESSIONAL RECEIPT . IT IS THEREFORE INCONTROVERTIBLY LIABLE TO TAX AS INCOME FROM PROFESSION. THE AMOUNT SO RECEIVED WOULD OTHERWISE HAVE BEEN AVAILABLE TO HIM POST - RETIREMENT BY WAY OF P ENSION FOR THE REST OF HIS LIFE TIME. PENSION IS A REVENUE REC EIPT AND GIVING UP A RIGHT THERETO WOULD NOT CONSTITUTE A SI TUATION OF NON-TAXABLE CAPITAL RECEIPT. THE FACT THAT THE AMOU NT WAS PAID BY M/S. ERNEST YOUNG & GLOBAL THOUGH ACCOUNTIN G PARTNERS TRUST FUND 1 HAS NO BEARING ON THE TAXABIL ITY OF THE AMOUNT PAID TO THE APPELLANT. IF THE PERSON CHOOSES TO RECEIVE IN A LUMPSUM WHAT HE COULD HAVE RECEIVED BY WAY OF MONTHLY PAYMENT, THERE IS NO CONNOTATION OF CAPITAL NATURE IN SPECTRUM OF TAX IN THIS CASE. THOSE CASES EMBRACED SITUATION WHEN PRESENT BUSINES S SET UPS CEASED TO EXIST OR A SOURCE FROM WHICH WAS BEING CURRENTLY DERIVED WHICH WAS NOT THE POSITION IN THE INSTANT I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 6 OF 14 BUT MERELY INVOLVED THE CONCEPT OF A VOLUNTARY CHAN GE IN TERMS WHICH WAS DEVOID OF ANY IMPACT ON TAXABILITY. 'PENSION' TO THE PARTNERS FROM THE FIRM WOULD CONST ITUTE PROFESSIONAL INCOME WHICH IS LIABLE TO TAX. THE CHO RALES TAXABILITY WOULD NOT CEASE BECAUSE THE PARTNERS DEC IDED TO RECEIVE SUCH INCOME IN ANOTHER MANNER. TAXABLE LAWS DO NOT BECOME INAPPLICABLE BECAUSE INCOME WHICH IS TAXABLE IS BY A CONVENIENT MANOEUVRE RECEIVED IN ANOTHER FORM. SEC. 176(4) OF INCOME TAX ACT IS CLEAR ON THIS ISSUE. THE PROVI SIONS ARE PRODUCED AS BELOW:- (4) 'WHERE ANY PROFESSION IS DISCONTINUED IN ANY YEAR ON ACCOUNT OF THE CESSATION OF THE PROFESSION BY, OR THE RETIREMENT OR DEATH OF, THE PERSON CARRYING ON THE PROFESSION, ANY SUM RECEIVED AFTER THE DISCONTINUANCE SHALL BE DEEMED TO BE THE INCOME OF THE RECIPIENT AND CHARGED TO TAX ACCORDINGLY IN THE EAR OF RECEIPT, IF SUCH SUM WOUL D HAVE BEEN INCLUDED IN THE TOTAL INCOME OF THE AFORESAID PERSON HAD IT BEEN RECEIVED BEFORE SUCH DISCONTINUANCE.' 4.3 THE LD. AR QUOTED THE VERDICT IN THE CASE OF KE TTLE WELL BULLEN & CO. LTD. (35 ITR 261)(SC), VAZIR SULTAN & SONS (36 ITR 175)(SC) AND OBEROI HOTEL PVT. LTD. (236 ITR 903)(S C), AND NARESH NARAYAN SAXENA VS. CIT 220 ITR 19 IN SUPPORT OF HIS CONTENTIONS. THESE CASES RELATE TO RECEIPTS AGAINST LOSS OF BUSINESS ASSETS OR SOURCES. THUS THESE JUDGMENTS AR E DISTINGUISHED VIS-A-VIS THE APPELLANT'S CASE. HIS P ROFESSION DID NOT CEASE AND THE SOURCE OF SUCH INCOME NOT EXTINGU ISHED BUT THERE WAS ONLY A CHANGE IN TERMS WHICH CANNOT HAVE THE EFFECT OF NEGATING THE PROVISIONS OF THE I. T. ACT 1963. I N ANY CASE PAYMENT RECEIVABLE FROM THE FIRM UNDER THE APPELLAT ION OF 'PENSION' IS A CONTINGENT RIGHT. IT WAS DEPENDENT O N THE APPELLANT SURVIVING TILL THE DATE OF RETIREMENT WHI CH WAS NOT A CERTAINLY AND THEN PARAMETER OF HOW LONG HE SURVIVE D. TO EXCHANGE SUCH A SITUATION FOR A HANDSOME PAYMENT WA S NOT TANTAMOUNT TO DISMANTLING AN APPARATUS. WHEN THE PA YMENT WAS RECEIVED FROM ERNEST & YOUNG PENSION WAS A DIST ANT AND CONTINGENT ISSUE. TO BORROW AN ANALOGY THE CONCEPT OF PENSION IN THE CASE OF AN EMPLOYEE IS NOT APPLICABLE DURING CONTINUATION OF HIS SERVICE AND IF ANY PAYMENT WAS MADE ON LIEU THEREOF IT WOULD BECOME TAXABLE AS 'PROFIT IN LIEU OF SALARY'. LIKEWISE IN A PROFESSIONAL SET UP A FUTURE CONTINGENT RECEIPT IS CONVERTED INTO PRESENT LUMP SUM ITS CHAR ACTER AS INCOME WILL NOT UNDERGO ANY CHANGE AND CAN HAVE NO IMPACT ON ITS TAXABLE. TAX LAWS DO NOT LAND THEMSELVES TO SUC H MANIPULATION NOR SLEIGHT OF HAND OPERATIONS TO DEFE AT ITS END TO ESCAPE A RIGHTFUL IMPOSITION. I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 7 OF 14 4.4. IT IS NOT POSSIBLE TO SAY THAT THE APPELLANT W AS FORCED TO ACCEPT A CAPITAL SUM IN LIEU OF HIS PENSION. HE VOL UNTARILY CHOSE TO ACCEPT INCOME BY WAY OF PAYMENT FROM ERNEST YOUN G & GLOBAL THROUGH ACCOUNTING PARTNERS TRUST - 1. THE P ENSION COULD NOT HA E BEEN A NON-TAXABLE ITEM AND THE APPE LLANT'S PREFERENCE TO RECEIVE LUMP SUM MONEY CARRIES THE SA ME CONNOTATION. PENSION ITSELF IS NOT A CAPITAL ASSET BUT A REVENUE ONE. THE PAYMENT SO RECEIVED IN OF OPTIONAL CHANGE DOES NOT FALL OUT OF THE UMBRELLA OF TAXABILITY. 4.5. DURING APPELLATE PROCEEDING DT. 12.06.2012 APP ELLANT MENTIONED THAT 'IF I WOULD HAVE RECEIVED COMPENSATI ON FROM E&Y, THEN IT IS REVENUE RECEIPTS. SINCE I HAVE RECE IVED FROM ACCOUNTING PARTNER TRUST-I IT IS CAPITAL RECEIPT'. HERE MODE OF RECEIPT IS NOT IMPORTANT BUT PURPOSE OF RECEIPT IS IMPORTANT. APPELLANT HIMSELF ADMITTED THE RECEIPTS ARE TAXABLE . IT IS A RECEIPT FOR PREMATURE RETIREMENT. ACCOUNTING PARTNE RS TRUST- I MERELY HELPED TO FACILITATE THE RECEIPT OF COMPENSA TION FROM E& Y LTD. AFTER RETIRING FROM S R BATLIBOI & CO., TAKE N OVER E & Y KOLKATA, APPELLANT BEING C.A. BY PROFESSION STARTED HIS OWN PARTNERSHIP CONCERN IN THE NAME & STYLE OF M/S. DOS HI, CHATTERJEE, BAGRI & CO. APPELLANT NEVER LOST THE QU ALIFICATION BUT CHANGE IT FROM ONE TO ANOTHER PROFESSIONAL CONC ERN. HENCE THE APPELLANT'S CONTENTIONS IN THIS BEHALF DO NOT F ORM ANY BASIS FOR ITS CONSIDERATION AS RECEIPT EXEMPT FROM TAX. T HE ADDITION OF RS.L,46,00,000/-IS THEREFORE CONFIRMED. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS CONTENDED THAT THIS ISSUE INVOLVED IN GROUND NO. 1 OF THE ASSESSEES APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MR . RAMKRISHNA AGARWAL VS.- ACIT RENDERED VIDE ITS ORDER DATED 17.07.2014 IN ITA NO. 1740/KOL/2012, WHEREIN A SIMILAR AMOUNT RECEIVED BY THE ASSESSEE AS COMPENSATION FOR GIVING UP HIS RIGHT TO RECEIVE PEN SION WAS HELD TO BE CAPITAL RECEIPT NOT CHARGEABLE TO TAX BY RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KHANNA AND ANNADHANAM REPORTED IN 351 ITR 110. HOWEVER, AS RIGHTLY POINTED OUT BY THE LD. D.R., THE AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE WAS NEV ER CLAIMED BY THE ASSESSEE EITHER DURING THE COURSE OF ASSESSMENT PRO CEEDINGS BEFORE THE ASSESSING OFFICER OR EVEN IN THE STATEMENT OF FACTS FILED BEFORE THE LD. I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 8 OF 14 CIT(APPEALS) TO BE THE AMOUNT RECEIVED FOR GIVING U P HIS RIGHT TO RECEIVE PENSION AND ALTHOUGH THIS CLAIM WAS MADE BY THE ASS ESSEE FOR THE FIRST TIME BEFORE THE LD. CIT(APPEALS), THE IMPUGNED ORDE R OF THE LD. CIT(APPEALS) DOES NOT SHOW THAT HE HAS VERIFIED THE SAME FROM THE RELEVANT DOCUMENTARY EVIDENCE, SUCH AS THE RELEVANT PARTNERSHIP DEED GIVING THE ASSESSEE HIS RIGHT TO RECEIVE PENSION, A GREEMENT WHEREBY THE RIGHT TO RECEIVE PENSION, IF ANY, WAS GIVEN UP BY T HE ASSESSEE FOR THE AMOUNT IN QUESTION, ETC. HE HAS CONTENDED THAT THIS MATTER MAY, THEREFORE, BE SENT BACK TO THE FILE OF THE ASSESSIN G OFFICER FOR VERIFYING THE CLAIM OF THE ASSESSEE. SINCE THIS POSITION POIN TED OUT BY THE LD. D.R. IS CLEARLY EVIDENT FROM THE ORDERS OF THE AUTHORITIES BELOW AND THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO NOT DISPUTED THE SAME, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSU E AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DEC IDING THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE COORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF MR. RAMKRISHNA AGARWAL (SUPRA) AFTER VERIFY ING THE CLAIM OF THE ASSESSEE FROM THE RELEVANT DOCUMENTARY EVIDENCE. NE EDLESS TO MENTION, THAT THE ASSESSEE SHALL OFFER PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 1 OF THE ASSESSEE S APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 7. IN GROUND NO. 2, THE ASSESSEE HAS DISPUTED THE A DDITION OF RS.22,56,250/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF SHARE OF GOODWILL RECEIV ED BY THE ASSESSEE ON HIS RETIREMENT FROM THE PARTNERSHIP FIRM OF M/S. S .R.. BATLIBOI & CO. 8. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD RETIRED FROM THE PARTNERSHIP FIRM OF M/S. S.R. BATLIBOI & CO. UP ON HIS RETIREMENT, HE WAS PAID, INTER ALIA, A SUM OF RS.22,56,250/- IN LIEU OF THE GOODWILL FR OM THE SAID FIRM AND THE SAME WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE FROM TAX BEING IN THE NATURE OF CAPITAL RECEIPT. THE CLA IM MADE BY THE ASSESEE I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 9 OF 14 IN THIS REGARD WAS THAT THE SAID AMOUNT COULD NOT B E TAXED EVEN AS CAPITAL GAINS SINCE THERE WAS NO TRANSFER OF GOODWILL. THIS CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE S UM OF RS.22,56,250/- RECEIVED BY THE ASSESSEE AS HIS SHARE OF GOODWILL F ROM M/S. S.R. BATLIBOI & COMPANY ON HIS RETIREMENT WAS BROUGHT TO TAX BY THE ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FR OM OTHER SOURCES FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5.1 OF THE ASSESSMENT ORDER:- 5.1. THE FIRM CREATED GOODWILL AND APPORTIONED THE SAME AMONGST THE PARTNERS AND CREDITED THE VALUE OF THE GOODWILL TO THE ACCOUNTS OF THE PARTNERS ACCORDING TO THE PR OFIT SHARING RATIO. ON CREATION OF THE GOODWILL, IT DOES NOT IPS O FACTO BECOME ANY INCOME IN THE HANDS OF THE FIRM BUT THE VALUE OF THE GOODWILL DEPENDS ON THE REPUTATION AND THE QUAN TUM OF INCOME GENERATED/EARNED IN THE POST. THEREFORE, WHE N IT IS PAID TO THE PARTNER ON RETIREMENT, THE PARTNER'S SH ARE IN THE PROFIT AND LOSS RATIO ASSUMES THE CHARACTER OF DIST RIBUTION OF THE FIRM'S ACCUMULATED INCOME IN THE FORM OF GOODWI LL WHICH WAS NOT TAXED IN THE FIRM'S HANDS. THE MONEY RECEIV ED FROM THE FIRM BY A PARTNER ON ACCOUNT OF HIS CAPITAL IS A CAPITAL RECEIPT BECAUSE WHAT IS RECEIVED BY THE PARTNER IS HIS OWN CAPITAL WHICH WAS EITHER CONTRIBUTED BY HIM OR WAS OUT OF ACCUMULATION OF PROFIT SUBJECTED TO TAX. BUT WHEN I T IS RECEIVED ON ACCOUNT OF GOODWILL, IT IS NOT HIS CAPI TAL CONTRIBUTION OR OUT OF INCOME ACCUMULATION SUBJECTE D TO TAX IN FIRM'S HANDS. AS HE RECEIVES ANY MONEY IN LIEU O F GOODWILL, THE SAID MONEY BECOMES HIS INCOME AS HE GETS IT BY VIRTUE OF HIS BEING A PARTNER AND IN EXERCISE OF HIS PROFESSI ON. MOREOVER, ANY INCOME HAS TO BE TAXED EITHER IN THE HANDS OF THE EARNER OR RECEIVER OF INCOME IN BENEFICIAL CAPA CITY. THEREFORE, I DO NOT AGREE WITH ASSESSEE'S CONTENTIO N THAT HIS SHARE IN GOODWILL RECEIVED ON RETIREMENT IS A CAPIT AL RECEIPT, RATHER IT IS CASUAL RECEIPT IN THE NATURE OF INCOME WHICH WAS NOT TAXED IN THE HANDS OF FIRM. MOREOVER, THIS RECE IPT IS NOT LIABLE TO BE TAXED UNDER ANY OF THE HEADS FROM A TO E OF SECTION 14 OF THE ACT. IN VIEW OF THE OPENING SENTE NCE OF SECTION 56 OF THE ACT, SUCH RECEIPT OF INCOME IS LI ABLE TO BE TAXED AS INCOME FROM OTHER SOURCES. ACCORDINGLY, I TREAT THE ASSESSEES SHARE OF GOODWILL OF RS.22,56,250/- AS I NCOME FROM OTHER SOURCES AND INCLUDE THE SAME IN ASSESSEES TO TAL INCOME. I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 10 OF 14 9. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SA ID ADDITION MADE BY THE ASSESSING OFFICER AFTER RECORDING THE FOLLOW ING OBSERVATIONS IN PARAGRAPH NO. 6 OF HIS IMPUGNED ORDER:- 6. I HAVE CONSIDERED THE A.O.'S FINDINGS AS WELL A S SUBMISSIONS MADE BY APPELLANT CAREFULLY INCLUDING NUMBER OF CAS E LAWS CITED IN WRITTEN SUBMISSION. GOODWILL THOUGH NOT DEFINED IN THE I.T. ACT, 1961 (THE ACT) IT IS A CAPITAL ASSET FOR THE P URPOSE OF COMPUTING CAPITAL GAIN AS IS CLEAR FROM SECTION 55( 2)(A) OF THE ACT WHICH PROVIDES FOR COST OF ACQUISITION OF GOODW ILL TRADE MARK ETC. FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN . IN PRESENT CASE IT IS AN ADMITTED FACT THAT THE TER MS OF PARTNERSHIP OF M/S. S.R. BATLIBOI & CO. (THE FIRM) THERE IS A PROVISION SINCE INCEPTION THAT GOODWILL, IF ANY, OF THE FIRM SHALL ALWAYS BELONG TO THE FIRM AND THAT NONE OF THE PART NERSHIP WOULD HAVE ANY RIGHT, TITLE OR INTEREST IN GOODWILL OF THE FIRM OF WHATSOEVER NATURE. INSPITE OF THIS TERM, DURING THE YEAR UNDER APPEAL FIRM CREATED GOODWILL AS AN ASSET IN ITS BOO KS BY DEBITING TO GOODWILL ACCOUNT AND CREDITING TO THE ACCOUNTS O F THE THEN PARTNERS IN THEIR PROFIT SHARING RATIO. ACCORDINGLY IN PREVIOUS YEAR ENDED ON 31-03-2003 THE FIRM CREDITED RS.22,56 ,250/- TO THE ACCOUNTS OF THE APPELLANT ON ACCOUNT OF GOODWIL L APART FROM OTHER CREDITS ON ACCOUNT OF INTEREST ON CAPITAL AND SHARE OF PROFIT. OUT OF TOTAL CREDIT APPELLANT WITHDRAW RS.2 ,41,71,614/- OVERDRAWING BY RS.7,32,237/-. THUS THE CREDIT IN APPELLANT'S ACCOUNT IS FOR GOODW ILL RS.22,56,250/- OF THE FIRM WHICH IS CLEARLY LIABLE TO BE TAXED AS CAPITAL GAIN. HERE, AN ISSUE MAY BE RAISED THAT THE GOODWILL SO CREATED BY FIRM IN ITS BOOKS WILL BE/ CAN BE SOLD B Y FIRM ONLY AS THE APPELLANT HAS NOT SOLD GOODWILL TO ANYONE. BUT THE FIRM ON SALE OF GOODWILL AT A FUTURE DATE WILL CLAIM DEDUCT ION AGAINST SALE CONSIDERATION AS COST OF ACQUISITION THE TOTAL AMOUNT CREDITED TO ALL THE PARTNERS AS GOODWILL DURING THE YEAR UNDER REFERENCE AND CAN AVOID PAYMENT OF CAPITAL GAIN TAX SUBSTANTIALLY, IN TERMS OF SECTION 55(2)(A)(I) OF T HE ACT. SEC. 10(2A) OF THE ACT INVOKED BY THE APPELLANT CANNOT H ELP HIM AS SAID SECTION DEALS WITH SHARE OF A PARTNER IN THE T OTAL INCOME OF THE FIRM AND NOT SHARE OF GOODWILL OF THE FIRM. IN APPELLANT'S CASE HE IS BEING CREDITED HIS SHARE IN GOODWILL WHICH CREDIT GOES IN CREATION OF GOODWILL IN THE FI RM'S ASSETS. IN SUCH CASE PROVISIONS OF SECTION 55(2)(A)(I) WHICH P ROVIDES THAT IN CASES WHERE THERE IS NO PURCHASE OF GOODWILL COS T OF ACQUISITION WILL BE CONSIDERED AS 'NIL' AS APPELLAN T HAS NOT PURCHASED GOODWILL WHICH IS COVERED BY SUB-CLAUSE ( I) OF CLAUSE (A) OF SECTION 55(2) . I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 11 OF 14 IN VIEW OF ABOVE NO INTERVENTION IS CALLED FOR IN A .O.'S ACTION EXCEPT THAT IN PLACE OF INCOME FROM OTHER SOURCE IT IS TO BE TAXED AS LONG TERM CAPITAL GAIN AS THE AMOUNT IS FOR GOOD WILL RECEIVED BY THE APPELLANT FROM THE FIRM. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE I NVOLVED IN GROUND NO. 2 OF THE ASSESSEES APPEAL IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE D ECISIONS OF THE COORDINATE BENCHES OF THIS TRIBUNAL. IN ONE SUCH DE CISION RENDERED IN THE CASE OF SHRI AMITABH SINGH (ITA NO. 1996/DEL/2006), HONBLE DELHI BENCH OF THIS TRIBUNAL DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE IDENTICAL FACTS AND CIRCUMSTANCES FOR THE FO LLOWING REASONS GIVEN IN PARAGRAPH NO. 5 OF ITS ORDER:- 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RI VAL CONTENTIONS. THE REVENUES CASE IS PRIMARILY BASED ON THE PROVISION CONTAINED IN SECTION 55(2) UNDER WHICH TH E COST OF GOODWILL HAS TO BE TAKEN AS NIL IF IT HAS NOT BEEN PURCHASED FROM A PREVIOUS OWNER. SUCH IS THE CASE HERE NONETHELESS , THIS COST IS FOR THE PURPOSE OF SECTIONS 48 AND 49, WHICH DEAL W ITH THE MODE OF COMPUTATION OF THE INCOME CHARGEABLE UNDER THE H EAD CAPITAL GAINS. BEFORE COMING TO THE MODE OF COMPUTATION, IT HAS TO BE SEEN WHETHER ANY AMOUNT IS CHARGEABLE TO CAPITAL GA INS TAX U/S 45, WHICH IS THE CHARGING SECTION. THE LD. DR WAS N OT ABLE TO EXPLAIN HOW PROVISIONS OF SECTION 45 WERE APPLICABL E IN THE INSTANT CASE. SUB-SECTION 4 OF THIS SECTION DEALS W ITH PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASSET ON DISSOLUTION OR OTH ERWISE OF A FIRM, AND BRINGS TO TAX THE CAPITAL GAINS IN THE HA NDS OF THE FIRM. HOWEVER, WE ARE DEALING WITH A CASE OF THE PARTNER HERE. THE FIRM ACQUIRED GOODWILL OVER A PERIOD OF TIME, WHICH WAS BROUGHT INTO THE BOOKS AND DISTRIBUTED AMONGST EXISTING PAR TNERS BEFORE THE NEW PARTNERS WERE TAKEN IN AND SOME EXISTING PA RTNERS 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 HAV E ANY INDIVIDUAL GOODWILL. THE GOODWILL BELONGED TO THE F IRM AND CONTINUED TO REMAIN WITH THE FIRM. AS CLARIFIED BY THE LD. COUNSEL, NOTHING WAS CHARGED FROM THE INCOMING PART NERS BY WAY OF GOODWILL AND, THUS, THERE IS NO QUESTION OF EVEN INDIRECT I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 12 OF 14 REALIZATION OF THE VALUE OF GOODWILL BY THE ASSESSE E FROM THE INCOMING PARTNER THROUGH THE FIRM IN A NUMBER OF CA SES, 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 ASSE TS 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 MOHANBHAI PAMABHAI AND TRIBHUVANDAS G. PATEL (SU PRA). THE FACT IS THAT A PROVISION CORRESPONDING TO SUB-SECTI ON (3) REGARDING LEVY OF CAPITAL GAIN TAX WHEN A PARTNER B RINGS IN A CAPITAL ASSET TO THE FIRM DOES NOT EXIST ON THE STA TUTE BOOK IN CASE OF RETIREMENT OF THE PARTNER AND, THUS, GENERA L PROVISIONS OF LAW, NAMELY. THAT WHAT HE TAKES IS HIS SHARE IN THE ASSETS OF THE FIRM CONTINUES TO APPLY WITH THE EXCEPTION THAT UND ER SUB- SECTION (4), WHEN A CAPITAL ASSET IS DISTRIBUTED TO THE PARTNER ON DISSOLUTION OF THE FIRM OR ON HIS RETIREMENT AT LES S THAN THE FAIR MARKET VALUE, THEN, THE FIRM BECOMES LIABLE TO PAY CAPITAL GAINS TAX. SUCH IS NOT THE CASE HERE, AS WE ARE DEALING W ITH THE CASE OF A PARTNER. THEREFORE, WE CONCUR WITH THE LD. CIT(AP PEALS) THAT NOTHING WAS TAXABLE IN THE HANDS OF THE ASSESSEE. 12. THE COORDINATE BENCH OF THE TRIBUNAL AT KOLKATA ALSO HAD A OCCASION TO CONSIDER THE SIMILAR ISSUE IN THE CASE OF NAWSHI R H. MIRZA, WHEREIN THE CASE OF THE ASSESSEE FOR EXEMPTION ON ACCOUNT OF SH ARE OF GOODWILL RECEIVED ON RETIREMENT WAS HELD TO BE CAPITAL RECEI PT NOT CHARGEABLE TO TAX BY THE TRIBUNAL FOR THE FOLLOWING REASONS GIVEN IN ITS ORDER DATED 11.01.2008 PASSED IN ITA NO. 1252/KOL/2007:- 9. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RI VAL CONTENTIONS AND ARE OF THE VIEW THAT THE ORDER OF T HE LD. CIT(A) NEEDS TO BE UPHELD AND DOES NOT CALL FOR ANY INTERF ERENCE. IN THE INSTANT CASE, IT IS NOT DISPUTED THAT THE SAID FIRM S WERE HAVING SELF GENERATED GOODWILL WHICH WAS VALUED BY THEM DU RING THE PRESENT ASSESSMENT Y.EAR THERE HAS BEEN NO TRANSFER OF SUCH GOODWILL BY THE SAID FIRMS. THE FIRMS STILL OWN AND HOLD SUCH GOODWILL AND THE ASSESSEE WHO HAS RETIRED HAS NO IN TEREST OF ANY NATURE WHATSOEVER THEREIN. THE REVENUE'S CASE IS PR IMARILY BASED ON VIEW THAT MONEY RECEIVED. IN LIEU OF GOODWILL FR OM THE FIRM BY THE PARTNER IS CASUAL RECEIPT IN THE NATURE OF INCO ME WHICH IS NOT TAXABLE IN THE HANDS OF THE FIRM. WHAT THE PARTNERS GOT AT THE TIME OF THE RETIREMENT INCLUDING THE AMOUNT CREDITE D FOR THE GOODWILL OF THE FIRMS IS A CAPITAL RECEIPT IN THEIR HANDS. THE PARTNERS DID NOT OWN THE GOODWILL NOR DID THEY TRAN SFER THE SAME. THE GOODWILL ALL ALONG REMAINED WITH THE FIRM AS ITS ASSET EVEN AFTER THE RETIREMENT OF THE PARTNERS. WHAT THE PARTNERS GOT ON RETIREMENT WAS FOR THE VALUE OF THEIR INTEREST I N THE FIRM. THIS I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 13 OF 14 VIEW IS DULY SUPPORTED BY VARIOUS DECISION CITED BY THE LD. AUTHORISED REPRESENTATIVE INCLUDING THE DECISION .O F APEX COURT IN THE CASE OF SUNIL SIDDHARTHHBHAI VS. CIT (SUPRA) . 9.1. IN THE INSTANT CASE, THE FIRMS HAVE NOT REALIZ ED ANY AMOUNT ON ACCOUNT OF GOODWILL HENCE THE QUESTION OF ANY AS SESSMENT BEING MADE IN THEIR HANDS DOES NOT ARISE. THE NOTIO NAL VALUATION OF THE GOODWILL IN ITS ACCOUNTS BY THE FIRM DOES NO T RESULT IN ANY TRANSFER WHICH CAN ATTRACT CAPITAL GAINS AS HAS ALS O BEEN CLARIFIED BY THE BOARD IN ITS CIRCULAR NO.495 DATED SEPTEMBER 27. 1987. EVEN THE AMENDMENT MADE IN SECTION 55(2) OF T HE ACT IS OF NO HELP TO THE CASE OF THE DEPARTMENT IN VIEW OF TH E CLARIFICATION MADE BY THE BOARD. WE FAIL TO APPRECIATE HOW THE AMOUNT COULD BE ASSES SED IN THE HANDS OF THE PARTNERS AND THAT TOO UNDER THE HE AD 'INCOME FROM OTHER SOURCES. GOODWILL IS AN INTANGIBLE ASSET AND TRANSFER/SURRENDER OF WHICH WOULD ATTRACT SECTION 4 5 SO THAT THE VALUE RECEIVED WOULD BE A CAPITAL RECEIPT AND ASSES SABLE IF AT ALL ONLY UNDER ITEM 'E' OF SECTION 14. IT CANNOT BE TRE ATED AS A CASUAL RECEIPT AND BE SUBJECTED TO TAX UNDER SECTIO N 56. THE ARGUMENT THAT EVEN IF THE INCOME CANNOT BE CHARGEAB LE U/S. 45, BECAUSE OF THE INAPPLICABILITY OF THE COMPUTATION P ROVIDED U/S. 48, IT COULD STILL IMPOSE TAX UNDER THE RESIDUARY H EAD IS THUS UNACCEPTABLE. IF THE INCOME CANNOT BE TAXED U/S. 45 , IT CANNOT BE TAXED AT ALL AS HAS BEEN HELD IN THE CASE OF S.G. M ERCANTILE CORPORATION (P) LTD. VS.- CIT [1972] 83 ITR 700 (S C). 13. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WE LL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASES OF SHRI AMITABH SINGH (SUPRA) AND NAWSHIR H. MIRZA (SUPRA) DECIDED BY THE COORDINATE BENCHES OF THIS TRIBUNAL, WE RESPECTFULLY FOLLOW THE DECISI ON RENDERED IN THE SAID CASES TO HOLD THAT THE AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE AS HIS SHARE OF GOODWILL ON RETIREMENT FROM THE FIRM IS NO T CHARGEABLE TO TAX BEING CAPITAL RECEIPT. THE ADDITION MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON THIS ISSUE IS ACCORDINGLY DELETED. GROUND NO. 2 IS ACCORDINGLY ALLOWED. 14. AS REGARDS THE APPEAL OF THE REVENUE, IT IS OBS ERVED THAT THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE TAXA BILITY OF THE AMOUNT OF RS.22,56,250/- RECEIVED BY THE ASSESSEE ON ACCOUNT OF HIS SHARE OF I.T.A. NO. 1866/KOL./2012 ASSESSMENT YEAR: 2003-2004 & I.T.A. NO. 120/ KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 14 OF 14 GOODWILL FROM THE FIRM ON RETIREMENT. SINCE THIS IS SUE HAS ALREADY BEEN DECIDED BY US WHILE DISPOSING THE APPEAL OF THE ASS ESSEE, WE DO NOT FIND ANY MERIT IN THIS APPEAL FILED BY THE REVENUE. EVEN OTHERWISE, THE TAX EFFECT INVOLVED IN THIS APPEAL OF THE REVENUE IS LE SS THAN THE PRESCRIBED MONETARY LIMITS OF RS.3,00,000/- AS APPLICABLE AT T HE RELEVANT TIME FOR FILING OF APPEAL BEFORE ITAT. THIS APPEAL OF THE RE VENUE THUS IS NOT MAINTAINABLE AND IS LIABLE TO BE DISMISSED ON THIS GROUND ALSO. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, WHILE THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICAT ED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 11, 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 11 TH DAY OF DECEMBER, 2015 COPIES TO : (1) AJAY KUMAR DOSHI, P-130, CIT ROAD, 2 ND FLOOR, KOLKATA-700 010 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-XXXVI, KO LKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.