M/s Universal Infrastructure, Nagpur V. Deputy Commissioner of Income tax, Cir -8, Nagpur

ITA 295/NAG/2012

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9075 (ITAT-NAGPUR)
• Duration Of Justice: 7 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AGNESH P THOMAS
• Keywords: Revenue expenditure; Capital expenditure
• Section: 13

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, NAGPUR (AT E - COURT, PUNE) BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO S . 294 & 295 /NAG /20 12 / ASSESSMENT YEAR S : 2006 - 07 & 2007 - 08 M/S. UNIVERSAL INFRASTRUCTURE, C/O. DEVARSHI SECURITY, J.P CHAMBERS, 2 ND FLOOR, A - WING, OPP. SHRADANAND PETH AN A THALAYA , SOUTH AMBAZARI ROAD, NAGPUR - 440 022. PAN : AABFU2671E ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8, NAGPUR. / RESPONDENT A SSESSEE BY : NONE REVENUE BY : SMT. AGNESH P. THOMAS / DATE OF HEARING : 13.01.2020 / DATE OF PRONOUNCEMENT : 13 .01.2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THE SE TWO APPEALS PREFERRED BY THE COMMON ASSESSEE EMANATES FROM THE COMMON ORDER OF THE LD. CIT(APPEALS) - II, NAGPUR DATED 09.02.2012 FOR THE ASSESSMENT YEARS 2006 - 07 & 2007 - 08 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO S . 294 & 295 /NAG /20 12 A.YS. 2006 - 07 & 2007 - 08 2. THESE CASES WERE HEARD TOGETHER. SINCE ISSUES COMMON AND FACTS ARE SIMILAR, THESE CASES ARE BEING DISPOSED OF VIDE THIS CONSO LIDATED ORDER. 3. AT THE TIME OF HEARING THROUGH VIDEO CONFERENCE , NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE HAD APPEARED. IT IS APPARENT FROM THE RECORD THAT THE NOTICE WAS DUL Y SERVED BUT THE ASSESSEE IS N OT KEEN TO PURSUE HIS APPEAL BEFORE THE TRIBUNAL . CONSIDERING THE TOTALITY OF FACTS AND ISSUE UNDER CONSIDERATION, WE ARE OF THE OPINION THAT THE ISSUE CAN BE ADJUDICATED WITH THE ASSISTANCE OF THE LD. DR FOR THE REVENUE AND DOCUMENTS ON RECORD. THE SUBMISSIO NS OF THE LD. DR ARE TAKEN ON RECORD AND CASE OF THE ASSESSEE IS HEARD ON MERITS. 4 . THE BRIEF FACTS IN RESPECT OF BOTH THE ASSESSMENT YEARS UNDER APPEAL ARE THAT THE A SSESSEE SUBMITTED RETURN DECLARING INCOME THEREIN FOR RS.13,75,762/ - FOR ASSESSMENT YEAR 2006 - 07 AND RS.16 ,80,884/ - FOR THE ASSESSMENT YEAR 2007 - 08 AND ASSESSMENT WAS COMPLETED DETERMINING TOTAL INCOME AT RS.45,25,762/ - FOR ASSESSMENT YEAR 2006 - 07 AND RS.39,30,880/ - FOR ASSESSMENT YEAR 2007 - 08 VIDE ORDER DATED 27.11.2009 BY THE L D. DCIT, CIRCLE - 8, NAGPUR FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 RESPECTIVELY. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION EXPELLED ONE OF THE PARTNER, DUE TO BUS INESS DIFFERENCES AND PAID H IM A SUM OF RS.45 LAKHS IN TWO YEARS IN EQUAL INSTALLMENTS I.E. RS.22.50 LAKHS IN ASSESSMENT YEAR 2006 - 07 AND SIMILARLY, AMOUNT OF RS.22.5 0 LAKHS IN ASSESSMENT YEAR 2007 - 08. THE ASSESSING OFFICER MADE ADDITION TREATING THEM AS C APITAL E XPENDITURE . IT IS THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE PAYMENT OF RS.45 LAKHS SHOULD BE ALLOWED AS REVENUE EXPENDITURE BY PLACING RELIANCE ON THE DECISION OF THE 3 ITA NO S . 294 & 295 /NAG /20 12 A.YS. 2006 - 07 & 2007 - 08 HON BLE SUPREME COURT IN THE CASE OF DEVIDAS VITHALDAS & CO. VS. CIT (197 2) 84 ITR 277 (SC) . 5 . THE LD. CIT(APPE ALS) WHILE GOING THROUGH THE RETIREMENT DEED OF THE PARTNER AND OTHER RELEVANT DOCUMENTS AS EVIDENT IN HIS ORDER OBSERVED THAT IT IS A CASE OF A PARTNER RETIRING FROM PARTNERSHIP AND THE RETIRING PARTNER IS PAID FOR HIS CAPITAL AND THE ENTIRE GOODWILL AT THE TIME OF RETIREMENT AFTER DUE VALUATION MUTUALLY AGREED AND RETIRING PARTNER SOLD EVERYTHING I.E. NO CLAIM WHETHER WAS LEFT IN THE RECONSTITUTED FIRM FOR RETIRING PARTNER. IN RETURN THE REMAINING PARTNERS SHARE HAVE GONE UP FROM 1/4 TO 1/3 EACH. T HE ASSESSEE RELIED ON THE CASE LAWS QUOTED IS MISPLACED AS THE HON BLE SUPREME COURT HAS CLEARLY HELD THAT PAYMENT MADE FOR PURCHASE OF GOODWILL IS CAPITAL EXPENDI TURE AND IN THE CASE AT HAND, PAYMENT IS MADE BY REMAINING PARTNERS OF THE FIRM TO RETIRING PARTNER BOTH FOR HIS CAPITAL AND GOODWILL I.E. TO ACQUIRE THE INCOME EARNING APPARATUS ALONG WITH THE GOODWILL OF THE FIRM ( AT A MUTUALLY AGREED PRICE). EAC H OF THE REMAINING TH REE PARTNERS ARE NOW PARTNER S FOR 1/3 SHARE OF INCOM E INSTEAD OF SHARE EARLIER AND NO C ONTINUING PAYMENT IS TO BE MADE TO RETIRING PARTNER FOR USE OF GOOD WILL. HENCE, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE OUT GO IN BOTH THE YEARS AS CAPITAL EXPENDITURE FOLLOWING THE JUDGMENT OF MINNO MEHTA VS. CIT (1996) 217 ITR 57 8 AS IT IS OUTRIGHT PURCHASE OF SHARE OF GOODWILL OF RETIRING PARTNER BY CONTINUING PARTNERS. 6 . WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THIS CASE. ON GOING THROUGH THE R ELEVANT DOCUMENTS SPECIFICALLY THE RETIREMENT DEED OF THE PARTNERS, IT IS EVIDENT THAT THE AMOUNT OF RS.45 LAKHS PAID IN TWO YEARS IN E QUAL INSTALLMENT OF RS.22.50 LAKHS IN 4 ITA NO S . 294 & 295 /NAG /20 12 A.YS. 2006 - 07 & 2007 - 08 EACH YEAR IS NOTHING BUT THE AMO UNT PAID BY REMAINING PARTNERS OF THE FIRM TO RETIRING PAR TNER FO R THE PURCHASE OF SHARE OF GOOD WILL OF RETIRING PARTNER BY CONTINUING PARTNERS. THEREFORE, IT IS CAPITAL EXPENDITURE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) FOR BOTH THE ASSESSMENT YEARS IS UPHELD. 7 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 ARE DISMISSED . ORDER PRO NOUNCED ON 13 TH DAY OF JANUARY, 2020 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 13 TH J ANUARY , 20 20 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - II, NAGPUR. 4. THE CIT - IV, NAGPUR. 5 . , , / DR, ITAT, NAGPUR. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 5 ITA NO S . 294 & 295 /NAG /20 12 A.YS. 2006 - 07 & 2007 - 08 DATE 1 DRAFT DICTATED ON 13.01.2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 1 3.01.2020 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER