CA Sandeep Kanoi
ACIT vs Shri N. Prasad (ITAT-Hyderabad)
Brief Facts :- Briefly the facts are, the assessee is an individual. For the impugned assessment year the assessee filed his return of income on 31-10-2006 declaring income of Rs.8,54,47,144/- During the scrutiny assessment proceeding it came to the notice of the Assessing Officer that the assessee during the previous year had retired as a partner from the partnership firm M/s Square Projects Associates on 20-4-2005. On retirement, the assessee apart from his share capital of Rs.1 crore had received Rs.25 lakhs surplus from the partnership firm. This surplus of Rs.25 lakhs was not offered for taxation. When queried by the Assessing Officer the assessee relying upon a decision of Hon’ble Supreme Court in case of CIT vs. R. Lingamallu Raghu Kumar (247 ITR 801) submitted that the amount is not taxable as there is no transfer. The Assessing Officer however rejected the contention of the assessee by holding that surplus received by assessee from the firm is nothing but goodwill paid to him for leaving the firm. The goodwill is taxable under the head capital gains income. He further held that the decision relied upon by the assessee being prior to the amendment of sec. 55(2) it is not applicable. Accordingly, the Assessing Officer by treating the cost of acquisition as nil treated the amount of Rs.25 lakhs as the short term capital gain for the year.
Held by CIT (A)
CIT (A) deleted the addition by holding that there is no ‘transfer’ when a partner received his share in the partnership business.
Held by ITAT
