Case Law Details
Wadia Ghandy & Co. Vs ACIT (ITAT Mumbai)
The assessee is a Solicitor Firm and was initially constituted by three partners who were eminent Lawyers. He submitted, all the three partners had created huge goodwill which was definitely exploited by the firm. He submitted, for use of goodwill, the firm was required to pay 5% of the net profit to the concerned partners or their legal heirs, as provided in the partnership deed. He submitted, such payment made by the firm for use of goodwill is an allowable expenditure. Further, he submitted, since the partnership deed specifically provided for payment to legal heirs of the deceased partners, a charge is created to that extent and the income to the extent of goodwill falling to the share of legal heirs of deceased partners is diverted at source by overriding title, hence, does not form part of the income of the assessee. In support of such submissions, the learned Counsel for the assessee relied upon a number of judicial precedents. Without prejudice, he submitted, the issue has been decided in favour of the assessee in the preceding assessment years and there being no change in facts, the decisions of the Tribunal in the preceding assessment years would squarely apply. In this context, he drew our attention to the latest order of the Tribunal passed for the assessment year 2011–12 in ITA no.3400/ Mum./2016, dated 1st March 2018.
We have considered rival submissions and perused the material on record. It is evident, the allowability of payment made to the legal heirs of deceased partners towards share in goodwill is a recurring issue between the parties continuing from the preceding assessment years. Though, the Assessing Officer in the preceding assessment years has made similar disallowance, however, when the issue came up for consideration before the Tribunal, it was held that the payment made to the legal heirs of the deceased partners is allowable as deduction. In the latest order passed for the assessment year 2011–12 cited supra, the Tribunal following its earlier orders has upheld the decision of learned Commissioner (Appeals) in allowing assessee’s claim of deduction. Facts being identical, respectfully following the consistent view of the Tribunal in assessee’s own case as referred to above, we uphold the decision of learned Commissioner (Appeals) on this issue. Grounds raised are dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
Captioned cross appeals arise out of order dated 5th July 2016, passed by the learned Commissioner of Income Tax (Appeals)–7, Mumbai, for the assessment year 2012–13.
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