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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI R.C.SHARMA (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against order dated 07/08/2014 passed by the Ld. CIT(Appeals)-27, Mumbai, for the Asst. year 2011-12.
Brief facts of the case are that the assessee filed its return of income for the A.Y. 2011-12 on 31/08/2012 declaring the total income of Rs.68,89,620/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (in short ‘the Act’). After scrutiny the Assessing Officer passed the assessment order u/s 143(3) of the Act determining the total income of the assessee at Rs. 1,02,53,860/- making addition of Rs. 32,64,242/- received from M/s K.S. Aiyer & Co. under the head ‘income from other sources’. The assessee challenged the assessment order before the Ld. CIT(A). The Ld. CIT(A) following the decisions rendered by the ITAT, Mumbai in assessee’s own cases and the law laid down by the Hon’ble Supreme Court in Padmaraje R Kadambande vs CIT (1992) 195 ITR877 allowed the main ground of appeal of the assessee.
The revenue is in appeal before the Tribunal against the said order on the following effective grounds of appeal:-
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the A.O. without appreciating that the firm does not have any control over the charge created by the partnership deed on the gross profit of the firm in favour of the spouse/heirs of the deceased partners which would constitute ‘diversion of income by way of overriding title’ which will constitute revenue receipt coming within the meaning of Sec. 28(iv) of the Income Tax Act, 1961.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the A.O. without appreciating that the Patna High Court judgment in the case of Jaya Bhaskran 168 ITR 256 relied on by the assess, is distinguishable from the facts of the instant case, inasmuch as charge by the spouse/heir of the deceased partner is on the gross profit and not on the net profit of the firm.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the A.O. without appreciating that the payments made by the firm to the spouse/heirs of the deceased partners can alternatively be treated as a capital receipt on which capital gains can be computed by treating as a capital receipt on which capital gains can be computed by treating the cost of acquisition as Nil, by virtue of provisions of Sec. 55(a)(ii) of the Income-tax Act, 1961, as the payments are compensation in lieu of foregoing of claim on the firm by the spouse/heirs of the deceased partners, as the amounts paid are in full and final settlement of the rights of the deceased partner.”
The Ld. AR submitted before us that the present case is covered in favour of the assessee by the decision of ITAT, Mumbai, in assessee’s own case for the A.Y. 2005-06, ITA No. 1416/M/11 for the A.Y. 2006-07 and ITA No. 5950 & 5951/M/12 for the A.Y. 2007-08 & 2009-10. Rs. 32,64,242/-, received by the assessee during the year under consideration from M/s K.S. Aiyar & Co. has been reflected in the capital account. The assessee has not included the said receipt in the total income of the assessee in view of the ratio laid down by the Hon’ble Patna High Court in CIT vs. Jaya Bhaskaran 168 ITR 256 (Pat). On the other hand, the Ld. DR relying upon the finding of the AO, submitted that the order passed by the Ld. CIT(A) is erroneous an liable to be set aside.
We have heard the rival submissions and also gone through the material placed before us. The only grievance of the revenue is that the Ld. CIT(A) has wrongly deleted the addition Rs. 32,64,242/made by the AO, without appreciating the fact that the firm does not have any control over the charge created by the partnership deed on the gross profit of the firm in favour of the spouse/heirs of the deceased partners. We notice that the identical issue has been decided in favour of the assessee and against the revenue in assessee’s own case for the A.Y. 2005-06, DCIT vs. Laxmi Mani Aiyar, by the Mumbai, Tribunal following the ratio laid down by the Hon’ble Supreme Court in Padmaraje R Kadhambande vs. CIT (1992) 195 ITR 877 and the Hon’ble Patna High Court in CIT vs. Jaya Bhaskaran (supra). In the aforesaid case the only issue before the Tribunal was whether the amount received by the assessee after the death of her husband from the firm M/s K.S.Aiyer & Co., in which he was a partner, is a capital or revenue receipt? The Tribunal decided the said issue in favour of the assessee holding as under:-
“ In view of the above judgments of the Hon’ble Supreme Court and also the judgment of the Hon’ble Patna High Court in the case of Jaya Baskaran (supra), taking into consideration of the facts of the present case, we uphold the order of CIT (A) in holding that the amount in question received by the assessee cannot be charged to tax as the same are in capital receipt.”
This decision of the coordinate bench was further followed by the coordinate Benches in the assessee’s own cases to 5895/M/09 for the A.Ys. 2001-02 to 2004-05, solar ITA No. 1416/M/2011for the A.Y. 2006-07, ITA No 5950 & 5951/Mum/2012 for the A.Y. 2007-08 & 2009-10, ITA No 8270/Mum/2011 for the A.Y. 2008-09 and ITA No 6000/Mum/2013 for the A.Y. 2010-11.
Thus consistent with the view taken on the identical issue by the Tribunal in the earlier assessment years in assessee’s own cases, we uphold the order of the CIT(A) deleting the addition in question by treating it as capital receipt. Accordingly, ground of appeal raised by the revenue stands dismissed.
In the result appeal filed by the revenue for the A.Y. 2011-12 is dismissed.
Order pronounced in the open court 03rd June, 2016.