Law:

Section:

Section 45, read with sections 2(14), 2(47) and 48 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1963-64 - Whether when a partner retires from a partnership and amount of his share in net partnership assets after deduction of liabilities and prior charges is determined on taking accounts on footing of notional sale of partnership assets and given to him, what he receives is his share in partnership and not any consideration for transfer of his interest in partnership to continuing partners - Held, yes - Whether where capital asset is self created, that is, acquisition of which has cost nothing to assessee in terms of money, it would be outside ambit and coverage of section 45 - Held, no - Whether where assessees retired from firm and received amount which included in its break-up proportionate share in value of goodwill, there was no transfer of interest by any of assessee in goodwill within meaning of section 2(47) and, therefore, amount received by them in respect of goodwill could not be regarded as capital gain chargeable to tax - Held, yes Words and phrases : Words 'property of any king' as occuring in section 2(14) of the Income-tax Act, 1961. FACTS The assessees and seven other persons carried on business in partnership, firm. The business of the firm was the manufacture of tiles. Disputes arose between the partners as a result of which the assessees retired from the firm. On retirement, each assessee received a certain amount in respect of his share in the partnership and this amount was worked out by taking the proportionate value of his share in the net partnership assets after deduction of liabilities and prior charges. The amount received by each assessee included in its break-up an amount representing his proportionate share in the value of the goodwill, since goodwill constituted an asset of the partnership and it was liable to be taken into account in determining the share of each assessee in the partnership at the date of retirement. The ITO for the relevant assessment year held that the amount received by each assessee to the extent it included his proportionate share in the value of the goodwill represented…

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