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JUDGMENT Tulzapurkar, J.—In this reference made to this court by the Appellate Tribunal at the instance of the Commissioner of Income-tax, Bombay City III, Bombay, under section 256(1) of the Income-tax Act, 1961, the following three questions have been referred to us for our opinion : "(1)Whether, on the facts and in the circumstances of the case, Rs. 1,72,182 or Rs. 1,00,000 were liable to be included in the total income of the assessee as his share of profit from the firm of Kumar Engineering Works ? (2)Whether, on the facts and in the circumstances of the case, the sum of Rs. 50,000 received by the assessee as his share of the value of the goodwill or any part thereof was liable to tax as capital gain ? (3)Whether, on the facts and in the circumstances of the case, the sum of Rs. 4,77,941 or any part thereof was liable to tax as capital gain by reason of section 47(ii) of the Act ?" The questions relate to the assessment year 1962-63 and arise out of the assessment proceeding of the assessee (Tribhuvandas G. Patel), a retired partner of the firm of Kumar Engineering Works, Bombay. The facts giving rise to the questions may be stated : the assessee was a partner in the firm of Kumar Engineering Works up to 31st August, 1961, whereafter he retired therefrom. It appears that on December 5, 1960, he served on the remaining partners a notice of his intention to dissolve the firm with effect from December 31, 1960, but as the remaining partners opposed the move of the assessee to dissolve the firm and contended that the firm continued to exist notwithstanding the notices served on them by the assessee, the assessee filed Suit No. 72 of 1961 on the original side of this court on March 8, 1961, for a declaration that the firm was dissolved with effect from December 31, 1960, and for accounts and other reliefs. The dispute was ultimately settled by the partners out of court and under a deed dated January 19, 1962, the assessee retired from the firm with effect from August 31, 1961, and the remaining partners continued to carry on the business of the firm. On the occasion of such retirement the assessee was paid in all Rs. 9 lakhs which, inter alia, comprised three…

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