Law: Income Tax Act, 1961

Section: 28(iv)

Income-tax----Business income---Partner of firm---Benefit or perquisite arising from business---Dissolution of firm---Amount received by partner on account of goodwill and as premium on revaluation of asset---Not a benefit or perquisite arising from business---Indian Income Tax Act, 1961, S.28(iv). The assessee was a partner of a firm which was dissolved in December, 1972. On the dissolution of the firm, the assessee had received a sum of Rs.40,000 which represented goodwill amounting to Rs.20,000 and premium on account of revaluation of assets, Rs.20,000. The Income Tax Officer noticed that the firm came to be dissolved with effect from December 9, 1972, but, prior to that date, the assessee had received the above said amount of Rs.40,000 from the firm for which a credit entry was placed in the account books prior to the dissolution of the firm. Since the dissolution deed could be drawn up later on and it was actually drawn up only after finally adjusting the account of the partners, the Income Tax Officer had taken the view that the amount of Rs.40,000 received by the assessee was a benefit arising from the business within the meaning of section 28(iv) of the Income Tax Act, 1961: The Tribunal held that the amount was not assessable. On a reference: Held, that the amount that had fallen to the share of the assessee as her share in the assets of the partnership firm could never be equated with the benefit accruing to, her under the provisions contained under section 28(iv). The amount of Rs.40,000 received by the assessee by way of her share in the goodwill and in the appreciation of the value of assets of the firm in which the assessee was admitted to the benefits was not eligible to tax as benefits or perquisites of business under section 28(iv). Malabar Fisheries Co. v. CIT (1979) 120 ITR 49 (SC) applied. CIT v. Bankey Lal Vaidya (1971) 79 ITR 594 (SC); CIT v. Bhavnagar Bone and Fertiliser Co. Ltd. (1987) 166 ITR 316 (Guj.); CIT v. Gangadhar Baijnath (1972) 86 ITR 19 (SC); CIT v. Keshavlal Chandulal (1966) 59 ITR 120 (Guj.) ref. JUDGMENT S.D. DAVE, J: --The Income Tax Appellate Tribunal has referred the undermentioned question to this Court while exercising…

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