COMMISSIONER OF INCOME TAX Vs. GANESA CHETTIAR P

JUDGEMENT

(1.) IN this reference under S. 256(1) of the IT Act, 1961, the following question was referred : "Whether, on the facts and in the circumstances of the case, it has been rightly held that what was received by the assessee on leaving the firm represented capital receipt and not revenue receipt ?"

(2.) THERE was a firm known as "Dhanalakshmi Pictures" in which the assessee was a partner. This firm was constituted under a partnership deed dated 24th April, 1964, with four partners, including the assessee. On 11th October, 1969, the assessee retired from the firm and the assets and liabilities were liable to be taken over by two of the partners who would carry on the distribution of films thereafter. A dissolution deed was drawn up on 11th October, 1969, in which it was stated that the parties had mutually agreed to dissolve the partnership as and from 11th October, 1969. Clause 6 of the dissolution deed ran as follows :

(3.) WHEN the matter was taken on appeal to the Tribunal, the Tribunal held that a lump sum payment made to the assessee, a partner, in lieu of his share of profits and interest in the partnership firm, is not getting any sum of a revenue nature. It, therefore, held that the sum of Rs. 79,130.56 received by the assessee did not have any revenue character. It is this order of the Tribunal that has given rise to the question extracted earlier.