COMMISSIONER OF INCOME TAX Vs. TAHIR HUSSAIN

JUDGEMENT

(1.) THIS is an income-tax reference under Section 256(1) of the Income-tax Act, 1961. The question of law referred to us is as under : .

(2.) THE assessment year involved is 1969-70. THE assessee was a partner in the partnership known as Nayab Biri Factory, Moradabad, created by a deed of partnership which was executed on April 1, 1964. As one of the partners died and another left the partnership, a new deed of partnership was executed on March 17, 1967. THE assessee continued to be a partner in the new partnership with his share and thereafter a deed of dissolution of this partnership was executed on March 17, 1969, and the assessee retired from the said partnership with effect from March 17, 1969. THE remaining partners continued to be partners of the said firm. A sum of Rs. 3,75,000 was paid to the assessee for relinquishing his share in the partnership firm. THE Income-tax Officer held the said amount to be a revenue receipt and his order was affirmed by the Assistant Commissioner. However, the Tribunal placing reliance on the decision in the case of Addl. CIT v. Smt. Mahinderpal Bhasin [1979] 117 ITR 26 (All) held the amount in question a capital receipt and not a revenue receipt. On the application of the Department, this reference has come up to this court.