Decided on July 26,1994



M.K. Chaturvedi, Judicial Member - (1.) THIS appeal by the assessee is directed against the order of the CIT(A)-XVII, Bombay and relates to the assessment year 1987-88.
(2.) The solitary issue raised in this appeal relates to the question whether the amount of Rs. 2,01,000 received by the assessee on transfer of practice of Chartered Accountancy to M/s. C.R. Bhansali & Associates, Chartered Accountants is exigible to tax? Shri P.L. Chaudhari, the assessee appeared in person. Relevant documents and papers were filed before us. It was stated that due to the old age, the assessee decided to transfer his practice to one M/s. C.R. Bhansali & Associates for a consideration of Rs. 2,01,000 with effect from 1-2-1988. The assessee surrendered the certificate of practice. As per letter issued by the Institute of Chartered Accountants of India dated 14th April, 1987, the certificate of practice was cancelled with effect from 1st April, 1987. The assessee issued a letter dated 1 -2-1986 to his clients. This letter is reproduced here as under : We have pleasure in stating that we have transferred our entire practice to M/s. C.R. Bhansali & Associates, Chartered Accountants, with effect from 1-2-1986 and they will now look after your tax matters and all other problems. You are requested to approach them whose address is as under: M/s. C.R. Bhansali & Associates, Chartered Accountants, Ridhi Sidhi Building, 2/12, Babu Genu Road, Bombay 400 002 Thanking you for best cooperation for all these years. Yours faithfully, Sd/- (P.L. Chaudhary) It was vehemently contended that the assessee manifested his intention to transfer the goodwill of the firm in the letter by his conduct, but on certain technical grounds, the consideration received on transfer was subjected to tax. It was argued that the amount was received by the assessee for relinquishing certain rights for which the acquisition cost was 'nil'. Therefore, the case of the assessee falls within the ambit of the ratio laid down by the Apex Court, in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC).
(3.) SHRI S.K. Jha, ld. Departmental Representative appeared before us. It was argued that the case of the assessee is not falling within the matrix of the decision rendered in the case of B.C. Srinivasa Setty (supra). The assessee did not transfer any goodwill. What he transferred was only the files of the clients, that too without the consent of the clients. Name of the assessee-firm was not given over to the transferee. Transfer of files cannot be equated with the transfer of goodwill. The clients were free to appoint their new representatives. They were not duty bound to follow the advice of the assessee. The money which the assessee received was consideration for introducing the clients with a new firm, It was therefore a revenue receipt, hence exigible to tax.;

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