- (1.) PER Shri Prakash Narain, Accountant Member - The only contention in this appeal is that the AAC had erred in deleting the addition of Rs. 61,282 made under Sec. 41(2) and Rs. 13,324 made under Sec. 45 of the Income Tax Act, 1961 (the Act).
(2.) THE assessee is an HUF. He was a partner in the firm of Vijai Picture Palace represented through its karta, Shri Sita Ram Tekriwal. The other partner was Shri Ram Kishan Tekriwal. The firm was running a cinema in Gorakhpur. Some dispites arose between the above two partners, as a result of which the cinema remained closed from 20 -10 -1971 to 30 -3 -1972. Subsequently, on 28 -3 -1972, an agreement was arrived at between the above two partners. As a result of this agreement, the firm was dissolved on the above date. It was further decided that Shri Sita Ram Tekriwal will sell his half interest in the assets of the firm to Smt. Chameli Devi wife of Shri Ram Kishan Tekriwal and Smt. Lalita Devi daughter -in -law of Shri Ram Kishan Tekriwal. The assessee was to receive a sum of Rs. 75,000 on this sale. Besides, his debit balance with the above firm was also wiped off.
(3.) THE above arrangement was put through two different documents executed on the same date, i.e., 28 -3 -1982. One was deed of dissolution and the other was sale deed. We will refer to these documents again in our this order. In its books of account, the assessee debited two sums of Rs. 56,182 and Rs. 75,000 being the debit balance from Vijay Picture Place. The aggregate of the two sums being Rs. 1,31,182 was transferred by the assessee to its profit and loss account. It was claimed before the ITO that the above amount was not liable to tax on the ground that it was casual income. It was submitted before him that the above amount represented the value of surrender of the rights in the firm and was entirely by goodwill that the firm had. The ITO rejected this contention. He observed that the goodwill was an intangible asset, whereas the machinery, building and stock -in -trade, etc., which were the subject of the sale were tangible assets. According to him, sale proceeds in respect of tangible assets could not be said to be exempt from tax. He analysed the various assets, which were subject of the sale and found that they were plot of land, cinema building, another building of Vijai Engg. Works and cinema machinery and its accessories. The ITO also found that the market value of the above properties on the date of their sale was much higher. In this opinion, this was clear from the fact that the assessee was allowed to wipe out its over draft with the firm amounting Rs. 75,000. The ITO finally held that the surplus of Rs. 79,000 which he arrived at after making certain adjustments, was assessable in the hands of the assessee either as profit under Sec. 4(2) or as capital gains under Sec. 45. He worked out the profit under Sec. 41(2) at Rs. 61,282 and the capital gains at Rs. 18,324. He included this amount in the assessment.;