1 itxa4920-10 sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.4920 OF 2010 The Commissioner of Income Tax-11, Mumbai ..Appellant. V/s. M/s. Little & Co. ..Respondent. Mr. Vimal Gupta for the appellant. Mr. F.B. Andhyarujina, senior Advocate with Ms. Parital Mehta i/b. Little & Co. for the respondent. CORAM : J.P. DEVADHAR AND A.A. SAYED, JJ. DATED : 1ST AUGUST, 2011 P.C. :- 1. Two questions of law are raised by the revenue in this appeal, which read thus :- (1) On the facts and in the circumstances of the case and in law, whether the Tribunal is right in deleting the addition of Rs. 2,28,89,939/- being short term capital gains u/s.45(4) of the I.T. Act, 1961 by holding that there is no transfer of goodwill from the partnership firm to the retiring partners and that there is no transfer of capital asset and further that section 45(4) is not applicable ? (2) On the facts and in the circumstances of the case and in law, whether the Tribunal is right in not appreciating the fact that the 2 itxa4920-10 assessee was covered by the decision of the Bombay High Court in the case of A.N. Nayak & Associates and, therefore, the addition was rightly made by the A.O. particularly in the light of observation of the CIT(A) that creation of reserve fund and the related activity is a colourable device and that through this device that goodwill have been created and transacted and no tax has been paid thereon ? 2. The ITAT in para 9 of its order has recorded a finding of fact that there is no transfer of goodwill by the Partnership Firm in favour of the retiring partners, because the Partnership Firm continued to carry on its business even after payments were made to the retiring partners. Amounts paid to the retiring partners under the Partnership Deed neither constituted transfer of the goodwill of the firm nor constituted transfer of capital asset of the Firm under Section 45(4) of the Income Tax Act, but constituted payment out of the reserve fund specifically created for making payment to the retiring partners. 3. In the circumstances, no fault can be found with the decision of the ITAT. Accordingly, we see no merit in the appeal and the same is hereby dismissed with no order as to costs. (A.A. SAYED, J.) (J.P. DEVADHAR, J.)