JUDGMENT JUDGMENT judgment of court was delivered by KASLIWAL J. - Both above references are disposed of by one single order as identical questions of law arise in above cases. We shall first deal with facts and circumstances of Income Tax Reference No. 42 of 1974 in detail in order to appreciate and decide controversy raised in these cases. Income-tax Appellate Tribunal, Jaipur Bench, by their order dated September 24, 1974, has referred following questions of law for opinion of this court arising out of order passed in ITA No. 885/JP/1972-73 dated 22- 2-1974 and ITA No. 886/JP/1972-73 dated 22-2-1974: Case No. 42 of 1974: "Whether, on facts and in circumstances of case, Tribunal was justified in deleting addition of Rs. 47,436 by holding that it was not revenue receipt and as such not liable to tax?" Case No. 43 of 1974: "Whether, on facts and in circumstances of case, Tribunal was justified in deleting addition of Rs. 30,000 by holding that it was capital receipt and as such not liable to tax?" Brief facts leading to Case No. 42 of 1974 are that M/s. Brahm Swaroop & Bros. (hereinafter referred to as "the assessee") filed return declaring income of Rs. 32,280 for assessment year 1966-67. assessee had shown income from shares in firms of M/s. Gurunanak Steel Rolling Mills, Bharatpur, M/s. Rama Steel Rolling Mills & General Engineering Works, Jaipur, and interest from Banks. assessee held 31 per cent. share in firm, M/s. Gurunanak Steel Rolling Mills. Formerly, Hindu undivided family was partner in firm, M/s. Gurunanak Steel Rolling Mills, Bharatpur, but subsequently, Hindu undivided family was dissolved on December 30, 1984. After dissolution of Hindu undivided family, assessee became partnership firm. present shares received from these two firms were to be assessed in assessee-firm styled as Brahm Swaroop Bros., Industrial area, Bharatpur. On behalf of assessee-firm, Shri Brahm Swaroop was one of partners of firm, M/s. Gurunanak Steel Rolling Mills. Shri Brahm Swaroop retired from partnership firm on June 30, 1965, and was paid amount of Rs. 47,436 by other partners of said firm. assessee-firm claimed exemption with regard to above amount of Rs. 47,436 before Income-tax Officer on ground that aforesaid amount was neither revenue receipt nor capital gain. Income-tax Officer after considering material on record held that amount of Rs. 47,436 was received by Brahm Swaroop, partner of assesseefirm, as revenue receipt and as such was liable to tax. He was also of view that amount in question can also be considered as compensation received by assessee and as such was liable to tax. In view of above finding, Income-tax Officer added sum of Rs. 47,436 as income of assessee in relevant year of account. As such, assessment was completed on total income of Rs. 85,800. assessee, aggrieved against order of Incometax Officer, filed appeal before Appellate Assistant Commissioner, but he also upheld order of Income-tax Officer and dismissed appeal. assessee then filed appeal before Income-tax Appellate Tribunal. It was contended before Tribunal that Brahm Swaroop, Jagannath, Prem Chand, Shiv Dayal Singh, Swaran Singh and Shivdev Singh had been carrying on business of re-rolling scrap and old material into saria, patti and other allied goods of same type at Bharatpur under name and style of M/s. Gurunanak Steel Rolling Mills in pursuance of deed of partnership dated November II, 1964, executed between partners. It was further submitted that parties mutually agreed to dissolve partnership on June 30, 1965, and according to said dissolution deed, partnership stood dissolved at end of June 30, 1965. Complete accounts of all assets and liabilities of said partnership firm were taken as it stood on June 30, 1965, and balance- sheet was prepared and signed by all partners. It was thus submitted that continuing partners had agreed to take over business including assets, liabilities, machinery and building of said partnership and had agreed to pay to Shri Brahm Swaroop amount of Rs. 93,984.63 as retiring partner which included value of his share, being credit balance standing in his favour in books of partnership as it stood on June 30, 1965, in full and final settlement of his claim. After that date, Shri Brahm Swaroop, who was acting on behalf of Hindu undivided family of M/s. Brahm Swaroop & Bros., from that date onwards assigned to continuing partners all his shares and interest in said partnership, fixture, fittings, machinery, building and other debts, benefits of contracts and all effects thereof, that after that date, continuing partners may hereinafter along or in partnership with other or others continue and carry on said business of dissolved partnership under same name of M/s. Gurunanak Steel Rolling Mills. It was thus submitted that after dissolution of firm, assessee's trading activity had come to end and assessee had parted with his rights of goodwill and amount in question was capital asset within meaning of section 2(14) of Income-tax Act, 1961 (hereinafter referred to as "the Act"), and it was not revenue receipt. Tribunal found favour with contention raised by assessee and placing reliance on CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393 (Guj) observed as under: "In view of aforesaid decision, it is clear that goodwill is capital asset. assessee was paid sum of Rs. 47,436 over and above share of his profit from firm. According to assessee, firm had goodwill and at time of dissolution of firm, goodwill was taken away and as result of it, assessee was paid sum of Rs. 47,436. Thus, it was submitted that it was only capital receipt." Tribunal then discussed in detail ratio of decision in case of CIT v. Gangadhar Baijnath [1972] 86 ITR 19 (SC). Tribunal distinguished above case and ultimately held that sum of Rs. 47,436 was capital receipt and was not liable to be taxed. In above circumstances, Tribunal has referred above question for opinion of this court. We have heard Shri Surolia appearing on behalf of Department. Nobody has appeared on behalf of assessee in spite of notice served on him. perusal of records shows that Brahm Swaroop as karta of Hindu undivided family was one of partners in firm, M/s. Gurunanak Steel Rolling Mills, in pursuance of partnership deed dated November 7, 1964. Hindu undivided family represented by Brahm Swaroop was dissolved on December 30, 1964. Thereafter, Brahm Swaroop became partner in assessee-firm, M/s. Brahm Swaroop & Bros. Brahm Swaroop was also one of partners in firm, M/s. Rama Steel Rolling and General Engineering Works, in pursuance of partnership deed dated June 1, 1965. On June 30, 1965, Brahm Swaroop retired as partner from firm, M/s. Gurunanak Steel Rolling Mills. Tribunal has recorded finding that there was no evidence to show that after June 30, 1965, Brahm Swaroop carried on business in some other firm by investing amount which he got as result of his retiring from firm, M/s. Gurunanak Steel Rolling Mills. Brahm Swaroop also retired from firm, M/s. Rama Steel Rolling and General Engineering Works, with effect from March 9, 1968. Tribunal further found that there was no material to show that trading activity of Brahm Swaroop after retirement from firm, M/s. Gurunanak Steel Rolling Mills, on June 30, 1964, continued. There was no evidence to show that after June 30, 1965, Brahm Swaroop again became partner in any of firms for carrying on same business. Tribunal further found that lower authorities had nothing on record to establish that assessee-firm had various business activities and by agreement dated June 30, 1965, Brahm Swaroop was only carrying on trading activity. In absence of such material and also finding of authorities below, Tribunal observed that departmental representative could not be heard to say that assessee by entering into agreement dated June 30, 1965, was carrying on trading activity. It was thus found that as result of dissolution deed dated June 30, 1965, only goodwill of assessee was taken away. view taken by Gujarat High Court was followed by Allahabad High Court in Addl. CIT v. Mahinderpal Bhasin [1979] 117 ITR 26. Allahabad High Court in identical circumstances held as under (headnote): "The interest of partner is right to obtain his share of profits from time to time during subsistence of partnership and on dissolution of partnership to get value of his share which remains after satisfying debts and liabilities of partnership. When partner retires, what he receives is really his share in partnership assets after deducting liabilities. It is not consideration for transfer of his interest in partnership to continuing partners. In transaction of retirement of partner, just as in case of dissolution of partnership, there is no element of transfer. transaction is in law adjustment of rights of partners and not relinquishment or even extinguishment of interest of retiring partner. Where partner retired from firm and received Rs. 20,000 as consideration for relinquishment of her interest in partnership: Held, that there was no material to sustain submission that assessee entered into partnership as part of her trading activity. With relinquishment of her partnership interest, her source of income was entirely extinguished. receipt of Rs. 20,000 could not, therefore, be held to be revenue receipt. As no transfer of any capital asset took place within meaning of section 45, sum of Rs. 20,000 was not assessable as capital gains. " In above Allahabad case, case of Supreme Court in CIT v. Gangadhar Baijnath [1972] 86 ITR 19 was distinguished and view taken by Gujarat High Court [1973] 91 ITR 393 was followed. Similarly, Madras High Court in A. K Sharfuddin v. CIT [1960] 39 ITR 333 held that (headnote) "Compensation received by one partner of partnership from another partner for relinquishing all his rights in partnership is compensation for loss of capital asset and is not trading receipt." In facts of case before us, Brahm Swaroop had retired as partner from firm, M/s. Gurunanak Steel Rolling Mills, in his individual capacity by dissolution deed dated June 30, 1965. amount paid to him was his share in partnership including goodwill. It was not consideration for transfer of is interest in partnership with continuing partner. In such transaction of retirement of Brahm Swaroop, there was no element of transfer and there was no material produced on record to sustain submission of learned counsel for Department that amount in question was receipt by assessee as part of his trading activity. With relinquishment of interest in partnership by Brahm Swaroop, source of income was entirely extinguished. receipt of Rs. 47,436 as such cannot be considered as revenue receipt. We have taken note of case decided by Supreme Court in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294. In above case, Supreme Court laid down that goodwill generated in newly commenced business cannot be described as "asset" within terms of section 45 of Income-tax Act, 1961, and transfer of goodwill initially generated in business does not give rise to capital gain for purpose of income-tax. In above case, question before Supreme Court was "Whether, on facts and in circumstances of case, Tribunal was right in holding that no capital gains can arise under section 45 of Income-tax Act, 1961, on transfer by assessee- firm of its goodwill to newly constituted firm?" While considering above question, Supreme Court considered catena of decisions of various High Courts of this country in which there was conflict of opinion. Supreme Court after referring to such decisions held that preponderance of judicial opinion favoured view that transfer of goodwill initially generated in business did not give rise to capital gain for purpose of incometax. So far, contrary view taken by Gujarat High Court in CIT v. Mohanbhai Padmabhai [1973] 91 ITR 393 and by Calcutta High Court in K N. Daftary v. CIT [1977] 106 ITR 998 were disapproved. However, point decided by Supreme Court in above case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 is not directly involved in case before us. authority of Gujarat High Court in case of CIT v. Mohanhai Pamabhai [1973] 91 ITR 393 has been disapproved by Supreme Court in above case on another point. In view of all these circumstances, we are inclined to follow view taken in Mahinderpal Bhasin's case [1979] 117 are inclined to follow view taken in Mahinderpal Bhasin's case [1979] 117 ITR 26 by High Court of Allahabad and affirm view taken by Incometax Appellate Tribunal in this regard. We have already dealt with, in detail, facts and circumstances of case while dealing with I.T. Ref. No. 42 of 1974 and as such it is not necessary to deal with facts and circumstances of I.T. Ref. No. 43 of 1974 in detail. In result, questions referred to above are answered in affirmative. As nobody has appeared on behalf of assessee, there will be no order as to costs. *** ADDITIONAL. COMMISSIONER OF INCOME TAX v. BRAHM SWAROOP & BROS.