R.L. SANGANI, J.M. This appeal by assessee related to asst. yr. 1979-80. 2. assessee was partner of firm M/s. Somayya construction Company, This firm was carrying on business as builders and contractors. said firm had agreed to purchase plot of land at Andheri from Nanalal Haridas (HUF) vide Agreement dt. 9th Nov., 1963. public notice reserving said plot for bus depot was published on 9th Jan., 1964. In pursuance of said notice said plot of land was to be acquired from vendor under provisions of Land Acquisition Act. 3. firm raised objections against proposed acquisition. It filed Writ Petition (No.313 of 1966) in High Court challenging proposed acquisition. High Court dirtied Divisional Commissioner to hold fresh inquiry under s. 5A of Land Acquisition Act. This was in 1970. 4. firm then filed suit No. 624 of 1973 in Bombay High Court for specific performance of contract dt. 9th Nov., 1963 against vendor. During pendency of suit, firm was dissolved in May 1978. Thereafter erstwhile partners continued suit by amending plaint. compromise took place between partners and vendor and consent terms were drawn up on 20th July, 1978. It was agreed that agreement to sell dt. 9th Nov., 1963 subsisted. 5.Fresh acquisition proceedings commended in 1977. Special Land Acquisition Officer gave award under s. 11 of Land Acquisition Act on 19th Feb., 1979. Under said award assessee as partner of dissolved firm got compensation at Rs.4,67,000 on 22nd Feb., 1979. 6. plea of assessee before ITO was that said amount of Rs.4,67,000 was capital receipt not subject to tax. alternate plea was that receipt of said amount gave rise to capital gains tax and not business income. assessee claimed deduction under s. 54E of IT Act, 1961. working regarding capital gains given by assessee was as under : . Rs. Rs. Capital receipt in Feb. 1979 . 4,67,000 Less Proportionate share in cost to firm for getting interest in 20,258 . land Proportionate share in 6,800 . payment made to Architect. Proportionate share in 22,000 . payment made to Solicitor Total deductions 49,058 49,058 Therefore, Long Term Capital . 4,17,942 Gains on 19-2-1979/22-2-1979 Less : Exempt under s. 54E on account of placing of Rs. 4,00,000 in 3,57,980 . F.D. on 17-8-1979 (as worked out below) Balance . . 59,962 Working of Amount Exempt under/s. 54E Net Amount Capital Excepted Consideration of Deposit Gain Gain 4,67,000 4,00,000 4,17,942 3,57,980 including Long Term Capital Gain = 59,962 Less deduction under s. 80-T Initial (i) Rs. 5,000 . deduction 25 % of Rs. (ii) . (ii) . 54.962 13,740 . . Rs.18.740 . . . . 18,740 Rs. . Balance . 41,222 7. ITO relied on s. 28(iv) r/w s. 176(3A) of Act. According to him, vale of benefit whether convertible into money or not arising form business was chargeable to tax as business income under s. 28(iv) of Act and that when said business was discontinued and amount was received by former partner after such discontinuance, same was chargeable to tax as business income under s. 176(3A) of Act, with result that above mentioned amount was chargeable to tax as business income under these two provisions read together. He negatived contention of assessee that s. 176(3A) applied only in those cases where firm had maintained accounts on cash basis. He, accordingly, brought said amount to tax as business income and rejected submissions that amount represented capital gains and not business income. 8 . assessee filed appeal before CIT (Appeals.) Before CIT (Apples) assessee did not press his earlier plea that amount was not taxable at all. only ground pressed by him was that amount in question gave rise to capital gains and that tax should be determined in accordance with provisions regarding capital gains tax including. 54E of Act. 9 . Before CIT(A) it was admitted on behalf of assessee that provisions of s. 176(3A) were attracted and submission before him was that even under that provision amount in question would be regarded as capital gains and not business income. 1 0 . CIT (A) observed that firm was carrying on business as builders and contractors and it was in course of this business that firm entered into agreement to purchase said land. firm, however, could not obtain possession or legal title because of fact that acquisition proceedings were initiated by Government. In theses circumstances any compensation that would be received by firm would be trading receipt because that amount would represent compensation for loss in business deal. Mere fact that earnest money paid in pursuance of agreement to purchase was not shown as stock-in-trade, would not, according to CIT(A) assist assessee because in such cases it was usual accounting practice to take into account profit imbedded in any compensation received for non-fulfilment of any contract by passing relevant entries at time of receipt of compensation. Since compensation would have been trading receipt in hands of firm, it would be considered as trading receipt in hand of partner (assessee) who received it after dissolution of firm by virtue of s. 176(3A). He, accordingly, confirmed inclusion of amount as business in hands of assessee. assessee is now in further appeal before us. 11. first question that we have to decide is whether right of firm under agreement dt. 9th Nov., 1963 was stock-in trade of firm as was contended on behalf of Department. firm was no doubt carrying on business of builders and contractors and it was in course of that business that agreement dt. 9th Nov., 1963 was entered into. However, fact remains that firm never obtained possession of land. IT had not paid full price of land. It had paid only earnest money firm did not acquire any right title or interest in said land, only tight it had, at time of agreement, was right of obtaining specific performance from vendor. Even that right came to end when land was acquired by Government by notification. right that survived was thereafter right to obtain appropriate share in compensation that would be paid by Government to vendor as result of compulsory acquisition. In these circumstances, it can not be said that land in question was stock in trade of firm at any moment of time. 12. We may in this connection refer to decision of Gujarat High Court in CIT vs. Shah Dosh & Company (1981) 23 CTR 307 (Guj) : (1982) 133 ITR 23 (Guj) where it was held that when dealer in land enters into agreement to purchase piece of land, land itself does not become his stock of trade because on entering into agreement he does not get any legal title to land. This decision supports view which we have taken on question whether land itself was stock-in-trade of firm at any moment of time. 1 3 . Besides, we have to make distinction between any commercial commodity and real estate (see Jankiram vs. CIT (1965) 57 ITR 21 at 26 (SC) person dealing in land may purchase piece do land for mere investment without any intention to treat it as stock in trade. All lands purchased by dealer i n lands do not automatically became his stock-in-trade. surrounding circumstances are to be seen In present case acquisition proceedings started within three months of entering into agreement. Only earnest money had been paid. price had not been paid. It cannot, therefore, be inferred that there was intention to treat it as stock-in-trade. 1 4 . We shall now consider question as to what was nature of property received by assessee on dissolution of partnership. 15. deed of dissolution is dt. 31st May, 1978. It is mentioned therein that firm was dissolved w.e.f. close of 21 st May, 1978. It is further mentioned that no dispute regarding accounts had survived because accounts were adjusted by mutual understanding. Then there is mention about such of affair which had remained incomplete at time of dissolution. One such item is agreement dt. 9th Nov., 1963 with which we are concerned here. This item is dealt with in para 6 of deed in following words : "The said dissolved firm had entered into agreement of 9th Nov., 1963 to purchase. and ultimately filed Suit No. 624 of 1973 in Bombay High Court against. for specific performance of agreement of sale mentioned on-the plaint and for other reliefs. parties here to and one Jairam Haridas, retired partner are entitled to benefits of reliefs that may be granted to plaintiffs in said suit and they shall be individually entitled to continue proceedings under said suit. parties hereto hereby agree, confirm and declare that interest of parties hereto and said Jairam Hariram Somaiya in said suit shall be as mentioned below : (a) Harirm N. Somaiya 20 per cent (b) Navinchandra H. Somaiya 20 per cent c) Jairam H. Somaiya 20 per cent (d) Smt. Asha N.Somaiya 20 per cent (e) Smt. Sarla Dilip Somaiya 20 per cent 16. It is obvious from this clause that interest of firm under agreement dt. 9th Nov., 1963 was divided into five equal shares and each partner was allotted one fifth share therein. assessee thus had one fifth shares in inters of firm under agreement dt. 9th Nov., 1963. That interest of firm resulted in grant of compensation and one fifth of that compensation was received by assessee as per terms in deed of dissolution. Thus amount of compensation represents price which assessee received for 1/5 share in interest of firm under agreement dt. 9th Nov., 1963. cost of acquisition of 1/5 share in interest of firm under agreement dt. 9th Nov., 1963 1/5th of amount spent by firm in acquiring said interest. It is now well settled that property allotted to partner on dissolution of firm was capital asset in his hands. In present case, therefore 1/5th share in interest under agreement dt. 9th Nov., 1963 was capital assert in hands of assessee on date of dissolution and gains received by him in receipt of his share of compensation, would, therefore, be capital gains chargeable under s. 45 of Act. 1 7 . Before arriving at above conclusion, we have dully considered arguments advanced by ld. counsel for Department. His contention was that right to receive compensation could never be capital asset. For this proposition he relied on decision of Delhi High Court in CIT vs. J Dalmia (1984) 42 CTR (Del) 168 (1984) 149 ITR 21 5 (Del) and s. 6 of Transfer of Property Act. In said decision, assessee had given up claim for specific performance and had retained only right to damages. Damages were awarded by arbitrator. High Court held that right to damages being mere right to use cannot b e transferred in view of s, 6 r/w s. 5 of Transfer of Property Act with result that no capital gains arose to assessee on receipt of damages awarded. Ours is not case where assessee had mere right to sue for damages. assessee and other partners were pursuing remedy of obtaining specific performance and ultimately they received compensation as result of compulsory acquisition of report. validity of acquisition was under challenge in Court. On date of dissolution, assessee did not get mere right to sue ; he got 1/5 share in interest of firm under agreement dt. 9th Nov., 1963 specific performance of which was being sought in Court. That interest of firm was capital asset and assessee s 1/5 share therein was also capital with result gains arising by award of compensation for acquisition of that asset were capital gains. Another argument was that of dissolution showed that claim for specific performance had been given up. This is also not correct. deed does not indicate any such thing. Yet another argument was that amount was fruit of litigation and as such could not give rise to capital gains. This contention was also unacceptable. As already stated although amount came as result of litigation, yet it was for acquisition by Government of right of firm under agreement dt. 9th Nov., 1963. It was also submitted that since partners deed did not single out this property (right under deed dt. 9th Nov., 1963) it could not be capital asset. This submission was also without merit. As already stated this property was distributed to five partners on dissolution and as such share received by assessee as one of partner was capital asset in his hands. Thus none of contentions raised by Department can be accepted against finding recorded by us in earlier paragraphs. 18. ld. counsel for Department relied on s. 176(3A) of IT Act, 1961 which is as follows: "(3A) Where any business is discontinued in any year, any sum received after shall be deemed to be income of recipient and charged to tax accordingly in year of receipt if such sum would have been included in total income of person who carried on business had such sum been received before such discontinuance. " 19. ld. counsel for assessee contended that this clause would not apply when discontinuance is followed by continuance of business by other partners after dissolution and present case falls in that category in view of cl. 7 of deed of dissolution. We do not accept this contention. We are of opinion that dissolution in this case has affect of discontinuance of business which was till then carried on by firm and as such said provision would which was till then carried on by firm and as such said provision would not be inapplicable in present case merely because under cl. 7 of deed of dissolution benefit of one project (which has no concern with agreement dt. 9th Nov., 1963) are assigned to one of partners. 20. It was contended on behalf of assessee that even if business of firm had not been discontinued and if firm had received compensation, that amount would have given rise to capital gains and not business income. submission on behalf of Department, on other hand was, that said compensation would have resulted in business income and not in capital gains. On behalf of Department reliance was placed on s. 28(i) and 28(iv) of Act. Decisions on which Department relied were Khatan Vithaldas vs. CIT (1979) 13 CTR (Bom) 1 21 : (1979) 119 ITR 846 (Bom) and Donald Miranda & Ors. vs. CIT (1961) 42 ITR 166 (SC). On behalf of assessee these decisions were distinguished and it was submitted that s. 28(iv) would not apply when case was received because words therein viz., any benefit or perquisite whether convertible into money or not" excluded cash receipts. Reliance was placed on decision of Bombay High Court in CIT vs. Indokem Pvt. Ltd. (1981) 22 CTR (Bom) 268 : (1981) 132 ITR 125 (Bom) where similar words in s. 40 (c) were interpreted so as to exclude cash receipts. On behalf of Department reliance was placed on Metal Rolling Works Pvt Ltd. vs. CIT (1982) 31 CTR (Bom) 116 : (1983) 142 ITR 170 (Bom) and Ravi Machine Tools Pvt Ltd. vs. CIT 1978 CTR (Cal) 280 : (1978) 114 ITR 459 (Cal) where it was held that gains by sale of import entitlements gave rise to business income under s. 28. (iv) of Act. 2 1 . We do not consider it necessary to express any opinion on question whether receipt of compensation by firm would have given rise to business income or capital gains, had business been continued. This is because even if we assume that such compensation in hands of firm would have given rise to business income and not capital gains, yet said compensation received by assessee after dissolution of firm would not give rise to business income and that words in s. 176 (3A) do not warrant conclusion that when particular receipt would have been business income in hands of firm if firm had continued, same would necessarily be business income in hands of partner after dissolution. It would no doubt represent income but not necessarily business income. head under which it would fall would depend upon facts of case and facts of present case indicated that head under which income would fall would be capital gains. We now proceed to give detailed reasons in support of said conclusion. 22. We have already quoted s. 176 (3A) of Act. words therein are almost identical with those in s.176(4) former applies to discontinuance of business while latter applies to discontinuance of profession. In sub-ss. (3A) and (4) of s. 176 there is no statement that income should be chargeable under head "business or profession." provisions in sub-ss (3A) (4) have set at rest controversy whether receipt in question (after discontinuance of business or profession) was taxable or not. These provisions expressly say that it is taxable. However, they have left open question about character of receipt viz., as to under which head it would be assessable. word "accordingly" in there provision can not be pressed into service as indicative of head of cargo. This conclusion is fortified by comparison of theses sub section with sub-ss. (1) to (4) of s. 41 which deal with similar items of statutory receipts. Those sub-sections lay down that such items of receipts of items due shall be chargeable in year of receipts of items due shall be chargeable in year of receipt or in year when they became due under head "business or profession". There is on such express mention about head "business or profession" in sub-ss. (3A) and (4) of s. 176. Recipient of amount may not be person who carried on business or profession but may be person who had topped into his shoes as legal representative. ambiguity has arisen, as rightly obseved by learned author in Sampath Iyengar s Law of Income-tax, page 3845 cited on behalf of assessee, because of introduction in essentially procedural section like 176, charging provisions which should really find place elsewhere. In fact Choksi Committee drew attention to this aspect and suggested that sub-ss. (3A) and (4) should be deleted from s. 176 and appropriate provisions should be made in s. 28. We, therefore, hold that income which would have been charged as business income in hands of firm had firm continued need not necessarily fall under same head when received by another person after discontinuance of business under s. 176 (3A) of Act. 23. Before parting with this topic, we mention that learned counsel for Department had drawn our attention to following observations in treatise on Income-tax by Kanga and Palkhivala at page 996 Vol. I. "Any sum chargeable by virtue of these sub-sections should be assessed under head "Business or Profession" and expenses incurred after year of discontinuance to earn such sum should be allowed as deduction (Cf. s. 41 (5)". These observations, no doubt, support Revenue. At time (1976) when said treatise was published, there was no reported decision on point as t o under what head income should be assessed in hands of recipient under s. 176 (3) or 176 (4). Subsequently, there came decision of Madras High Court in CIT vs. Viswanath Sastri's Estate (1979) 10 CTR (Mad) 143 : (1980). 1 21 ITR 270 (Mad) where it was held that amount received after death of person carrying on profession should be assessed in hands of recipient under head "other sources," This decision has expressed view contrary to view expressed in said treatise in Volume I. Subsequently, in 1982 Vol. III of said treatise was published in which decisions published subsequent of publication of Vol. I were cited. Regarding above observation in Vol I learned author in Vol. III added: "However, Madras High Court held in CIT vs. Vishwanath Sastri's Estate (1980) 1 21 ITR 270 (Mad)m that fees collect after death of professional person are taxable as income from other sources." Thus it is clear that Madras High Court decision has taken view different from view expressed in Vol. I of said treatise. There is no High Court decision which has dissented from view of Madras High Court in above case. Consequently, we are bound to follow said decision. That decision is authority for view expounded by us earlier to effect that head under which income would be chargeable under s. 176 (3A) need not necessarily be profits and gains of business or profession and that head under which such income would be chargeable would depend on circumstances in which recipient received amount 24. In Viswanath Sastri's Estate case (supra) head under which income was held assessable was income from other sources. This was on facts of that case. In our case share of assessee in interest of firm under agreement dt. 9th Nov., 1963 allotted to assessee on dissolution of firm was his capital asset (and not stock-in trade) and as such gains arising on receipt of his share of compensation would be assessable as capital gains and not as business income. 2 5 . We consider it necessary to make special reference to decision of Bombay High Court in Khatau Vallabhdas vs. CIT (1979) 13 CTR (Bom) 1 21 : (1979) 119 ITR 846 (Bom) on which great emphasis was laid by learned counsel for Department In that case on dissolution of firm partner received grocery articles of large value at cost which had been stock in trade of firm and partner then sold said articles and made gains. controversy w s whether gains would chargeable as business income or capital gains. High Court observed that we have to look to nature of commodities. grocery articles are never purchased by way of investment. High Court found that they had been acquired to make profit by sale as part of profit making scheme. Consequently, profit were business profits. At pages 854 and 855, High Court observed that as far as land was concerned, matter was different. acquisition of land could as well be by investment and as such presumption which they drew regarding grocery articles was not necessarily applicable when what is allotted to partner is land. This decision is of no assistance to us. In present case, circumstances do not indicate that share which assessee received in interest of firm in agreement dt. 9th Nov., 1963 was intended to be stock in trade in hands of assessee. In fact land had already been acquired and compensation in lieu of interest under agreement dt. 9th Nov., 1963 had to be received. This was clear case of capital asset in hand of assessee for which received compensation and as such provisions relating to capital gains would be attracted. 26. We may reiterate that it was not assessee's case before CIT (A) that amount was not taxable at all. plea was that it was taxable under head capital gains. Before us also learned counsel for assessee stated that it was not assessee's case that amount was not taxable at all. assessee wanted that it should be taxed under head capital gains. 27. We may also mention that one of contentions raised on behalf of assessee before us was that s. 176 (3A) applied only when firm had allowed cash system of accounting. We do not find anything in said provision to support said submission. Consequently, we have not accepted said submission. 28. For reasons gives above, we set aside orders of authorities below on this point. We restore matter to ITO with direction to compute capital gains and bring them to tax in accordance with law after giving exemption under s. 54E, if assessee is so entitled. 29. appeal is allowed. *** NAVINCHANDRA H. SOMAIYA v. NINTH INCOME TAX OFFICER