Payment made to a RETIRING partner- Business Expense

Chennai ITAT observes that, the payment made by the assessee , a partnership firm (originally established as a proprietory concern, reconstituted into a firm on death of the original proprietor) to a partner , in settlement of a family dispute, to keep the capital of the firm intact, and for the smooth running of the business, even though not in the nature of royalty or business expenditure , is deductible from business income. Also holds that, the payment being made in settlement of a family dispute, there is no transfer, of capital asset and hence no capital gain liability U/S 45, even though in the normal course, there will be capital gain on distribution assets on retirement of a partner.  TS -434 -ITAT (CHENNAI) 2018.