Settlement deed transfer of trade mark counts like a gift for holding period, sustaining long-term capital gains treatment.

A voluntary transfer of a trade mark by settlement deed without consideration is treated on the same footing as a gift for computing the period of holding under section 2(42A) read with section 49(1)(ii), so the previous owner's holding period is counted and the gain is characterised as long-term capital gain. Eligibility for deduction under section 54F depends on the factual position regarding ownership of residential property, including whether one of the assets is commercial in nature and whether the assessee owned more than one residential house on the transfer date; that issue requires fresh factual examination.

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Issues: (i) Whether the gains arising on transfer of the trade mark were to be treated as long-term capital gains by applying the period of holding of the previous owner in the case of a transfer by settlement deed. (ii) Whether the assessee was entitled to deduction under section 54F of the Income-tax Act, 1961, in view of the dispute regarding ownership of more than one residential property.

Issue (i): Whether the gains arising on transfer of the trade mark were to be treated as long-term capital gains by applying the period of holding of the previous owner in the case of a transfer by settlement deed.

Analysis: The transfer of the trademark rights had already been considered by the Tribunal in an earlier matter involving the same asset and substantially identical facts. The governing principle applied was that a voluntary transfer by way of settlement deed, without consideration, falls within the same legal footing as a gift for the purpose of computing the period of holding under section 2(42A) read with section 49(1)(ii). On that basis, the holding period of the previous owner was required to be taken into account.

Conclusion: The gains were correctly treated as long-term capital gains and no interference was called for on that issue.

Issue (ii): Whether the assessee was entitled to deduction under section 54F of the Income-tax Act, 1961, in view of the dispute regarding ownership of more than one residential property.

Analysis: The claim under section 54F turned on whether one of the properties was in fact a commercial property and whether the assessee could be said to own more than one residential house on the date of transfer. The existing findings were based on incomplete scrutiny of the conveyance deeds, and the factual position required closer examination. The proper course was to re-examine the nature of the property and the assessee's eligibility in accordance with law.

Conclusion: The question of eligibility for deduction under section 54F was remitted to the Assessing Officer for fresh consideration.

Final Conclusion: The appeal succeeded only in part, with the capital-gains characterization sustained and the deduction issue sent back for reconsideration.

Ratio Decidendi: A voluntary transfer by settlement deed without consideration is to be treated on par with a gift for computing the period of holding under the capital gains provisions, while entitlement to deduction under section 54F depends on a factual determination of whether the assessee owned more than one residential house.

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