Self-generated trademark transfer before the cutoff is not business income and escapes post-amendment computation rules.

Where specified registered trademarks transferred before 01.04.2002 were self-generated and no ascertainable cost of acquisition existed, the receipts from their assignment are not to be recharacterised as business income and the post-amendment computation rule for capital gains does not apply retrospectively; the 2001 insertion bringing trademarks within the cost computation operates prospectively from 01.04.2002, leaving pre-cutoff transfers governed by the pre-amendment position. Separately, a claimed short-term capital loss was held allowable in conformity with binding precedent relied on by the assessee.

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Issues: (i) Whether the consideration of Rs. 29.10 crores received on assignment of trademarks/brand names (vide deed dated 15.06.2000) is taxable as capital gains or as business income; (ii) Whether the short-term capital loss of Rs. 2,50,45,545/- claimed by the assessee is allowable.

Issue (i): Whether the Rs. 29.10 crores received on assignment of trademarks/brand names is chargeable to tax as capital gains or as business income.

Analysis: The question turns on (a) the character of the transferred rights (trademark/brand name vis-a -vis goodwill of the business), (b) whether the transferred trademarks are self-generated and hence have no ascertainable cost of acquisition for the purposes of sections 48 and 55(2)(a), and (c) the temporal effect of the amendment inserting "trademark or brand name associated with a business" into section 55(2)(a) which took effect from 01.04.2002. The deed of assignment identifies transfer of specified registered trademarks and the accompanying goodwill limited to the business concerned in the goods for which those trademarks are registered; the broader business was not transferred. Established precedent treats goodwill as an intangible attached to an ongoing business and treats self-generated intangible assets as having no ascertainable cost unless acquired from a previous owner. The 2001 amendment to section 55(2)(a) brought trademarks within the computation net prospectively from 01.04.2002; transactions prior to that date remain governed by the pre-amendment position. The provisions invoked to classify the receipt as business income (value of benefit/perquisite or deemed income on account of earlier deductions) do not, on the facts, displace the capital character where the asset transferred is a capital asset and self-generated trademarks lack an ascertainable cost.

Conclusion: The Rs. 29.10 crores is not taxable as business income and, being receipt on transfer of self-generated trademarks prior to 01.04.2002, does not attract capital gains tax under the computation provisions; issue answered in favour of the assessee.

Issue (ii): Whether the short-term capital loss of Rs. 2,50,45,545/- is allowable to the assessee.

Analysis: Relevant binding precedent on the claim of short-term capital loss controls the treatment of such loss and its allowance; the revenue did not contest applicability of that precedent.

Conclusion: The short-term capital loss is allowable; issue answered in favour of the assessee.

Final Conclusion: The appeals challenging the Tribunal's order are dismissed; the tax characterisation of the receipts is resolved in favour of the assessee and the claimed short-term capital loss is upheld.

Ratio Decidendi: Where specified registered trademarks transferred before 01.04.2002 are self-generated and no ascertainable cost of acquisition exists, the computation provisions for capital gains cannot be applied and such receipts are not taxable as capital gains; the 2001 amendment to section 55(2)(a) applying trademarks to capital gains operates prospectively from 01.04.2002 and does not affect pre-cutoff transactions.

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