BASIC FACTS :  

The respondents are family members of Menezes family who own 58.88% of equity shares (10598 shares out of 18000 shares) in the capital Colfax Laboratories India Limited (for short "Colfax"). 7200 share i.e. 40% of the equity of Colfax was held by Shulton (GB) Ltd, United Kingdom. The remaining 202 shares were held by three other individuals. Shulton (GB) Ltd., U.K., a 100% subsidiary of Shulton Inc. USA, is the registered proprietor in India of a trade mark "Old Spice". By an agreement entered in the year 1967 Shulton (GB) granted to Colfax right to use and market products under the brand name "Old Spice". In the year 1990-91, Procter and Gamble, Cincinatti, USA took over and acquired Shulton Inc. USA. Procter and Gamble USA thus became the holding company of Shulton (GB) Ltd., UK. On account of the aforesaid acquisition, Procter and Gamble (India) Ltd., (for short "PGI") through Procter and Gamble USA became the owner of the trade mark "Old Spice" in India. PGI also appointed a director on the board of Colfax. On acquisition of Shulton Inc., the Procter and Gamble USA became interested in using the trade mark Old Spice by itself or through its Indian subsidiary the PGI. It appears that it was not interested in renewing the agreement with Colfax permitting it the use of the trade mark Old Spice. The arrangement/agreement was last renewed on 1st January, 1991 upto 31st December, 1993. After 1st January, 1994, PGI intended to market the products by itself under the brand name "Old Spice". In order to avoid any dispute about use of the trade mark "Old Spice", PGI wanted confirmation from Colfax about its right to exclusively use the trade mark "Old Spice". It, therefore, started negotiations with Menezes family who were holding majority of equity in Colfax and majority of directors on its board. It requested them to get a resolution passed in the General Meeting of Colfax giving up the right of marketing, selling and distribution of Old Spice range of products in favour of PGI. It offered to pay to the Menezes family a sum of Rs.3.5 crores in consideration of their casting affirmative vote in favour of the resolution of the transfer of business of marketing the products under the trade name "Old Spice" in favour of PGI. In addition to the said consideration which was to be paid to the members of the Menezes family, PGI also offered that it would grant Colfax exclusive manufacturing right of its products for 10 years under the arrangement. Colfax was to manufacture and sell and PGI was to purchase from Colfax on principal to principal basis several products. PGI was then free to market these products under the brand name Old Spice. In pursuance of the above, an agreement was entered into between PGI and Colfax on 21st October, 1993. An extraordinary general body meeting of Colfax was also convened on 11th February, 1994 wherein the resolution regarding giving up of the business of marketing of products under the trade mark "Old Spice" was passed. The members of Menezes family voted in favour of the resolution. As agreed, PGI paid Rs.3.5 crores to the members of Menezes family. The amount was distributed amongst the members of Menezes family in the proportion agreed between them. The proportion agreed was not proportionate to the number of shares held by them in Colfax.  

Decision

Relied upon judgment:  Dr. K. George Thomas vs. Commissioner of Income-tax, Ernakulam, [1986 -TMI - 5927 - SUPREME Court]

The revenue was required to initially establish that the amount of Rs.3.5 crores received by the members of Menezes family was of a revenue character. They have not discharged that burden.

The receipt was a casual receipt in the nature of windfall arising out of one time event of affirmative voting on a resolution. It was not of repetitive character and was not likely to happen again.

Amount received by the assessee is not revenue income within the meaning of section 2(24) of the Income Tax Act, 1961.

For detailed decision:  visit:

CIT Versus Late David Lopes Menezes Patto Plaza [2010 -TMI - 78191 - BOMBAY HIGH COURT (GOA)]