TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 503
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....:- The respondent/assessee is a private limited company incorporated in the year 1995 vide certificate of incorporation issued by ROC, Delhi & Haryana and is engaged in the business of Healthcare, print media & electronic media communications. It would be pertinent to mention here, in order to portray the assessee's work that the business of print media communications comprises of publication of regular journals and customized publications for the industries & professional groups; electronic media communication also includes production of customized audio video healthcare communications. On 10-3-2006, the assessee company entered into a 'Specified Assets Transfer Agreement' with one M/S CMP MEDICA INDIA PRIVATE LIMITED, Bangalore, for the sale of all its rights, titles and interest in specified assets of its Healthcare Journals & Communications business. These assets, as narrated in the agreement, were (a) the periodicals (b) the products (c) the business intellectual property rights along with the goodwill and all rights (d) the customer database (e) the records (f) the editorial materials & (g) the contracts. Pursuant to aforesaid agreement, two separate deeds namely 'Deed of As....
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....erred to as the INSDOC). Thus, the assessee was exclusively holder of the copyrights in all the journals and was also the exclusive holder of trade Marks of all the journals. These were, therefore, intangible assets within the meaning of section 55(2)(a) of the Act. The cost of acquisition of these assets was 'Nil' and the consideration received on the sale of these intangible assets therefore, should be treated as long term capital gain. The Assessing Officer, however, did not accept the aforesaid contention of the assessee. He examined the features of the agreement entered into between the assessee and the transferee of the aforesaid assets on the basis of which he noticed as under :- "(a) The assessee has not sold of whole of his business but only surrendered his right regarding publication of the journals. (b) As seen from the clause (5) of above, in return CMP Medica has granted the assessee a royalty free, non-exclusive license to use the data comprised of the advertisers and pharmaceutical companies which the assessee shall, use in respect of its clinical trials business." 4. On that basis, the Assessing Officer formed an opinion that the amount received....
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....t apply. 5. It is under these circumstances, the revenue has preferred the present appeal under section 260A of the Act. 6. After hearing the counsel for the parties and going through the orders of the authorities below, we are of the opinion that the view taken by the CIT(A) as well as ITAT is without any blemish and in the facts of this case, it is rightly held by these two authorities that a sum of about Rs. 3.80 crores received as sale of the aforesaid intangible assets amounted to long term capital gain. It is to be borne in mind that vide agreement entered into by the assessee in favour of M/s CMP Medica Pvt. Ltd. the assessee had sold/transferred the rights of trademark, brands, copyrights, etc.; in the journals and publications which the assessee had. All the journals were registered with RNI. These publications were indexed by the INSDC and were also published as property of the assessee. The assessee also had copyrights therein. 7. It cannot be disputed that trademarks/brands, copyright and good will constitute assets of the business and are profit earning apparatus. Section 2(14) of the Act defines "Capital Asset" and section 2(11)(b) of the Act defines "intangible as....
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....." Section 2(11): "block of assets" means a group of assets falling within a class of assets comprising- (b) Intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed". 8. It can also be said that the 'right to carry on any business' has been recognized by the legislature as capital asset for the purposes of assessing and computing the capital gains as is clear from the reading of section 55(2)(a) of the Act, which is in the following terms:- "(2) For the purposes of sections 48 and 49, "cost of acquisition", - (a) In relation to a capital asset, being goodwill of a business, or a right to manufacture, produce or process any article or thing, tenancy rights, stage carriage permits or loom hours, - (i) In the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price; and (ii) In any other case [not being a case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49], shall be taken to be nil" 9. T....
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.... in Trade Mark Journal No. 1328 Suppl. 4 (vi) All publications have a copyright declaration. 11. The CIT(A) as well as ITAT have rightly held that in this backdrop provisions of section 28(va) would not apply to the instant case. In this behalf, it is to be borne in mind that the clinical trial business which the assessee continues to carry on was distinct and separate from the business of Healthcare Journals and Communication. As far as Healthcare Journal and Communication business is concerned, it had been given up in entirety in favour of the transferee. Therefore, the Assessing Officer was wrong in holding that the assessee had given up only one of the activities in relation to its business. In such circumstances, the proviso to section 28(va) becomes applicable which stipulates that section 28(va) was not applied to any sum received on account of transfer of right to carry on any business which is chargeable under the head "capital gains". Section 55(2)(a) of the Act has to be read in conjunction with this proviso. We are in agreement with the following analysis of the CIT(A) in this behalf :- "5.2 It is also quite clear that giving up the right to carry on the Health....