TaxTMI 
TaxTMI 
2010 (3) TMI 851
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.... etc., for about two years. However, due to financial constraints and lack of finance, it could not make its business venture a profitable one and in the process incurred heavy losses. The sales achieved for the year ended March, 2001 were Rs.941.62 lakhs and for the next 9 months period, i.e., from April, 2001 to December, 2001 Rs. 361.06 lakhs. In view of heavy losses, the board of directors of the assessee-company decided in a meeting held on December 29, 2001 to transfer the distribution assignment of Acer products to M/s. Salora International Ltd. for which M/s. Acer India (P.) Ltd. have also consented. For the services so rendered, the assessee-company was in receipt of income in the form of commission. The assessee offered the same as business income. However, the Assessing Officer did not accept the assessee's contention and treated the commission income so received as income from other sources. 4. It was contended by the assessee before the Assessing Officer that in terms of the agreement entered by it the assessee-company is to provide the following services to M/s. Salora International Ltd. : (i) To provide dealer network with their creditworthy report and status. ....
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....s for year ended March, 2001 and Rs. 361.06 lakhs for the next nine months ending on December 31, 2001. For carrying on business smoothly the board of directors of the assessee-company held meeting on December 29, 2001 and resolved to transfer the distribution assignment to M/s. Salora International Ltd. for which Acer India P. Ltd. have also consented. The said distributorship of Acer products was transferred to M/s. Salora International Ltd. with effect from January 1, 2002 with the consent of Acer India P. Ltd. The Commissioner of Income-tax (Appeals) observed that the assessee-company made available services like providing dealer network with their creditworthy report and status, to assist in making product mix, area-wise and season-wise guidance on inventory level maintenance and in logistics for movement of inventory, timely and economically guidance on marketing strategy, guidance on installation service and after sale service with optimum cost effectiveness, to provide market survey and research report and guidance in further market research, to provide report on research and survey with various other brands goods with comparative price, features and market shares with Acer....
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....n of establishment and infrastructure of the assessee M/s. FX Info Technologies Ltd. As per the learned authorised representative, the same income received by the assessee is therefore liable to be taxed as business income only in terms of the decision of the Tribunal in the case of M/s. Salora International Ltd. Our attention was also invited to the objects clause of the memorandum of association and the terms of the conditions of the distribution agreement and the nature of services being rendered by the assessee in the normal course of its business which generated income in the hands of the assessee in the form of commission liable to be taxed as business income. 10. We have considered the rival contentions and gone through the orders of the authorities below. From the record, we found that in view of the assessee being incurring business losses on account of business of distribution of Acer products, the board of directors of the company held its meeting on December 29, 2001 and resolved to transfer the distribution agreement of Acer products to M/s. Salora International Ltd. We also found that Acer India P. Ltd. have also consented to transfer the distribution business to M....
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....ssessee earned substantial income but M/s. Salora International Ltd. was also able to have remarkable achievement in the sales turnover, thereby earning substantial profit thereon. We have carefully gone through the terms and conditions of the distribution agreement placed on record as well as letter dated December 27, 2001, wherein M/s. Acer India P. Ltd. agreed for transfer of distribution arrangement to M/s. Salora International Ltd. We have also gone through the various clauses of the memorandum of association as alleged by the Assessing Officer for imputing that assignment of distributorship was not coming in the object clause of the assessee-company. After going through all these material, we found that as per the terms of agreement, the assessee had agreed to transfer its dealer network to M/s. Salora International Ltd. with list of its clients, customers, the benefit of all contracts, engagements and orders in connection with the business of Acer products and its skilled employees having vast experience and knowledge of rendering services in this line of business. We also found that the assessee-company had not agreed but also provided continued support on various aspects o....
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....her municipal, local or otherwise or any person, firm or company, in India or abroad, that may seem conducive to the attainment of the company's objects or any of them, and obtain from any such Government, authority, person, firm or company any rights, privileges, licences and concessions which the company may consider necessary or desirable to obtain and to carry out, exercise, use or comply with any such arrangements, rights, privileges or concessions." 12. It is crystal clear from the above clause of the memorandum that the assessee-company had the power to enter into the arrangement with any company which may seem conducive to the attainment of the company's objects as also to obtain from such company any rights, privileges or concessions which the company may consider necessary. Thus, we do not find any merit in the observation of the Assessing Officer in this regard. The Assessing Officer has also alleged that commission earned by the assessee-company was just diversion of the income on the same products on which the assessee-company was incurring losses and is an eye wash to defraud the Revenue as M/s. Salora International Ltd. was holding substantial shares of the assess....