TaxTMI 
TaxTMI 
2011 (10) TMI 382
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....ese appeals are being disposed of by way of this consolidated order. 2. To adjudicate on these appeals, only a few material facts need to be taken note of. The assessee before us was a shareholder in Mandhana Exports Pvt Ltd - a closely held company owned and managed by Mandhana family for a number of years. In the year 1996, the assessee company entered into a joint venture arrangement with Bornemann and Bick GmbH, Germany, under which 50% of the 50% of Equity shares were allotted to this German company and the name of the company was changed to Mandhana Boremann Industries Pvt Ltd ('Mandhana Boremann', in short) . As this German company was acquired by a Dutch company by the name of Paxar BV, the shareholdings in Mandhana Boremann....
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....share sale agreement, and, therefore, a part of the sale consideration is to be attributed to the non compete obligations. None of the parties is satisfied. While the Assessing Officer is aggrieved of the partial relief given by the CIT(A), the assessee still maintains that no part of the consideration can be attributed to the non compete fees. 3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 4. We find that, even in the case of Hami Aspi Balsara (supra) there was a specific non compete obligation and yet the coordinate bench was of the view that no part of the sale consideration of shares could be attributed to be tax....
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....n the balance sheet, which constituted major part of the share price, the same had to be determined before arriving at the true book value of share of these two companies. The A.O. has computed approximately 80% of the consideration towards noncompete fees which, in any case, is not in conformity with the settled principles of valuation of shares. Therefore, we are of the opinion that the basis adopted for assigning consideration towards non-compete fees was not correct. Now the question would be how to assign the consideration towards non-compete fees. We really do not need to enter this area particularly because the difference, between the sale price of share and the true book value of the share, if allocated towards non-compete fees, was....
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....ead "Capital gains", Thus, section 28 (va) would be attracted where the assessee was carrying on business and not where assessee only had right to carry on business in the form of capital asset. Further as per Circular No. 763 dated 18/2/1998 by Finance Act, 1997 the amendments were made in section 55(2)(a) of the Act to bring extinguishment of right to manufacture, produce or process any article or thing or right to carry on any business within the ambit of capital gain tax. Similarly Circular No.8 of 2002 dated 27/8/2002 explaining the provisions of Finance Act, 2002 by which clause (va) was inserted in section 28 of the Act, clarifies that receipts for transfer of rights to manufacture, produce or process any article or thing or ....