TaxTMI 
TaxTMI 
2012 (6) TMI 659
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....as against business income treated by the A.O. 3. Facts of the case in brief are that during the previous year relevant to A.Y. 2004-05 the assessee company has sold its entire Sofoin-DS business to Transpek Silox Industry Ltd. (TSIL) vide agreement entered into by the assessee company and ISIL for a total consideration of Rs. 19.50 million to be payable by TSIL to the assessee company in the following manner:- Trade marks 1,00,000 Non-compete clause 175,00,000 Scientific and Technology know-how transfer 14,00,000 Plant and machinery 5,00,000 1,95,00,000 The sum of Rs. 1,75,00,000/- received by the assessee from TSIL as noncompete fee was offered to tax under the head "capital gain". During the course of assessment proceedings, the A.O. asked the assessee to furnish the justification for taxability of non-compete fees under the head "capital gain". It was submitted by the assessee that it has transferred the right to carry on the business of the specified chemicals and any alternates thereon (including the right to use of allow its name to be used in connection with any such business) to TSIL. The provisions of section 28(va) of the....
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....tion received or receivable in any kind under an Agreement for not carrying out any activity in relation to any business is chargeable to income tax under the head 'profits and gains of business or profession. But the sub clause (a) is restricted in its operations by the proviso that if any sum received or receivable is on account of transfer of right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable to tax under the head "capital gains" would not be taxable as 'profits and gains of business or profession'. According to him this proviso has not been taken into consideration by the assessing officer while attracting the provisions of section 28(va)(a) although admittedly he has recorded that the assessee has not just transferred the right to manufacture or produce or process Saffolin - DS but also its entire business to Transpek Silox Industry Limited (TSIL) and the sale of business as such is not disputed. According to him the application of the provisions of section 28(va) are also clarified by the CBDT vide Circular No. 8 of 2002. According to him since the assessee has transferred the entire business and ha....
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....n the manufacture or processing of goods or provision for services; Provided that sub-clause (a) shall not apply to (i) any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business; which is chargeable under the head "Capital gains"; In view of the clear-cut provisions of proviso to section 28(va)(a) and the clauses of the agreement, we concur with the findings of the ld. CIT(A) that the A.O. has not correctly appreciated the facts and the provisions of law before disallowing the claim of the assessee. When the assessee has transferred the entire business and has thereby transferred its right to manufacture or produce or process the product namely Saffolin -DS, the consideration so received has to be taxed under the head "capital gains" and not under the head "profits and gains of business or profession". The ld. D.R. also could not controvert the findings given by the ld. CIT(A). Under these circumstances, we do not find any infirmity in the order of the ld. CIT(A) allowing the claim of the assessee treating the non-compete fees a....
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.... out the use of CTC. It was argued that the necessary funds had been released by the IDBI only in its capacity as representative of G01 in the matter. A copy of the communication sanctioning the release of funds to the assessee was also filed in the paper book. Accordingly it was submitted that the assessee company had entered into the agreement with IDBI (duly authorized agent of GOI) and received the compensation for phasing out the use of CTC, as required under the multilateral fund of the Montreal Protocol. In view of the same it was stated that the provisions of the second proviso to sec. 28(va) had been duly fulfilled and accordingly it- was stated that the said compensation was not liable to be taxed as income. 5.3 Based on the arguments advanced by the assessee the ld. CIT(A) allowed the claim of the assessee. While doing so he noted that second proviso to section 28(va) would squarely cover the impugned compensation received by the assessee company from the multilateral fund of the Montreal protocol under United Nations Environment Programme. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before us. 6. After hearing both the sides....
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....by the Assessing Officer towards expenses attributable to the earning of dividend income under the provisions of Section 14A against the dividend income of only Rs. 11,210 earned by the appellant." 7.1 After hearing both the sides we find the A.O. made disallowance of Rs. 71,214/- u/s 14A read with rule 8D by following the decision of the Special Bench of the Tribunal in the case of Daga Capital Management Pvt. Ltd. In this case the assessment year involved is 2006-07. The dividend income received by the assessee is only Rs. 11,210/-. Both the parties fairly agreed that the matter needs fresh adjudication at the level of A.O. in view of the decision of the Hon'ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT reported in 328 ITR 81. In view of the above submissions made by both sides, we deem it proper to restore the issue to the file of the A.O. for fresh adjudication in the light of the ratio laid down by the Hon'ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra) and in accordance with law. Needles to say the A.O. shall give adequate opportunity of being heard to the assessee. The ground raised by the a....
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.... there and whether the expenditure incurred by the assessee was for repairs of old roads or construction of new roads. 8.5 The ld. D.R., on the other hand, while supporting the order of the ld. CIT(A) submitted that he has no objection if the mater is restored to the file of the A.O. for verification. 8.6 We have considered the rival arguments made by both the sides. Since the dispute in the impugned ground is regarding whether the expenditure incurred is for repairs of existing road or construction of new roads and since the full facts are not coming out of the records, therefore, we deem it proper to restore the issue to the file of the A.O. with a direction to verify as to whether there was existence of road in the past. If there was road earlier and if the expenditure is incurred for repair of the existing road then of course the assessee is entitled to claim the same as revenue expenditure. However, if the expenditure incurred is for construction of new road then the expenditure has to be capitalised and the assessee is entitled to depreciation as directed by the ld. CIT(A). With these observations, we restore the issue to the file of the A.O. for deciding ....
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....e assessee has made only legal arguments without giving any factual data. Nothing was brought to our notice to establish that the consultancy charges have been paid for new products for existing business of the assessee. The argument of the ld. Counsel for the assesse that the consultancy charges have been paid to find out some new area for existing business is also a mere submission without any documentary evidence. Under these circumstances we do not find any infirmity in the order of the ld. CIT(A) and accordingly uphold the same. The ground raised by the assessee is accordingly dismissed. 10. Ground of appeal No. 4 by the assessee reads as under:- "That on the facts and in the circumstances of the case and in law, the Learned Commissioner (Appeals) erred in not deleting the entire ad-hoc disallowance of Rs. 228,639 in respect of foreign travel expenses and in only granting partial relief by restricting the said disallowance to 10% of the foreign travel expenses incurred by the appellant." 10.1 Facts of the case in brief are that an amount of Rs. 22,86,393/- was debited by the assessee in the PandL account towards travelling and conveyance expenses.....