TaxTMI 
TaxTMI 
2014 (12) TMI 935
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....ent subsisting at the time of receipt towards goodwill? 2.1. The facts in a nutshell are as under: The appellant, which is a private limited company incorporated in the year 1984, is engaged in the business of shipping and clearing agency. It was sub-agent of M/s.Sea Land (I) Ltd., who acted as an agent of M/s.Sea Land Inc., USA. The appellant was a partnership firm at the inception and was carrying on the business of clearing, forwarding and shipping agency. It had entered into a service agreement with Sea Land Service Inc. in November, 1978, which was renewed in 1981. 2.2. The appellant company took over the assets and liabilities of the partnership firm Chakiat Agencies and also acquired the goodwill of the firm for a consideration of Rs. 20,00,000/-. Thereafter, the appellant continued the business arrangement with Sea Land (I) Ltd., agent of Sea Land Inc., USA, and renewed it also. 2.3. It appears that A.P.Moller, Denmark took over the business of Sea Land Inc., USA, on 11.12.1999. Consequently, with effect from 13.12.1999, Sea Land Inc., USA terminated the Agency Agreement dated 14.10.1992 entered into with Sea Land (I) Ltd. By notice dated 15.11.1999, Sea Land....
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....(ii)(c) of the Act. 2.7. Calling in question the said order passed by the Commissioner of Income Tax, the assessee preferred an appeal before the Tribunal. The Tribunal dismissed the appeal filed by the assessee, by confirming the order passed by the Commissioner of Income Tax. 2.8. Aggrieved by the said order passed by the Tribunal, the present appeal is filed on the questions of law, referred supra. 3. We have heard Mr.C.V.Rajan, learned counsel for the appellant and Mr.T.Ravi Kumar, learned Senior Standing Counsel appearing for the Revenue and perused the order passed by the Tribunal and the authorities below. 4. As the questions of law raised are intertwined and are relating to the interpretation of Sections 28(ii)(c) and 45 of the Act, they are dealt with together. 5. It is the plea of the appellant that the consideration received by them for transfer of goodwill is a profit or gain out of transfer of capital asset under the head 'profits and gains of business or profession' as defined in Section 45 of the Act and, therefore, it is not chargeable to income-tax under Section 28(ii)(c) of the Act. 6. Before adverting to the merits of the said plea, it is apposite t....
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....its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. (2A) Where any person has had at any time during the previous year any beneficial interest in any securities, then, any profits or gains arising from transfer made by the depository or participant of such beneficial interest in respect of securities shall be chargeable to income-tax as the income of the beneficial owner of the previous year in which such transfer took place and shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of sub-section (1) of section 10 of the Depositories Act, 1996, and for the purposes of-- (i) section 48 ; and (ii) the proviso to clause (42A) of section 2, the cost of acquisition and the period of holding of any securities shall be determined o....
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....he previous year in which such compensation or part thereof, or such consideration or part thereof, was first received ; and (b) the amount by which the compensation or consideration is enhanced or further enhanced by the court, tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which such amount is received by the assessee. (c) where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration. Explanation.--For the purposes of this sub-section,-- (i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil ; (ii) the provisions ....
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....28(ii)(c) of the Act, which is extracted above, provides an answer to the issue involved in this case. 9. In the case on hand, the appellant is a recipient of certain amount for holding an agency in India for the activities relating to the business of Sea Land (I) Ltd. and it is only in connection with the termination of the agency, the appellant received certain payment under Clause (1) of the agreement dated 1.6.2000 by transferring such rights covered by the sub-agency to MAERSK and that is referable to the initial Sub-Agency Agreement dated 8.11.1992. Therefore, in our considered opinion, Section 28(ii)(2) of the Act would come into play and the income received by the appellant has to be certainly treated as profits and gains of business. It can partake the character of transfer of capital asset, as what is transferred is the sub-agency and goodwill attached. 10. If it is a case of transfer simpliciter of the asset, without reference to the sub-agency or the terms contained in the agreement dated 8.11.1992, then the appellant would be entitled to harp on Section 45 of the Act. But, when Clause (1) of the agreement dated 1.6.2000 is interpreted as such, it will clearly fall wi....