TaxTMI 
TaxTMI 
2016 (7) TMI 337
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....ffidavits in support thereof, have been filed by the assessee for admission of belated appeals. The assessee has made out a case that the delay occurred is not intentional or deliberate. The small delay has not caused any prejudice to other side either. Considering the reasons for the delay narrated in the said petitions, we are convinced that sufficient cause for the delay in the filing of these appeals exists. No mala fide can be imputed in the cause narrated. Cause of substantial justice deserves to be preferred over technical considerations in the facts of the present case. We accordingly condone the delay in terms of S.253(5) of the Act and proceed to dispose of these appeals on merits. 3. Solitary issue arising for consideration in all these appeals is whether the compensatory sum received in terms of settlement agreement for not using the word 'Longman' in the name or trade mark of the assessee is business income or a capital receipt not liable to tax. 4. Facts of the case relevant to the issue in dispute, as taken from the appeal for the assessment year 2008-09, are that the assessee company is engaged in the business of publishing and trading of educational and academic ....
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....r the registration of exiting trade mark after the expiry of some time frame referred as 'primary period ' and 'secondary period' as per settlement agreement. Similarly, the Person Group on its part undertook that it shall not use the name 'Longman' in combination with the name 'Orient' or any name confusingly similar to name 'Orient' in India or anywhere else in the world. Hence, the assessee was estopped from using the trade mark which includes the word 'Longman' and similarly, the Longman Group or Pearson Group were estopped from using the word 'Orient' in combination with 'Longman'. A 'Tomlin order' as per consent terms of the parties set out in the settlement agreement was passed by the U.K. Court in this regard. Under the terms of settlement deed, the assessee was entitled to receive a sum quantified at Rs. 16,14,81,323 in aggregate towards impugned settlement. This amount was agreed to be paid to the assessee in three equal instalments of Rs. 5,38,27,108, with the first instalment becoming receivable by the assessee within five working days from the settlement date, second instalment on 21.11.2008 (falling in assessment year 2009-10) and the last one on 23.11.2009 (falling i....
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....ion or technique likely to assist in the manufacture or processing of goods or provisions for services; 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 tiling or right to carry on any business, which is chargeable under the head "Capital Gains ", Thus it can be seen that the categories of items to be charged under the head profits and gains of business should ab-initio be in the nature of income". As explained earlier the consideration for the payment was having its origin in an order passed by the High Court of justice Chancery division given effect to the settlement agreement dated 22.11.2007. The settlement agreement was regarding the use of trademark and the use of the name 'Longman' by Orient Longman. Since this is an agreement for restraint on trading, the decision of House of Lords, which the Honourable S.C. of India followed in many cases in the case of Beak (Inspector of Taxes) Vs. Robson 1943 1J ITR 23 (Supp) (HL) squarely applies wherein it was hold that such receipts were capital receipts. Similarly, the Honourable S.C. in Maharaja Chintamani Saran Nath Sa....
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....ge in the business in which it is already engaged. The CIT(A) noted that from the agreement, it emerges that only after the specified period, the assessee company shall not use the words 'Orient Longman' or the word 'Longman'. 5.2 The CIT(A) thereafter observed that the assessee was not being allowed to use the word 'Longman' because the Pearson Group of UK which has originally owned the assessee company and has its trade mark 'Longman' has sold its entire share holding in the assessee company to the directors of the assessee company. Therefore, the real transaction is that of the sale of shareholding of the Pearson Group in the assessee company. Hence, the real owner of the trade mark was Pearson Group and once they have no stake in the assessee company, they wanted that after a fixed time frame, the assessee company is not entitled to use the word 'Longman' in its name. In these circumstances, in three equal instalments of Rs. 5.38 cores each, compensation was agreed to be paid to the assessee company. 5.3 The CIT(A) observed that in the light of the aforesaid factual background, there is no restrictive covenant on the assessee to carry on the trade or business of the assessee ....
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....sharing the trade mark per se. The learned Authorised Representative emphasised that the assessee is entitled to use the word 'Orient', which the other party shall not be entitled to use or share. He next stridently contended that in order to fall within the purview of (via) of S.28, the receipt must be in the nature of income which is chargeable to tax under the head 'profits and gains of business or profession'. The learned Authorised Representative vociferously contended that the receipt is inherently in the nature of a capital receipt and not a revenue receipt and therefore, there is no scope for taxing the sum as income chargeable to tax. Secondly, it was contended that the receipt has not arisen in the course of business or trade in order to be taxed under the head 'profits and gains of business or profession'. The compensation has been received by it for abstaining to use a part of trade mark i.e. the word 'Longman' which does not per se results in any transfer of any trade mark to other party. In substance, the learned Authorised Representative exhorted that this provision applies to a receipt in consideration of not sharing of a patent or a trade mark or rights of similar ....
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....riod and it is also entitled to use the term 'Formerly Orient Longman' until the expiry of the secondary period. Therefore, the assessee continues to enjoy the word 'Longman' on the one hand and has received the consideration on the other hand. The Learned Departmental Representative heavily relied upon the provisions of subsection (va) of S.28 to submit that the consideration has been received towards not sharing trade mark or any other business or commercial rights of similar nature. The Learned Departmental Representative submitted that the case-laws relied upon by the learned Authorised Representative relate to the assessment years prior to the insertion of sub-section (va) of S.28 and therefore are of no relevance in the present context. The impugned receipts squarely falls within the ambit of S.28(va). He therefore pleaded that no interference is called for. 10. We have carefully considered the rival submissions, the orders of the authorities below and the material and documents as referred to us by the parties in the course of hearing and also the case-laws cited at bar. The assessee in the instant case has received certain consideration as noted above, by virtue of settlem....
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....ard. Therefore, a capital receipt can be brought to taxation only when such receipts strictly falls within the purview of such provision which in the instant case is S. 28(va)(b) of the Act. While the revenue holds that such receipts falls under the provision of S. 28(va)(b) of the Act, the case of the assessee is three fold. Firstly, the receipt is not an income to trigger section 28 of the Act. Secondly, the alleged receipt did not arise in the course of trade or business per se and therefore not a business receipt. Thirdly, trade mark is registered in the name of 'ORIENT LONGMAN' and when the word 'ORIENT' which is integral part of the trademark continues to be available to the Assessee for its commercial exploitation as going concern, the question of sharing of trade mark or otherwise does not arise at all. It is the case of the assessee that the trade mark 'ORIENT LONGMAN' can neither be used by the assessee nor by the Longman/ Pearson group. The trade mark per se has not been released in favour of Pearson group. As a result of the settlement, while the word 'Orient' will be exclusively available to the assessee, the right to use of other word 'Longman' will stand extinguished....
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....f the Primary Period failing which it shall destroy those books as soon as reasonably practicable thereafter unless PEL and/or LCL provide their express written consent for Orient to sell the remaining printed books thereafter. (i) not hereafter print or stockpile any publications bearing the Orient Longman imprint in quantities exceeding those it would ordinarily print or stockpile in the normal course of business. (j) not subject to any rights that orient may have under Clause 6.2, seek to challenge PEL's., LCL's, DKL's or any Associated Entities use of the "Longman" name nor seek to oppose, challenge , revoke or invalidate any of their trade marks or trade ark applications in any way in India or in any other jurisdiction in so far as Orient, JKR and NRR may be so bound under the laws of England and Wales. Orient JKR and/or NRR shall consent to any trade mark application made by PEL, LCL or DKL in India or elsewhere for any mark incorporating the 'Longman" name if such consent be required in order for the trade mark application to be granted. () not use Orient's domain name after expiry of the Primary Period save that until expiry of the Secondary Period. Orient may use the....
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....he name "Orient" in India or anywhere else in the world for any purpose: (b) It will not at any time attempt to sue the Trade Marks or any other trade marks registered in India by Orient including but not limited to registration number 306385 in India or anywhere else in the world for any purpose and it undertakes to procure that none of its Associated Entities, whether now or in the future, will at any time attempt to sue the said trade marks in India or anywhere else in the world for purpose; (c) It will not at any time seek to register a domain name under the name "Orient Longman" or any name in the form "Longman" in combination with the name "Orient" or with any name confusingly similar to the name "Orient". 6.3 Pearson hereby irrevocably waives any and all rights, whether contemplated or not, to the payment of any dividend, royalty or other payment that may be due by Orient that arises out of or in connection with its Shares in Orient, Orient's printed publications under license, and Orient's distribution of any Pearson's book. 6.4 For the avoidance of doubt, Pearson shall have no objection to Orient making the necessary modifications/ amendments to Orient's Articl....