TaxTMI 
TaxTMI 
2016 (9) TMI 542
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....ue is as follows:- "The learned Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 90,00,000/- which was assessed as business receipts under section 28(1)(va) of the Act by the learned Assessing Officer as against "Nil" short term capital gain claimed by the assessee." 3. Brief facts of the case are that the assessee is an individual, designated Director of M/s. Edserv Soft Systems Ltd., filed his return of income for the assessment year 2008- 09 on 20.03.2009 admitting income of Rs. 17,33,750/-. The case was selected for scrutiny and the assessment was completed under section 143 (3) of the Act on 21.12.2010 by making certain additions/disallowances. On appeal, the learned Commissioner of Income Tax (Appeals)....
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....d the present transaction was only related to transfer of his right to do business in the same line for a period five years. Thus the learned Assessing Officer disregarding the purchase consideration paid by the assessee for the portion of the business of Rs. 90,00,000/-, treated the entire sale consideration receives as business receipt under section 28(1)(va) of the Act. 5. On appeal, the learned Commissioner of Income Tax (Appeals) after examining the issue in detail arrived at the conclusion that the assessee had paid the purchase consideration of Rs. 90,00,000/- on 29.09.2007 for acquiring the portion of the business which was subsequently sold on 27.03.2008 for the same amount and therefore, allowed the appeal of the assessee. The re....
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....s acted upon the contents of as per the MOU. The assessee, as per the M0U had undertaken several liabilities of M/s. On spec Technology P Ltd pertaining to the business under transfer - like Vijaya Bank Of) (Rs.17,00,000/-), creditors etc. Subsequently, the assessee has cleared the said liabilities, Of) amount etc. These facts are clearly available from the assessee's bank extracts. These facts clearly establish that the assessee had acted upon the above MOU entered with M/ s. Onspec Technolgy P Ltd. Further, as could be seen from the above MOU, the assessee gets the right over the software brand "Elmaq.edu" developed by the company along with various course contents of the software. 4.2.4 Subsequently, the assessee, vide "business pu....
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....s for acquisition of ELMAQ DIVISION. 4.2.5 It is also important to mention here that Shri Girigharan was not doing any business on his own, as could be seen from the assessee's return of income. Therefore, but for acquisition of a business, it would not have been possible for the sale of business including the course contents, brand name of Elmaq, liabilities etc. In other words, if the sale of the business is to be accepted, its corresponding purchase is also to be accepted. Thus, unless there is purchase of the business by the assessee from M / s. Onspec Technolgy P Ltd, it wouldn't have been possible for the assessee to sell the same to M/s. Edserv Softsystems Ltd in the financial year 2007-08. 4.2.6 The other observation of ....
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....o accepted these claims. This also proves that the transfer of various assets/items, as mentioned in the transfer agreement, is genuine. In such a case, the consideration of Rs. 90 lakhs is actually for the assets/items included in the transfer. Therefore, the Assessing Officer's contention that the payment was of 'non-compete fee' is not justified. 4.2.8 The next observation of the Assessing Officer is that the assessee was changing his stands while explaining the transaction. As per the Assessing Officer, the assessee has given three contradictory explanations in support of his claim of short term capital gains. This observation of the Assessing Officer is also not correct. Though everything is pertaining to the purchase and....
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....Rs. 90 lakhs in 2006- 07 is to be considered as genuine. Subsequently, the said business was sold to M/s. Edserv Softsystems Lmited for Rs. 90 lakhs on 29.09.2007 and received the consideration in the form of debentures. The debentures were in-turn redeemed (sold) on 27.03.2008 for Rs. 90 lakhs. The assessee, in the process, has not made any profits or gains. In any case, since the assessee has purchased the business as a going concern and subsequently sold the same to another person, the same constitutes a capital asset in the hands of the assessee and liable for 'capital gains'. Since the length of holding was less than 3 years, it is liable for short term capital gains. The computation of capital gains, which is again in two stag....