TaxTMI 
TaxTMI 
2017 (1) TMI 248
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....3 for Brand Acquisition, Consultancy and Non-compete. The parties agreed that the consideration for the transaction shall be a sum of Rs. 6 crores. For the assessment year 2003-04, CLL took a stand in its Income Tax Assessment that the amount of Rs. 6 crores related solely to the transfer of business under the Brand Acquisition Agreement and no part thereof was attributable to non-compete. The Assessing Authority, however, held that part of the consideration of Rs. 6 crores would be attributable to non-compete as well. According to him, the bifurcation could be made on the basis of the instalments set out in the agreement, being upfront payment of Rs. 4 crores upon execution of the agreement, Rs. 1 crore upon transfer to SPIL of necessary r....
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....pe of the transaction is set out in clause 4 of the preamble to the Brand Acquisition Agreement as follows: "4. CLL intends to sell and SPIL intends to acquire the entire Brands and any and all rights related thereto, past, present and future and whether or not registered, free of all encumbrances, claims, etc, and to this end the Parties wish to enter into an Agreement on the terms and conditions specified herein;" 5. The parties specified the terms and conditions for the sale of Brands, Assignment of Trade Marks, Copy Rights, Designs etc and interestingly, the Non-compete Agreement dated 06.02.2003 was specifically telescoped and made an integral part of the Brand Acquisition agreement by virtue of clause 4 thereof as follows:....
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....2.2003 sets out the agreement of the parties in terms almost similar to the Brand Acquisition agreement as under: "2.Non-competition 2.1. During the term of this Agreement, CLL shall not compete with SPIL and/or any of its Affiliates in the business in the Territory nor shall it commence, engage in, be interested in or carry on the business or any business similar to that of the business. Provided that, nothing herein shall be construed to restrict CLLs rights to compete in any other commercial activities, not similar to the business. 2.2. CLL also undertakes to SPIL that it will not either on its own or in conjunction with others whether directly or indirectly:- (i) at any time do or attempt to do anyth....
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.... Rules, to enable SPIL to import any of the products or the Active Drug Substances in respect of any of the products. SPIL shall pay simple interest at a rate lower of, 7% p.a. and the rate offered by ICICI Bank on deposits placed with the Bank for a tenure of one year, on the said sum of Rs. 10,000,000/- from the date of the agreement until the date of registration under the new Drug rules or until February 28, 2003, whichever is earlier. c.A sum of Rs. 10,000,000/- (Rupees Ten Million Only) upon the completion of one year from the date of execution of this agreement. SPIL shall pay simple interest at a rate lower of 7% p.a. and the rate offered by ICICI Bank on deposits sum of Rs. 10,000,000/- from the date of the agreement until....
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....minant purpose of the transaction was not to formulate a restrictive covenant, which was incidental, but to enforce enjoyment of the rights by exploitation of the brands. Consequently, the submission of the assessee to the effect that the transaction was one of transfer of a right to carry on any business falling within the purview of the exclusion in the Proviso to section 28(va) of the Act, stood accepted. We differ with this conclusion. 10. Section 28(va)(a), inserted by Finance Act 2002, w.e.f. 1.4.2002, reads as follows: "(va)any sum, whether received or receivable, in cash or kind, under an agreement for - (a)not carrying out any activity in relation to any business [or profession] or Provided that sub-cl....
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....gative covenant as well. 12. We now address the more ticklish question of attribution since the agreements are silent in this regard. The learned counsel for the Assessee, would impress upon us the fact that the business transfered by CLL is highly specialized and exclusive. It involves cutting edge technology wholly inaccessible to CLL in the absence of the brands transferred. The products sold by CLL constitute harmones utilized for infertility treatment under prescription, close monitoring and in controlled conditions. They were: Brand name Generic name 1.Puregon Pure FSH 2.Nugon HMG 3.Life HCG 4.Adractim Dihydrotestesterone Gel 5.Uterogestan Micronised Progesterone 13....