2018 (7) TMI 739

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.... and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: 1. The Order of the CIT(A) is opposed to law and facts of the case. 2(a) On the facts and in the circumstances of the case, and in law the Ld.CIT(A) erred in holding that the compensation received by the assessee for transferring the business of Investment Management to Principal Asset Management Company is not chargeable to tax as neither the cost of acquisition or cost of improvement is determinable. 2(b) The Ld. CIT(A) erred in relying upon the decision of the Hon'ble Supreme Court in the case of B.C. Srinivasa Shetty which stands superceded by virtue of amendments made by Finance Act 2002 in the provisions of sec. 55(2)(a) w.e.f. 01/04/2003. 2(c) The Ld. CIT(A) erred in not appreciating the provisions of sec. 55(2)(a) which provides that cost of right to carry on any business shall be taken to be nil if no cost was incurred for its acquisition. 3(a) Without prejudice to the above, the Ld. CIT(A) failed to appreciate that the compensation received by the assessee is business income being revenue i....

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....ling the present appeal bearing ITA No. 4782/Del/2013, sought to set aside the impugned order dated 17.05.2013 qua Assessment Year 2005-06 by the Ld. CIT(A)- XI, New Delhi, on the grounds that:- "1. The Ld. CIT(A) has erred in direction the AO to comply with the directions of Ld. CIT(A), Mumbai and not levy capital gains tax on retirement fees of Rs. 5,37,68,659/-. 2. The Ld. CIT(A) has erred in directing the AO to verify the working of the short term capital gain of Rs. 2,63,150/-. 3. The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 5. Briefly stated the facts necessary for adjudication of the controversy at hand are: assessee being an Investment Manager for the schemes of the Sun F&C Mutual Fund up to 15.05.2004 had received retirement fees of Rs. 5,87,35,492/- (after reducing the W.D.V. Written Down Value of Rs. 49,66,833/-) as short-term capital gain from the Principal Asset Management Company Ltd., as consideration for retiring as an Principal Asset Management Company of Sun F&C Mutual Fund. Aforesaid arrangement has been approved by the Securities and Exchange Board of India....

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....r, on the other hand, Ld. DR for the Revenue challenged the impugned order. 9. It is not in a dispute that total 14 schemes have been transferred by the assessee pursuant to its retirement to Principal Mutual Funds out of which two schemes were acquired from JF Mutual Fund during the Financial Year 2002-03 for a consideration of Rs. 88,29,925/- and same was capitalized as intangible asset and depreciation @ 25% was claimed by assessee as per section 32 of the Act. The Written Down Value of the said asset at the beginning of the relevant Assessment Year was Rs. 49,66,833/-. 10. In the backdrop of the aforesaid facts and circumstances of the case, the Ld. DR challenging the impugned order contended inter alia that as per amended provisions contained u/s 55(2)(a) of the Act w.e.f. 01.04.2003, the word 'right to carry on any business' has been inserted and the assessee did not get the 'right to carry on any business' and contended in the alternative if the case of assessee is not covered u/s 55(2)(a) it is covered u/s 28(va)(a) of the Act as per ground no. 3(b) raised in this case. 11. However, on the other hand, Ld. AR for the assessee in order to repel the arguments addressed by L....

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....ll of a business shall be taken as nil. 16. So, when the assessee company had undisputedly been running 14 schemes, out of which 12 schemes were floated by it and two schemes were acquired from J.F. Mutual Funds during the Financial Year 2002-03 for a consideration of Rs. 88,29,925/- and the said consideration paid by the assessee for acquisition of rights to manage asset was in the nature of payment for acquiring the right/license to manage to schemes, the same mere capitalized as intangible asset and claimed depreciation @ 25%, the transfer of whole business by the assessee in terms of agreement dated 3.6.2004 to the Principal Asset Management Company and Principal Trustee Company Ltd. by virtue of para 5.2 of the agreement, the consideration of Rs. 53768659/- received by the assessee is for transfer of the management rights to the transferee free company which cannot be treated as 'Retiring fees' because while acquiring management rights by the assessee company of two schemes acquired from J.F. Mutual Funds, assessee itself admitted by claiming the depreciation on the consideration of Rs. 88,29,925/- @ 25% with Written Down Value of such right at Rs. 49,66,833/- as on 31.3.2005....