TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1254
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....Shri P.L. Lamba, the deceased father of the Respondent Assessee, along with Shri I.K. Ghai, commenced business in the name of 'Kwality Restaurant and Ice Cream in Delhi in 1942. As the business grew, Shri Ghai and Shri Lamba promoted another firm Pure Ice Cream with effect from 1st October, 1956 for manufacturing Ice Cream at Bombay and for marketing it under the name 'Kwality'. 4. The firm got the trade mark 'Kwality' registered in January, 1957. Later the firm Pure Ice Cream was converted into a private limited company under the name of Pure Ice Cream (1967) (Pvt.) Ltd. The trade mark 'Kwality' registered in the name of the aforementioned company was licenced to the Kwality Restaurant and Ice Cream Co., New Delhi as registered user. 5. The Respondent Assessee was admitted to the benefits of the partnership i.e. Kwality Restaurant and Ice Cream Co., under the partnership deed dated 12th September, 1967. The Lamba group were represented by Shri P.L. Lamba, the Assessee and other members of the family. Shri Ghai and others represented the Ghai group in the partnership. It is stated that the firm was reconstituted from time to time and was finally dissolved on 31st December, 1977. ....
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....1995-96 disclosing an income of Rs. 26,67,520/-. In Part (IV) of the return concerning 'Income Exempt From Tax' the Assessee disclosed the receipt of the non-compete fee of Rs. 1 crore from 'BBLIL' as well as Rs. 1.85 crores from DSPL on account of assignment of the 'Kwality' trademark. The Assessment Order 11. The Assessing Officer ('AO') scrutinised the return and passed an Assessment Order dated 31st December, 1997 under Section 143 (3) of the Act accepting the returned income and without making any additions. An audit objection was subsequently raised qua the said assessment to the effect that pointing out that the Assessee had not brought to tax the aforementioned two receipts. The AO, however, defended the assessment and pointed out that the claim of the Assessee that the aforementioned receipts were exempted from tax, was supported by judgments of the Supreme Court. It was further pointed out that the amendments in law making such receipts taxable were not retrospective and did not apply in the AY in question. Proceedings under Section 263 12. A notice under Section 263 of the Act dated 13th March, 2000 was issued by the Commissioner of Income Tax (CIT) asking the Asse....
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....ion 55(2) (a) of the Act by virtue of the amendment introduced by the Finance Act, 2001 with effect from 1st April, 2002. Therefore for AY 1995-96 such payment could not be subjected to tax. (iv) The CIT had not validly assumed jurisdiction under Section 263 of the Act. 15. This Court has heard the submissions of Mr. Ashok Manchanda, learned Senior Standing counsel for the Revenue and Mr. Ajay Vohra, learned Senior counsel for the Assessee. Case of the Revenue 16. The case of the Revenue is that as far as the consideration of Rs. 1.85 crores received by the Assessee from DSPL is concerned, it was for transfer of trademarks, brand names and the goodwill. In other words, it was not for self-generated assets but for assets that had been acquired by the Assessee over the period from different firms and companies. It was submitted that any transfer from a firm or a limited company to a partner or a substantial shareholder is a transfer under Section 47 of the Act. Therefore, it was incorrect on part of the Assessee to contend that the trademarks, brand names and goodwill were 'self generated' or that they could not be assigned any cost of acquisition on the date of transfer. It wa....
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....ated asset would not be liable to tax in the absence of the cost of acquisition. 22. Section 55(2) (a) of the Act was amended by the Finance Act, 2001 with effect from 1st April, 2002 whereby there was deemed to be a nil cost of acquisition in respect of a self-generated trademark. Consequently, from AY 2002-03 onwards any amount received for assignment/transfer of a trademark would be taxable under 'capital gains'. This amendment was clearly prospective. As held in CIT v. Associated Electronics & Electrical Industries (Bangalore) (P.) Ltd. (2016) 65 Taxmann.com 253 (Karnataka) and Birla Sunlife Asset Management Co. v. DCIT (2011) 128 ITD 64 (Mum), payment received for assignment of a self-generated trademark prior to AY 2002-03 was not liable to tax. 23. This Court in Hilton Roulunds Limited v. CIT (2018) 255 Taxman 209 (Del) held that "an exclusive right to use, to the exclusion of the owner, though termed as license, could be a transfer of title in the mark." Any amount received for such transfer could not be said to be a revenue receipt. Likewise the non-compete fee received from BBLIL was in the nature of a capital receipt. This resulted in sterilization of the profit making....