TaxTMI 
TaxTMI 
2021 (10) TMI 1157
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....rought to tax as by holding that the consideration received by assessee towards sale of technical know-how was capital in nature of goodwill which is liable to be taxed under Section 45 of the Act as capital receipt? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the addition made by assessing authority with regard to non-competition fee of Rs. 30 crores as revenue receipt when the assessing authority has rightly made addition as it satisfies ingredients of income as defined under Section 2(24) of the Act and as such receipt is liable to be taxed? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the levy of interest under Section 220(2) of the Act by relying on its earlier decisions which have not reached finality and are distinguishable from facts of present case?" 3. The assessee is a company engaged in the business of manufacture and trading of machinery components of locomotives. Asseseee has filed its return of income for the period under consideration. Assessment order came to be passed under Section 143[3] read with Section 254 of the Act ho....
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....r and sell to ABB Daimler Benz Transportation [India] Ltd., the transportation business- railway equipment business/undertaking for a sale consideration of Rs. 53,10,00,000/-. It was agreed that the assessee will not compete with ABB Bahnbeteiligungen GmbH for which it had paid Rs. 3,00,00,000/-. The said transfer was with retrospective effect from 01.01.1996. The undertaking was a going concern on an as-is-where-is basis and included all plant, machinery, current assets, industrial and other licenses, all intangible assets, all benefits and obligations of all current and pending contracts, technology for design, manufacture, test, quality assurance and servicing for all railway equipment and parts/components thereof as existing with the assessee, all liabilities relating to the operations and activities of the assessee's transportation business. Thus, it was slump sale. In the first round of litigation, the said contention of slump sale was not accepted by the department up to the Tribunal. Revenue in the first round of litigation has asserted that the said consideration of Rs. 53,10,00,000/- was towards the sale of technical know-how as no cost of the said assets could be determi....
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....itted that charging interest under Section 220[2] of the Act would amount to charging interest on interest. The Tribunal having meticulously examined all these issues has rightly allowed the appeal filed by the assessee. 9. We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record. Re. substantial question of law No.1: 10. Section 2[42C] of the Act was inserted by Finance Act, 1999 with effect from 01.04.2000 which reads thus: ""slump sale" means the transfer of one or more undertakings by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales." 11. The judicial pronouncement on the aspect of slump sale would indicate that the said slump sale would not be taxable neither as business income under Section 41[2] nor under Section 45 of the Act. In the case B.C.Srinivasa Setty Supra, the Hon'ble Apex Court has held that the charging section and computation section are integrated code and if one fails, other fails. Thus, it was held that the gain from the transfer of a bundle of asset on a slump basis is not chargeabl....
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....venue or the Tribunal in its order doubt the fact that the Assessee in fact transferred "Technical know-how" and that the consideration for such transfer was a sum of Rs. 43,17,62,000/- as recorded by the Purchaser in their books of accounts as allocable to transfer of "Technical know-how". The reason why the Revenue wants to treat the payment of Rs. 43,17,62,000/- as consideration towards goodwill is because even though "goodwill" is a self-generated asset and therefore its costs of acquisition cannot be determined, by reason of amendment to the provisions of Sec.55(2)(a) of the Act by the Finance Act, 1987 w.e.f. 1.4.1989, the cost of acquisition of "Goodwill" is nil and therefore it is possible to compute of capital gain on transfer of goodwill. Such an approach cannot be adopted if the capital asset transferred is "Technical know-how". As we have already noticed the Hon'ble Supreme Court in the case of in CIT v. B. C. Srinivasa Seetty [1981] 128 ITR 294 (SC) dealt with the question whether capital gain accrue or arise when "Goodwill" of a business is transferred. The Hon'ble Supreme Court held that section 45 of the Act operates if there is a transfer of a (Assessment Y....
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....rved that for the relevant assessment year 1995-96, the Tribunal accepted (after a detailed discussion) the contention of the assessee that trademarks, copy rights and technical know-how alone were comprised in the assets of the business and not goodwill. It was also held that when the Revenue alleges that it is goodwill and not trademark etc., that is transferred, the onus will be on the Revenue to prove it. The Tribunal then examined the question whether the sale of these intangible assets would attract capital gains. The question was answered in the negative and it was held that the assets are self-generated and would not attract the capital gains. The decision of the Tribunal has been accepted by the Revenue and thus the Hon'ble Apex Court held that there was no reason for taking a different conclusion with the said decision. This dictum pronounced by the Hon'ble Apex Court certainly has a bearing on the present set of facts. It cannot be gainsaid that the assets were self-generated and the cost of acquisition of the said assets was indeterminable. The whole exercise was done by the Revenue merely for the reason that the purchaser in his books of accounts has shown the ....
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....here however a receipt is of the nature of income, the burden of proving, that it is not taxable because it falls within in exemption provided by the Act lies upon the assessee. The appellant admitted that she had received jewellery and diverse sums of money from Sita Devi and she claimed that these were gifts made out of love and affection. The case of the appellant was that the receipts did not fall within the taxing provision : it was not her case that being income the receipts were exempt from taxation because of a statutory provision. It was, therefore, for the Department to establish that these receipts were chargeable to tax." 17. Since we have held that the technical knowhow is not a goodwill, the arguments of the Revenue for remand would not inspire any confidence. 18. The non-computation receipt of Rs. 30 Crores was received by the assessee in cash. At this juncture, it would be beneficial to refer to the judgment of the High Court of Bombay in the case of Mahindra & Mahindra Ltd., V/s. CIT [261 ITR 501 (Bom)] wherein it is held that Section 28[iv] does not apply to benefits in cash or money, referring to the judgment of the Hon'ble High Court of Gujarat in CIT V/s.....
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.... so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month. 22. Learned counsel for the Revenue would argue that the interest paid on Section 244A granted earlier, has to be considered while computing the interest under Section 220[2] of the Act. The Revenue's stand that charging interest on interest is permissible in terms of the decision of the Hon'ble Apex Court in the case of Sandvik Asia Ltd., V/s. Commissioner of Income Tax I, Pune and Others [(2006) 2 SCC 508] is wholly misconceived. 23. In Sandvik Asia Ltd., supra, the Hon'ble Court was considering the payment of interest by the Revenue, in the context of withholding the amounts unjustifiably. The Hon'ble Court enunciated the principles, assuming that there is no provision in the Act for payment for compensation, compensation for delay is required to be paid. The defence taken by the Revenue for not granting the interest was that the amounts on which interest was claimed were amounts of advance tax and no interest under Section 214 of the Act could be paid on advance tax after the date of the order of the assessment which was rejected....