TaxTMI 
TaxTMI 
2024 (7) TMI 151
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....ment year 2006-07 it disclosed in its return total income of Rs. 3041,42,53,870/- which was revised by return of Income dated 19.03.2008 to Rs. 3040,47,74,966/-. In assessment proceedings one of the addition made by the assessment officer was of Rs. 32.42 crore received by the assessee from ELEL under an award/consent terms dated 11.05.2005 which the assessee claimed as long term capital gains while the assessing officer treated it as revenue receipt. The CIT (A) and the ITAT held it to be long term capital gain. Hence the revenue has filed the present appeal asserting that the aforesaid receipt of Rs. 32.40 crore is revenue receipt and not long term capital gain. 3. Under an agreement dated 03.05.1986, the owner namely, M/s. ELEL Hotels & Investment Ltd. (hereinafter referred to as 'ELEL') granted licence to the respondent herein i.e., ITC to operate the hotel 'Sea Rock' from the first day of July, 1986 for a period of 25 years with an option to renew the licence for a further period of 25 years on giving notice to ELEL of such intention of not less than 24 months before the expiry of the licence. The licence fees was to be calculated and paid @ 23% on the gross turnover of the S....
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....llowed and the receipt of the aforesaid amount of Rs. 32.42 crores was held to be a capital receipt. Aggrieved with the order of the CIT[A], the revenue filed an appeal being ITA Nos. 253 and 336/KOL/2011 which has been dismissed by the Income Tax Appellate Tribunal, Kolkata Bench "B". 7. Aggrieved with the aforesaid impugned order of the ITAT, the revenue has filed the present appeal which has been admitted by this court by order dated 12.7.2018, on the following substantial question of law: "Whether receipt of money by the Assessed on account of relinquishment of its right to operate a hotel as a licensee would constitute capital receipt exposing the Assessee to capital gains tax or the same shall be treated as business receipt ?" Operating Licence Agreement dated 03.05.1986:- 8. The licence agreement in question is most relevant for the purposes of the controversy involved in this Appeal which is reproduced below:- "THIS AGREEMENT made at Bombay this third day of MAY One Thousand Nine Hundred and Eighty Six between ELEL HOTELS & INVESTMENTS LIMITED, a Company having its registered office at Hotel SeaRock, registered under the Indian Companies Act, (hereinafter referred to....
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....g Supplies" shall mean all silver, linen, chine, cutlery, glass, cooking utensils, guest room supplies and consumable supplies, used or intended for use in connection with the operation of the Hotel. 1.4 "Agreement" or "This Agreement" shall mean this instrument as originally executed and delivered, if amended or supplemented as so amended or supplemented. 1.5 The "Term of the Agreement" shall mean the term of this Agreement as hereinafter provided in Article IV but subject to earlier termination or determination thereof in terms of Article XVII hereof. 1.6 The term "Gross Turnover" of the said Hotel means total amount of revenue as herein below defined. "Revenue" shall mean revenue on account of rooms, restaurants, banquet parties, poolside, snack bar, bar-b-cue, public rooms, function rooms, laundry, shopping area rental, entertainment show, counter space, show windows, showcases, barber shop and beauty shop, as well as any other income which directly accrues from operating the said Hotel but after excluding therefrom: (a) commissions or discounts, paid or payable to Travel Agents, Tour Operators, Group Leaders, Credit Card Companies/Agencies, making bookings in the said ....
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....by ITC one or more specific powers of Attorney or such other documents or instruments as ITC may require in order to conduct, operate and run the said Hotel. ITC hereby indemnifies and keeps EHIL indemnified against any loss or damage EHIL may sustain or any costs, charges and expenses EHIL may suffer as a result of any irregular or illegal or mala fide exercise of the powers in the Power of Attorney to be executed by EHIL in favour of ITC. 2.4 These Powers of Attorneys will not include powers to borrow, sell or mortgage Hotel and EHIL's property. ARTICLE III: EMPLOYMENT OF WORKMEN, STAFF, ETC. 3. All workmen, employees and members of the staff including managerial staff as may be decided by ITC shall be on the payroll of EHIL and their salaries, wages and other emoluments and perquisites shall be granted and disbursed by ITC, but expressly for and on behalf of EHIL at ITC cost and EHIL hereby expressly and irrevocably authorises ITC to recruit such workmen, employees and members of the managerial staff and terminate their service as ITC may in their absolute discretion think fit. At the time of termination of this agreement any Manager of EHIL appointed by ITC and not re....
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....hree percent) of the gross turnover and an additional 2% (two percent) on gross turnover for that financial year in which growth falls short by 5% (five percent) over the base year. Provided, that should the growth in any financial year be 5% (fifteen percent) or more over the growth which should have been achieved under the foregoing provision, then ITC shall be entitled to deduct from the Licence Fee the amount equivalent to 0.75% (i.e. the net Licence Fee payable will be 22.25%) of the gross turnover payable to EHIL and if the growth is 20% (twenty percent) or more as stated herein, then the deduction in fee will be 1% (i.e. the net Licence Fee payable will be 22%). ARTICLE VI: SECURITY DEPOSIT 6.1 ITC shall place as Security Deposit for the specific performance of this agreement immediately on signing of the Agreement the sum of Rs. 7.75 crores (Rupees Seven Crores and Seventy Five Lakhs) interest-free said Deposit will be adjusted and appropriated towards payment of Licence Fee for the last 24 months or thereabout prior to the expiry or termination of this Agreement. Provided that ITC is hereby expressly authorised by EHIL to pay in liquidation of EHIL's indebtedness t....
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....ep in force and renew all Licences and permissions and ITC agrees to pay the Fees for these renewals, and perform terms and conditions of all Licences and Permissions applicable to the said Hotel and keep them in force and alive on EHIL's behalf. 8.3 EHIL agrees to assign their Agreement in to dated 19.10.1984 with Sheraton International Inc. (Sheraton) to ITC subject to the approval of Sheraton, and ITC shall be authorised to alter, amend, renew or cancel the agreement in terms thereof. ITC indemnifies EHIL against any loss or claim arising from any such action on the part of ITC. 8.4 All of the terms and provisions of this Agreement shall be binding upon and innure to the benefit of the parties hereto and their respective successors and assigns. ARTICLE IX: RENOVATIONS AND REFURBISHINGS ETC. 9. All renovations, alterations, refurbishings, equipment replacements and capital expenditure shall be undertaken by ITC at its own cost. The said movable Assets will belong to ITC and depreciation on the same will be claimed by ITC. However, it is mutually agreed that in the event of termination of this Agreement in the manner referred to in Article XVII below or on expiry of th....
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....ve right to assign or transfer all rights and benefits of this Agreement to any of the ITC Group of Companies only, and none else but without in any way absolving ITC from its monetary obligations and warranties Bank Guarantees under these presents, and obtains necessary formal confirmation from the said Assignees that they will abide by all the terms and conditions of these presents. ARTICLE XIII: ASSETS AND LIABILITIES 13. It is agreed between EHIL and ITC that the current Assets and Liabilities of the said Hotel will be as per a statement to be drawn up and agreed to by both EHIL and ITC reflecting the state of affairs as on 30th June 1983. The Net Working Capital figures as on 1st July, 1986 will be recorded and at the end of the licence period or termination the Net Working Capital will be determined, evaluated and recorded. The difference in Net Working Capital will be mutually settled by the parties. ITC on termination of this Agreement under any circumstances shall return to EHIL all the above Assets in good condition subject to normal wear and tear/ shown in the statement /as or their replacement at the end of the period. ARTICLE XIV: DISCLOSURE 14. EHIL shall disc....
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....o rectify the said default. In case the said default is not so rectified, EHIL will terminate the Agreement without further notice. The Security Deposit of Rs. 7.75 Crores (Rupees Seven Crores Seventy Five Lakhs) will be returned by EHIL to ITC immediately after deducting therefrom all unpaid Licence Fee and other dues agreed by the parties under this Agreement, including any unpaid bills for which EHIL is held legally liable subject to Article 13 above. 17.4 Notwithstanding anything herein contained, ITC will be entitled to terminate the contract by giving to EHIL not less the 24 calendar months notice and the Security Deposit lying with EHIL will be adjusted towards the payment of the Licence Fee to EHIL, during this period, and any balance lying with EHIL shall be refunded to ITC. 17.5 ITC shall have the first option to take the Dubbing Theatre on a leasing agreement. 17.6 ITC will continue to pay within the due date Expenses for the lease arrangement entered into with Sundaram Finance Limited only. 17.7 EHIL shall regularly pay interest and other dues in respect of loans taken by EHIL for the purpose of the said Hotel. Should there be any breach of any of the terms and ....
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....ment and no interest or no tenancy or lease or other interest in EHIL's properties or assets is created or intended to be created in favour of ITC, the intention of the parties being that ITC will be authorised to conduct, operate and run the said Hotel on the terms, conditions and stipulations herein contained. It being clearly and distinctly understood that the property and assets as defined in the schedule are and will continue to be the exclusive property and asset of EHIL and the legal ownership thereof shall be of EHIL, who are and shall be the exclusive owners and in legal possession of the entire Hotel with Operating Licence to ITC to operate Hotel SeaRock. 18.2 Notwithstanding the foregoing, if ITC claims tenancy or leasehold interest in EHIL's property or any part thereof or any right, title or interest inconsistent with or contrary to the sole and exclusive ownership and possession of EHIL of the property or any of its assets including additions, renovations or refurbishings made hereafter, EHIL shall be entitled to call upon ITC to purchase the Hotel at or the mutually agreed price of Rs. 15 Lakhs (Rupees Fifteen Lakhs) per room irrespective of its use or Rs. ....
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.... property and Assets of EHIL. IN WITNESS WHEREOF the Parties hereto have hereunto set their hands the day and year first above written. THE FIRST SCHEDULE ABOVE REFERRED TO: All that piece and parcel of land bearing Survey No. B 1150 and measuring 30960 sq. mtrs., which includes land-in-sea and the boundaries of the same are:- On the North - Arabian Sea On the South - Arabian Sea On the West - Arabian Sea On 'the East - Byramji Jijibhoy Road The Extract from the property Register Card is attached hereto. THE SECOND SCHEDULE ABOVE REFERRED TO: As per the Statement to be drawn up and agreed to by the parties." 9. The Settlement Agreement dated 11.05.2005 between ELEL and ITC is reproduced below:- "SETTLEMENT AGREEMENT SETTLEMENT AGREEMENT made this 11th day of May Two Thousand and five between: ELEL HOTELS AND INVESTMENTS LIMITED, a Company incorporated under the provisions of the Companies Act, 1956 and having its Registered Office at 9th Floor, Hotel Sea Rock, Behramji Jeejeebhoy Road, Bandstand, Bandra (W), Mumbai- 400 050, hereinafter called "ELEL" (which expression shall unless it be repugnant to the context or meaning thereof be deemed to include its su....
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....lation to ELEL:- (I) means each of Excalibur Assets and Capital Management Pvt. Ltd. ('Excalibur') and Sheena Investment Pvt. Ltd. ('Sheena') both with registered offices at 9th floor, Hotel Searock, Behramji Jeejeebhoy Road, Bandstand, Bandra (West), Mumbai-400 050, (II) means Shyam Bhajanmal Luthria, Stanford Investments and Properties Private Limited and Deepak Shyam Luthria and (III) includes any Person claiming by through under or in trust for (whether by way of sale disposal assignment relinquishment or otherwise) any present or former shareholder(s) or director(s) or any of his/her/their Relative(s) or legal representatives of the Persons mentioned in (ii) (1) and (II) above; b) "Arbitration" has the meaning assigned in Recital 4; c) "Arbitrator" has the meaning assigned in Recital 4; d) "Award" shall mean the award of the Arbitrator on the Consent Terms; e) "Consent Terms" has the meaning assigned in Clause 4; f) "Disputes" means all allegations, claims, counter-claims and disputes forming the subject matter of the Suits and/or the Arbitration and includes all allegations, claims, counterclaims and/or demands between the Parties, of any....
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....endeavor to obtain the Award on signing of the Consent Terms. 6. On the Award the Parties shall obtain / submit to a decree and for the purpose each Party shall take all requisite steps with due diligence. IMPLEMENTATION AND BINDING EFFICACY 7. On execution of this Settlement Agreement each Party shall with diligence do all that is reasonably required to fulfil and implement the Settlement Agreement including passing of the Award, decree(s) thereon and withdrawal of the Suits. 8. Notwithstanding any delay in the making of the Award or passing of any decree(s) on the Award this Settlement Agreement shall be fully binding on and enforceable against each of ELEL and ITC and any Person claiming by, under, through, or in trust for any Party. 9. ITC will promptly withdraw unconditionally and with no order as to costs Suit No. 3886 of 1993 and Suit No. 1877 of 1995 and ELEL will promptly withdraw unconditionally and with no order as to costs Suit No. 3885 of 1993 and Suit No. 3832 of 1995 on the files of the High Court, Mumbai. Each of ITC and ELEL shall be eligible to refund of court fees as permitted by law. 10. Fees of the Arbitrator shall be borne and paid equally by each ....
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....;Welcomgroup' or other name(s) / brand(s)/logo(s) / mark(s) used by ITC and ELEL shall not, in the course of trade or otherwise use any of such name(s) / brand(s)/logo(s)/ mark(s) or attempt to register the same or otherwise claim any rights in any of the brand(s) /logo(s)/ mark(s). 18. ITC acknowledges and confirms that it has no claim to the Flats or either of them. ELEL confirms that R.M. Luthria and Luthria Brothers Trust are the owners ("Owners") of the Flats and ELEL has the authority of the Owners pursuant to which it confirms: 18.1 ELEL has inspected the Flats and satisfied itself as to the state and condition; 18.2 No amount whatsoever is payable by ITC or recoverable by the Owners from ITC whether for rent licence fees compensation or otherwise in relation to the Flats or either of them; 18.3 ITC will deliver vacant possession of the Flats to the Owners thereof or to ELEL if ELEL provides to ITC the written instructions of the Owners of each Flat within ninety (90) days from the date hereof. If ELEL does not produce the aforementioned written instructions from the Owners within the specified ninety (90) days, no claim shall lie against ITC in respect of the Fl....
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....rofessional fees and costs from any Person(s) (including but not limited to any present or former shareholder(s)/ director(s)/ their Relatives of ELEL or any Affiliate(s) of ELEL or any present or former shareholder(s)/ director(s) / Relatives of any Affiliate(s) or any Person claiming through, under or in trust for them (whether by sale / assignment or otherwise). 26.1 ELEL's indemnity shall cover any and all claims, demands, actions and liability howsoever arising out of or relating to: i) the Hotel and/or any and all arrangements / understandings / agreements relating to the Hotel including but not limited to the Operating Licence; ii) any pending/threatened / apprehended litigation by / against ELEL and/or Affiliate(s) to which ITC is / may be a party or may otherwise impact on ITC and/or any pending / threatened / apprehended litigation by any Affiliate(s) against ITC; iii) the occupation of the Flats by ITC and the surrender of the Flats by ITC in implementation of this Settlement Agreement; iv) the execution and / or implementation of this Settlement Agreement and/or the Consent Terms including (but not limited to) the competence and ability of ELEL to execute ....
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....losure after the information has come into the public domain (otherwise than by reason of a breach by the disclosing Party). ASSIGNMENT 30. Neither the rights nor the obligations under this Settlement Agreement shall be transferred or assigned by either Party except with the prior written consent of the other Party. The other Party may accord or withhold such consent (including subject to any condition(s)) as it deems appropriate without assigning any reason. CO-OPERATION 31. Each Party shall diligently co-operate with the other Party to implement and effectuate this Settlement Agreement. JURISDICTION 32. Courts in Mumbai shall have exclusive jurisdiction in respect of any dispute or claim relating to this Settlement Agreement. EFFECTIVE DATE 33. This Settlement Agreement is effective from the date hereof. MUTUAL REPRESENTATIONS 34. Each Party represents and warrants that: 34.1 Consent(s), if any, required by either Party to enter into and implement this Settlement Agreement and Consent Terms have been obtained by such Party and such consent(s) have been validly obtained and have not been withdrawn or revoked or suspended and will remain effective through impl....
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.... be eligible to refund of court fees as permitted by law. 39. This settlement compromise and adjustment as per this Settlement Agreement constitutes valid and binding obligations effective and executable in terms hereof and thereof and no claims of any nature are outstanding by or against any Party. Each Party to the fullest extent permissible in law waives any or all claims against the other excluding only claims (if any) for breach of this Settlement Agreement. Dated this 11th day of May, 2005. Common Seal of ELEL HOTELS AND INVESTMENTS LIMITED been hereunto affixed pursuant to a resolution of its Board of Directors passed at the meeting held on 29th April 2005 in the presence of Mr. KISHORE LUTHRIA and Mr. MAHESH LUTHRIA, Directors. For ITC LIMITED Authorised Signatory." 10. Pursuant to the aforesaid Settlement Agreement, the ELEL and ITC arrived at 'Consent Terms' recorded by the Arbitrator, as under:- "BEFORE THE LEARNED SOLE ARBITRATOR MR. H. SURESH (RETD.) In the matter of the arbitration between Elel Hotels and Investments Limited and ITC Limited CONSENT TERMS In these Consent Terms "Disputes" means all disputes between Elel Hotels and Investments Ltd. ("El....
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....ence being transferred to / endorsed in favour of Elel or, if such transfer / endorsement is not permissible, ITC shall surrender / cancel such Licence(s) promptly; (iii) Fees and other charges (if any) relating to the transfer / endorsement of Licence(s) shall be to the account of and borne and paid by Elel. Refund of security or other deposits (if any paid by ITC) in respect of Licence(s) as may be surrendered / cancelled by ITC shall be to the account of and appropriated by ITC; f. On or before the execution hereof ITC has - (i) (to the extent reasonably achievable) removed all signage materials and other goods and property bearing the 'TTC' or 'Welcomgroup' brand(s)/logo(s)/ mark(s) or any other brand(s) / logo(s) / mark(s) belonging to or used by ITC (the "Effects") and files papers books of accounts vouchers and documents including data stored in any electronic form (the "Record"); (ii) and withdrawn its management personnel from the Hotel; and (iii) delivered possession of the Hotel on as is where is basis subject to the possession control of the Court Receiver, High Court, Mumbai in respect of certain portions of the Hotel and also subject to the o....
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....ever against ITC in respect of or relating to the Hotel and/or the Stores and / or the Effects or Record or any portion or part thereof; (iv) If and to the extent Elel is at law entitled to receive / recover any payments under/in respect of insurance Policy No. 21300/11/93/0019 and Policy No. 21300/11/93/0020 for the year 1992-93, ITC has no objection to Elel receiving such payment from Oriental Insurance Company; (v) Elel has received from ITC (either directly or through payments made by ITC to the Income Tax authorities pursuant to orders of the tax authorities) fees in respect of operation of the Hotel upto the date hereof and Elel has no further claim against ITC towards any further licence fees and waives the same, if any; (vi) ITC has made no representation nor offered any warranties as to the condition, state or otherwise of the Hotel (nor any part thereof) nor the condition, state, quality or sufficiency of the Stores; (vii) All warranties or conditions (if any) howsoever implied at law are expressly excluded (and in any event waived by Elel); n. On or before the execution hereof Elel has paid to ITC and ITC has received from Elel: (i) The sum of Rs. 7.75 crores....
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.... cover any and all claims, demands and actions of any Person(s) (and any liability consequent thereto) howsoever arising out of or relating to: r(1)(a) the Hotel and/or any and all arrangements / understandings / 1 agreements relating to the Hotel including but not limited to the Operating Licence; r(1)(b) any pending / threatened / apprehended litigation by / against Elel and/or Affiliate(s) to which ITC is / may be a party or which may otherwise impact on ITC and/ or any pending /threatened apprehended litigation proceedings by any Affiliate(s) against ITC; r(1)(c) the execution and / or implementation of the settlement, compromise and adjudgment and/or these Consent Terms including (but not limited to) the competence and ability of Elel to execute and implement the settlement, compromise and adjustment and Consent Terms/ the validity and / or breach or alleged breach thereof or hereof; r(1)(d) any breach of Elel representation(s) / warranty(ies) as contained in the settlement, compromise and adjustment and these Consent Terms; r(1)(e) any representation(s) / warranty(ies) of Elel as contained in the . Consent Terms being incomplete or incorrect; r(1)(f) all litigatio....
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....tment and these Consent Terms have been obtained and such consents are currently valid and subsisting and will so remain through implementation; (iii) The executant of the settlement, compromise and adjustment and these Consent Terms is duly authorised to represent and bind Elel. 4) Fees of the learned Arbitrator shall be borne and paid equally by each of Elel and ITC. Each of Elel and ITC shall bear and pay its own costs and expenses of or relating to the arbitration and of the Suits. Dated 11th day of May, 2005. For Elel Hotels & Investments Limited For ITC Ltd. Sd/- ------------------------ Sd/- ------------------------ Director Sd/- ------------------------ Advocate for Elel hotels & Investments Ltd. Sd/- ------------------------ Advocate for LTC Ltd." Submission on behalf of the appellant:- 11. Sri Om Narayan Rai, learned senior standing counsel for the appellant has carried us to various findings recorded by the Assessing Officer in the assessment order, terms of agreement dated 3.5.1986, settlement agreement dated 11.5.2005 and the consent terms recorded by the sole Arbitrator dated 11.5.2005. He submits as under:- i) The agreement dated 3.5.198....
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....I. AIR 1959 SC 498 (Rameshwar Proshad Khandelwal & Ors. Vs. Commissioners, Land Reforms & Jagirs, Madhya Bharat & Ors.); Submission on behalf of the respondent:- 12. Sri J. P. Khaitan, learned senior Advocate assisted by Ms. Nilanjana Banerjee Pal submits as under:- i) Agreement in question dated 3rd May, 1986 is a license and thus an asset whereby right to run and operate hotel was conferred upon the respondent/assessee. Therefore, such a right under the license/agreement in question dated 3rd May, 1986 would constitute a capital asset under Section 2 (14) of the Income Tax Act, 1961 and its relinquishment by agreement dated 11.05.2005 followed by consent terms/award by the sole Arbitrator dated 11th May, 2005 would constitute transfer of capital asset within the meaning the Section 2 (47) of the Act, 1961. ii) The aforesaid transfer being transfer of a long term capital asset for Rs. 32.42 crores resulted in a long term capital gain under Section 45 of the Act, 1961 and the respondent/assessee has paid long term capital gain tax. The Tribunal has not committed any manifest error of law to hold the transfer in question to be transfer of a capital asset attracting long term c....
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....ct 1961. vi) Further referring to the judgment of Hon'ble Supreme Court in the case of Oberoi Hotel Pvt. Ltd. Vs. Commissioner of Income Tax reported in (1999) 3 SCC 127 (paras 7 to 11), it is contended that the Hon'ble Supreme Court has examined two types of situations; firstly, compensation paid in respect of rights arising under the trading contract and, secondly, Where the compensation is paid as a solacium for loss of office. In the first type of cases the receipt would be revenue receipt whereas in the second type of cases receipt would be capital receipt. In the present set of facts, the agreement dated 3rd May, 1986 was not a trading contract but was conferring a right to the respondent/assessee to operate hotel. Therefore, Rs. 32.42 crores received by the respondent/ ITC from the ELEL was not a revenue receipt but a capital receipt for loss of source of income. Reliance is placed upon a judgment of Delhi high Court in Abhipra Capital Limited Vs. Deputy Commissioner of Income Tax (investigation) reported in [2018 402 ITR 1 (Delhi) (paras 12 and 13) and a judgment of this Court in Oberoi hotels (P.) Ltd. Vs. Commissioner of income Tax reported in [2024] 158 Taxmann....
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....all have the meaning assigned to it in clause (a) of the Explanation to section 115AD; (b) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand ; or (b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment boa....
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.... (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA. Explanation 2.-For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India; [(47A) "virtual digital asset" means- (a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transactio....
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...."foreign currency ; (ii) the conversion of Indian currency into foreign currency ....... (iii)"indexed cost of acquisition" ...... (iv) "indexed cost of any improvement....... (v)[ "Cost Inflation Index", " 14. Section 2 (14) of the Act 1961 defines the term "Capital Asset" to mean (a) property of any kind held by an assessee, whether or not connect with his business or profession. The word property has not been defined under the Act. In Ahmed G.H. Ariff & Ors. Vs. Commissioner of Wealth Tax, Calcutta (1969) 2 SCC 471 (para 8) Hon'ble Supreme Court explained the meaning of the word "property" as under:- "8. Now "property" is a term of the widest import and subject to any limitation which the context may require, it signifies every possible interest which a person can clearly hold or enjoy. The meaning of the word "property" has come up for examination before this Court in a number of cases. Reference may be made to one of them in which the question arose whether Mahantship or Shebaitship which combines elements of office and property would fall within the ambit of the word "property" as used in Article 19 (1) (f) of the Constitution. It was observed in the Commissioner....
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....ised. Under Section 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of an interest in land. The interest transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the lessor. Whereas Section 52 of the Indian Easements Act defines a licence thus: "Where one person grants to another, or to a definite number of other persons, a right to do or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence." Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permiss....
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....d that the document is one of licence. Certainly it does not confer only a bare personal privilege on the respondent to make use of the rooms. It puts him in exclusive possession of them, untrammelled by the control and free from the directions of the appellants. The covenants are those that are usually found or expected to be included in a lease deed. The right of the respondent to transfer his interest under the document, although with the consent of the appellants, is destructive of any theory of licence. The solitary circumstance that the rooms let out in the present case or situated in a building wherein a hotel is run cannot make any difference in the character of the holding. The intention of the parties is clearly manifest, and the clever phraseology used or the ingenuity of the document-writer hardly conceals the real intent. I, therefore, hold that under the document there was transfer of a right to enjoy the two rooms, and, therefore, it created a tenancy in favour of the respondent." (Emphasis Supplied) 18. Learned counsel for the respondent has heavily relied upon the judgement of Hon'ble Supreme Court in M/S. Techno Shares & Stocks Ltd vs Commissioner Of Income Tax....
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....ver the base year, i.e. the year ending 30th June 1986, is achieved from year to year and if such growth is not achieved in any financial year then ITC will pay to ELEL an additional 2 per cent at the gross turnover but where the growth in any financial year is 15 per cent or more then ITC will be entitled to deduct from the Licence Fee the amount equivalent to 0.75% and the net Licence Fee payable will be 22.25%. If the growth is 20 per cent or more in any financial year then deduction in fees will be 1 per cent. Thus, the license fees payable by the ITC to ELEL for operating the Hotel was linked with the gross turnover. No premium or any non-refundable amount was paid by the ITC to ELEL under the operating license agreement. As per Clause 6.1, the ITC merely deposited adjustable security amount of Rs. 7.75 Crores to be appropriated towards payment of license fees for the last 24 months prior to the expiry or termination of the agreement. As per Article VII the ITC facilitated the ELEL for a bank loan of Rs. 3.50 Crores to be adjusted against monthly license fees referred in Article V until liquidation of the advance. As per Article IX, depreciation of the movable asset installed ....
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....nconsistent with or contrary to the sole and exclusive ownership and possession of ELEL of the properties or any of its assets then EHIL shall be entitled to call upon ITC to purchase the Hotel at or the mutually agreed price of Rs. 15 Lakhs (Rupees Fifteen Lakhs) per room irrespective of its use or Rs. 75 Crores (Rupees 'Seventy Five Crores) whichever is higher and upon EHIL exercising such option under written intimation to ITC, ITC shall be bound and liable to purchase the Hotel and pay the consideration monies at the aforesaid rate. 20. Thus from the agreement dated 03.05.1986 it is evident that under the agreement the ITC was authorised to run and operate hotel with all the employees, staff including managerial staff of the ELEL. No right, title or interest of any kind was created by the ELEL in favour of the ITC in any of the assets/properties of ELEL (Hotel) to carry on the aforesaid commercial activity of operating the hotel. The ELEL was to get 23% of the gross turnover as license fees (subject to some variation as provided in clause V). Considering the terms of the licence operating agreement in its entirety, it is a Trading contract. 21. The settlement agreement da....
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.... properties of ELEL. The settlement agreement dated 11.05.2005 was entered between the parties to settle number of disputes, claims and counter claims between the parties including those which were pending in courts. The termination of operating license agreement was part of the settlement of dispute. To run or operate Hotel is one of the business activity of the ITC under it was also running the Hotel in question belonging to ELEL. The amount in question i.e. Rs. 32.42 crores was part of 'Award' received by the ITC to finally adjust, compromise and settle all disputes, allegations, claims, counter claims and case pending in counts arising out of or relating to operating licence Agreement to run Hotel in question. The amount so received under the Award (consent terms) by the ITC in the matter of a Trading Contract, to settle all disputes, claims and counter claims, is certainly not the transfer of any capital asset. 24. In Commissioner of Income Tax, Nagpur vs. Rai Bahadur Jairam Vaiji, & Ors. AIR 1959 SC 291 (Para 11) Hon'ble Supreme Court considered the question "whether in the circumstances of the case the sum of Rs 2,500,000 received by the assessee as damages or compensation ....
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....ct of agency and termination of a trading contract held as under:- "15. These cases illustrate the principle that compensation for injury to trading operations, arising from breach of contract or in consequence of exercise of sovereign rights, is revenue. These cases must, however, be distinguished from another class of cases where compensation is paid as a solatium for loss of office. Such compensation may be regarded as capital or revenue : it would be regarded as capital, if it is for loss of a asset of enduring value to the assessee, but not where payment is received in settlement of loss in a trading transaction. 31.........Venkatarama Aiyar, J., observed, in an agency contract the actual business consists of dealings between the principal and his customers, and the work of the agent is only to bring about the business : What he does is not the business itself, but something which is intimately and directly linked up with it. The agency may, therefore, be viewed as the apparatus which leads to the business rather than the business itself. Considered in this light the agency right can be held to be of the nature of a capital asset invested in business. But this cannot be sa....
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....ollowing guidelines for finding out the true nature of such a receipt. The relevant observations read thus: "Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue; where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt." (Emphasis Supplied) 27. In Oberoi Hotel Pvt. Ltd. Vs. Commissioner of Income Tax (1999) 3 SCC 127 (para 6 and 9) Hon'ble Supreme Court held as under:- "6. Applying the aforesaid test laid down by this Court in the present case, in our view the Tribunal was right in arriving at a conclusion that it was a capital receipt. The reason is that as provided in ....
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....see's case that it was incapable of or was unable to do so for any reason. The assessee has not established that its trading structure even in respect of activities similar to the said distributorship agreement with HBB were impaired. In this regard it is important to recall that in the recital to the distributorship agreement it is stated that the assessee was "actively engaged in the business of sale and distribution of several engineering and electrical products throughout the territory of the Republic of India". 28. The distributorship agreement was a part of the assessee's business. At the cost of repetition, in the recital to the distributorship agreement, it is stated that the assessee was "actively engaged in the business of sale and distribution of several engineering and electrical products throughout the territory of the Republic of India". The termination thereof and the compensation allegedly paid in respect thereof were also only a part of the normal running of the business of the assessee." (Emphasis Supplied) 29. Vide in Commissioner of Income Tax, UP., Lucknow vs. Gangadhar Baijnath, Generalganj, Kanpur (1972) 4 SCC 28 (para 14) Hon'ble Supreme Court not....