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2015 (3) TMI 444 - ITAT MUMBAIReceipt on transfer of Goodwill - capital receipts v/s revenue receipts - assessee Company (EOPL) transferred its entire business to GNRS - As per terms of agreement assessee was to advertise, make publicity of the product. - assessee was entitled to fix resale price of the said product - A.O. opined that just because assessee has used the term goodwill, it doesn’t mean that amount in question would become goodwill. Accordingly the receipt on account of goodwill was assessed under the head ‘Profits and Gain from Business’. Held that:- From the combined reading of sections 55(2) and sec 28(va), it is crystal clear that if the assessee gives up right to carryon any activity in relation to business, the same would be revenue receipt. As against that if the assessee gives up the right to carryon any business the consideration received would be capital in nature. As submitted earlier that by virtue of the said agreement for transfer/ assignment of goodwill the assessee’s source of earning of income has been extinguished, thus there was sterlisation of assessee’s very profit making apparatus. Accordingly, the said receipt is a capital receipt in the hands of the assessee. The assessee had offered the said capital receipt under the head ‘Capital Gains’, and under no circumstances the said amount can be brought to tax under section 28(va) of the I.T. Act, 1961. - Decided in favour of assessee.
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