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2018 (7) TMI 739 - ITAT MUMBAIRetirement Fees - capital gain - acquiring management rights by the assessee company of two schemes acquired - Held that:- In B.C. Srinivasa Shetty (1981 (2) TMI 1 - SUPREME COURT) held that “goodwill generated in newly commenced business cannot be described an asset within the meaning of section 45 of the Act and the transfer of good-will initially generated in a business does not give rise to a capital gain for the purpose of Income Tax. As per amended provisions contained u/s 55(2)(a) of the Act extracted above w.e.f. 1.4.2003 are applicable to the instant case. For the purpose of section 48 & 49 cost of acquisition in relation to a capital asset being goodwill of a business shall be taken as nil. 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 ₹ 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 the agreement, the consideration of ₹ 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 ₹ 88,29,925/- @ 25% with Written Down Value of such right at ₹ 49,66,833/- as on 31.3.2005. When the assessee itself has admitted acquisition of management right qua two schemes acquired from J.F. Mutual funds as intangible assets, the assessee is estopped by its own act and company from denying the management rights transfer for a consideration of ₹ 5,37,68,659/- transfered by it to Principal Mutual Funds as intangible asset/goodwill. Findings returned by the Ld. CIT(A) granting relief to the assessee, that no capital gain is leviable on the retirement fees received by the assessee in this case is not sustainable in the eyes of the Law, hence, reversed and the findings returned by AO are hereby restored.
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