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2013 (10) TMI 1039 - AT - Income TaxWhether sale of assessee’s OHB to Colgate Palmolive is a slump sale as contended by the assessee or an itemized sale as contended by the Revenue – Held that:- A perusal of the sale agreement shows that the business sold included: (a) Goodwill (b) all tangible assets including the enhance packing , machinery and equipments (c) all rights, title , interest , benefit and advantages in under all agreements or arrangements pertaining and relating to or concluded with the business, authorized dealers, manufacturers (d) Distributors and customers (e) all rights , title, interest and benefits in relation to copy rights, trades, design and trade marks connected with the business (f) all rights , title , interest and benefits in respect of process know how technology (h) all other immovables , including tangible and intangible assets right and interest of any nature. The sale agreement further stated that in consideration of the sale of OHB to Colgate Palmolive (I) Limited India as going concern , CPL shall pay to assessee a sum of Rs. 99.54 crores – Reliance has to be placed upon the judgment in the case of CIT Vs. Artex Manufacturing Company [1997 (7) TMI 7 - SUPREME Court] - Transaction has to be taken a slump sale and the capital gains have to be computed accordingly as per the provisions of Section 45 to 50 – Decided in favor of assessee. Whether the amount received by the assessee as non-compete fee is a revenue or capital in nature for the purpose of taxability – Held that:- This issue to be decided on the basis of the facts and circumstances of each case as per the pre-amendment provisions of the Act. It is settled proposition on the point that if the compensation/receipt for refrain from carrying on business which effects the profit making structure of the assessee than such restriction will lead to loss of enduring trading asset by depriving the assessee from the future income and the receipt would be capital in nature. If the profit making structure is not affected as no loss of source of income resulted by putting such restrictions under the negative covenant then the receipt for agreeing such restrictive covenant would be revenue. Therefore, the principle is based on the test whether agreeing to the negative covenant, the assessee is deprived of a source of future earnings being the structure of the whole business or not. In the present case, assessee has refrained from competing same business which has been sold to CPL for which it has received this compensation. By doing this the assessee has given up one of its source of income and therefore it has to be treated as a capital receipt – Decided in favor of Assessee. Addition of freight in Closing stock – Held that:- Addition is being deleted following the reasoning given for the deletion of the addition on account of modvat – Reliance has also been placed upon the judgment in the case of Indo Nippon Chemical Co. Ltd.[ 2000 (8) TMI 69 - BOMBAY High Court] – Decided in favor of Assessee. Exclusion of sales tax and excise duty from the total turnover from the computation of deduction u/s 80HHC of the Act – Held that:- Deduction u/s 80HHC to be computed by excluding the amount of sales tax and excise duty from the total turnover – Reliance has been placed upon the judgment in the case of in the case of M/s Sudarshan Chemical Industries ltd. [2000 (8) TMI 73 - BOMBAY High Court], which is decided in favor of Assessee. Nature of expenditure, whether ‘Capital’ or ‘Revenue’ – Expenditure on production of advertisement films, On production of TV films, On production of cinema slides etc. – Held that:- expenditure is revenue in nature – Decided in favor of Assessee.
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