Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2013 (11) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (11) TMI 732 - HC - Income TaxNature of income – Capital receipt or revenue receipt – Forfeited amount out of the payment received, a capital receipt? - Assessee had received an advance amount of Rs.4.49 crores in terms of agreements of sale dtd.15-11-1999 and 17-01-2000. However, the said agreements were terminated with the consent of both the parties on 13-1-2001 and 15-1-2001 – Held that:- As per the agreement, if the purchaser fails to perform their part of the contract, the Vendor is entitled to terminate the agreement and claim liquidated damages of Rs.25,00,000/- and Rs.5,00,000/- respectively. However, in the present case, by mutual consent of the parties, the RIL had agreed to forego Rs.1.10 crores in favour of the assessee for loss of earnings due to the cancellation of agreement and the loss sustained in the sale transaction. The amount over and above Rs.30,00,000/- has to be treated as revenue receipts - As per the agreement, the assessee is entitled to forfeit only a sum of Rs.30,00,000/- and the remaining amount of Rs.80,00,000/- has to be treated as revenue receipt and the assessee is liable to pay tax. - Decided partly in favor of revenue. Whether stock pertaining to bulk drug unit and R & D should be taken as NIL as on 30.6.2000 when its realizable value as on 30.03.2000 was Rs.12.78 crores – Held that:- The said goods were not saleable items in the market - The life of the bulk drug was expired and it cannot be sold in the market. The Central Excise Records also disclose that the said goods cannot be sold in the market. The Income Tax Appellate Tribunal, taking into consideration all these aspects of the matter and that the manufacturer has been completely stopped the manufacturing of the bulk drug, has taken the value of closing stock of bulk drug as NIL. The assessee has not adopted any colourable devices in order to avoid the tax – Decided against the Revenue. Whether the amount received in regard to noncompetition clause for three year is a capital receipt – Amount received is Rs.4 Crore - Held that:- Compensation received for refraining from carrying on competitive business was a capital receipt - In the instant case, Rs.4.00 crores received from M/s.Recon Health Care Limited towards noncompetition to discontinue the business of three years has to be held as capital receipt – Decided against the Revenue. Whether Capital gains loss computed on sale of share of M/s.Recon Agro Tech Pvt Ltd., computed by adopting cost of acquisition of Rs.0.10 per share is a colourable transaction – Held that:- Under Section 48 of the Income Tax Act, the capital gain is to be computed after reducing the cost of acquisition of the asset, cost of any improvement thereto and the expenditure incurred in connection with the transfer of capital assets. In order to avoid the stringent action being taken by the financial institution, the assessee sold the shares to its subsidiary company in order to stabilize its financial position. No document has been produced by the Revenue to show that the transaction between the assessee and its subsidiary company is a colourable device. The finding recorded by the Appellate Tribunal is purely a question of fact. The Revenue has not made out a case to interfere with the same – Decided against the Revenue. Whether transfer of technical knowhow by the assessee for a consideration of Rs.25 crores should be treated as a capital receipt, not liable to capital gains tax and not consideration received towards sale of capital asset, liable to capital gains tax – Held that:- Under Section 28(v)(a) any sum, whether received or receivable, in cash or kind, under an agreement for not carrying out any activity in relation to any business, or not sharing any knowhow, patent, copyright, trademark, license, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of the goods is intangible goods acquired on or after 1-4-1998 is a capital asset and liable to be taxed under the head ‘Capital Gain’. The technical knowhow is an intangible asset, liable to be taxed under the head ‘Capital Gain’. The order passed by the Appellate Tribunal holding that the consideration of Rs.25.00 crores received is also for not carrying out certain activities pertaining to the business in manufacture of Pharmaceutical goods. Any consideration received for not carrying out certain activity in connection with business is not taxable earlier to 1-4-2003. Therefore, the receipt is a capital receipt and not liable for the capital gain is contrary to law – Decided in favor of Revenue.
|