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2016 (5) TMI 855 - AT - Income TaxPremium amount receipt - Nature of receipt - revenue’s view is that the same is a business receipt chargeable under the head Income from business - assessee’s contention is that it is a capital receipt not taxable at all, even though it initially offered the same as goodwill chargeable under the head Capital Gains - Held that:- Joint Venture would give benefits to the new company due to the large scale presence of Birla Group in the Indian Markets, since the Birla group is also well versed with the nuances of the Indian Markets. Hence, in our view, the impugned premium amount of ₹ 12.92 crores is nothing but a payment given by M/s Sunlife in exploit the business expertise held by M/s Birla group, which is nothing but a payment towards “good will” only. We have taken this view on account of one more reasoning, i.e., in the case of joint venture agreements, normally the parties to the agreement share the responsibilities in proportion to their respective share. The responsibilities shared would depend upon the core expertise of each of the parties and the difference, if any, is usually compensated through the variation in the profit sharing ratio. Under this principle of business, a prudent businessman would not agree to give any amount to a novice on account of strategic relationship. In fact, the all joint venture agreements are various types of strategic relationship only and they are normally entered for carrying an activity jointly by using expertise of each of the parties. M/s Sunlife Canada is aware of the strengths of M/s Birla group and hence the impugned amount has been given by it as premium for establishing strategic relationship. The undisputed fact remains that M/s Sunlife Canada is a new entrant in the Indian markets and it would take considerable time for it to under the complexities of the Indian market. On the contrary, M/s Birla group is an established player with interests in various types of financial markets and other field. Further, it has got branches all over the India and hence it is specifically provided in the joint venture agreement that the business expertise in all the fields shall be contributed by the Birla group to the Joint venture. Hence, the Birla group was considered to have an edge over M/s Sunlife, Canada. The business expertise, experience or edge, in our view, is considered as good will. Accordingly, we are of the view that the impugned payment of ₹ 12.92 crores received by the assessee is in the nature of goodwill only and hence we uphold the decision rendered by Ld CIT(A) on this issue. - Decided in favour of assessee Disallowance of bad debts claimed - Held that:- AO as well as Ld CIT(A) took the view that this claim is not allowable as the assessee has not disclosed the same as income in any of the years. In the first round of proceeding, the ITAT has taken the view that the facts relating to this claim are identical with the claim relating to Mafatlal securities Ltd and accordingly allowed the claim. We notice that the assessee has given the advance to various parties for purchase of securities in the course of carrying on business of non-banking finance company. Accordingly, we are of the view that this claim is allowable as trading loss, if not as bad debts. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to allow the claim. Disallowance of claim relating to TDS certificates - Held that:- Non-allowance of TDS credit for want of TDS certificates can be claimed as normal business loss. Consistent with the view taken therein, we set aside the order of Ld CIT(A) on this issue and direct the AO to allow this claim also. Disallowance of share issue expenses claimed u/s 35D - Held that:- We notice that this disallowance was confirmed by the Tribunal relating to AY 1994-95 and also in AY 1995- 96 on the reasoning that the provisions of sec. 35D are not applicable to a finance company and further the same is capital in nature in view of the decision of Hon’ble Supreme Court rendered in the case of Brooke Bond India Ltd (1997 (2) TMI 11 - SUPREME Court ).
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