TMI Blog2011 (10) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... ess income. Decided in favor of the assessee. - ITA No. 3900/Mum/2010, ITA No. 3878/Mum/2010 - - - Dated:- 7-10-2011 - Shri Pramod Kumar, Shri Vijay Pal Rao, JJ. Rajan Vora, a/w Miral Sangharajka, for the appellant G P Trivedi, for the respondent O R D E R Per Pramod Kumar: 1. These cross appeals call into question correctness of the same order dated 26th February 2010 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act. 1961, for the assessment year 2006-07, involve interconnected issues and were heard together. As a matter of convenience, therefore, both of these appeals are being disposed of by way of this consolidated order. 2. To adjudicate on these appeals, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p method, at Rs 365. Accordingly, the balance amount of Rs 205 per share was treated as towards non compete fee and brought to tax as business income under section 28(va) in the hands of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without complete success. Learned CIT(A) upheld the action of the AO in principle, but held that only Rs 41 per share can be attributed to non compete fees. The CIT(A) further held that decision of a coordinate bench in the case of Hami Aspi Balsara Vs ACIT (30 DTR 576) does not help the assessee as there is specific mention of the non compete obligations in the share sale agreement, and, therefore, a part of the sale consideration is to be attributed to the non compete obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee that for a period of 5 years from Completion, the Sellers shall not be engaged in any of the Restricted Business in India." This clause clearly shows that in the purchase price of shares, consideration towards Restraint Clause was embedded. But the same was not specifically mentioned in the Share Purchase Agreement, As rightly pointed by the ld. Counsel for the assessee, non-compete fees could be payable primarily with respect to manufacturing company viz. Balasara Home Products. As regards other two IPR companies viz. Balasara Hygiene Products and Besta Cosmetics, since value of IPR was not reflected in the balance sheet, which constituted major part of the share price, the same had to be determined before arriving at the true book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t carrying out any activity in relation to any business; or (b) Not sharing any know-how, patent, copy right, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services. Provided that sub-clause (a) shall not apply to - (i) Any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable under the head "Capital gains", Thus, section 28 (va) would be attracted where the assessee was carrying on business and not where assessee only had right to carry on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attributable to sale of shares and for non compete obligations is rendered academic and infructuous. We may also add that it is not even in dispute that the assessee before us was not actively engaged in the business and so far as the assessee actively engaged in the business is concerned, it has been stated at the bar that income attributable to non compete obligations has been offered to tax as business income, but then, given the uncontroverted position that the assessee was not actively engaged in business, it is not really necessary to examine that aspect of the matter any further. The stand of the assessee, in treating entire consideration received on sale of shares as taxable under the head capital gains must therefore be upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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