TMI Blog2012 (8) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of which AO came to the prima facie belief that the amount received by the assessee of Rs. 12,12,18,990/- was taxable as revenue receipt and not as capital gains , thus it is neither the case of change of opinion nor there is re-appraisal of the material available on record - no infirmity in the order of the CIT(A) confirming the reopening of assessment - against assessee. Assessing the receipts from a joint venture agreement with a French company - "Profits and gains of business or profession" OR "Capital gain" - the assessee contested that Schneider had incorporated a wholly owned subsidiary company in India in contravention of Press Note No.18 of 1998 - Held that:- The serious disputes arose between TE/Schneider on one hand and the assessee and CS on the other hand, which were subject matter of legal proceedings initiated by the parties against each other in various Courts. The Joint Venture Agreement intended to put an end to disputes and legal proceedings by amicable global settlement on the terms and conditions set out in the agreement. By virtue of Joint Venture Settlement Agreement the assessee recognized and acknowledged SE/SEI as owner of patents, desig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the action of the learned Assessing Officer in wrongly assuming jurisdiction in terms of Section 147 of the Income Tax Act, 1961. Further the reasons recorded for issue of notice u/s 148 were fully and truly disclosed in the return of income filed for the assessment year under appeal which was assessed u/s 143(1) of the Act and in the absence of any new material or new facts the Assessing Officer is not empowered to reopen an assessment u/s 147 irrespective of whether it is made under Section 143(1) or 143(3) as held by the Hon'ble Delhi High Court in ITA 109/2008. 2. The learned Commissioner of Income Tax (Appeals) has further erred both on facts and in law in upholding the action of the learned Assessing Officer in wrongly assessing u/s 28(va)(a) of the Act capital compensation received by the appellant company in lieu of giving up inter alia their right under Press note 18m to debar the collaboration from carrying out business in India without the permission of the Indian joint venture partner. 2.1 The learned Commissioner of Income Tax (Appeals) has further erred both on facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulti-party settlement agreement was signed including Schneider Electric S.A. (SE). As a result of this agreement both agreed to put an end to legal proceedings and in view of the same payment of Rs. 12,12,18,990/- was made. However, the assessee in computation of total income furnished along with the return of income had shown the sum of Rs. 12,12,18,990/- as capital gain taking the cost of acquisition as 'Nil'. The assessee had invested the said sum in capital gain bonds and claimed deduction under sec. 54EC of the equivalent amount which resulted in chargeable capital gains at 'Nil'. The receipt has been claimed to be capital in nature (not taxable) as per the foot note to the computation of income. The Assessing Officer was of the opinion that the assessee's case fell within the scope of (va) of sec. 28 and the agreement signed by the assessee did not envisage transfer of any rights covered by the proviso to clause (va) of sec. 28 of the Act. The AO therefore, after recording reasons initiated proceedings under sec. 147 of the Act. The assessing officer completed assessment by treating the sum of Rs. 12,12,18,990/- chargeable to tax u/s 28(va) of the Act. 3. Before the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profits and gains of business or procession and hence the income had escaped the assessment. The learned CIT(A) therefore, upheld the reopening of the assessment. 5. Before us it was submitted by the ld. AR of the assessee that jurisdiction under sec. 147 of the Act could not be exercised to make assessment on issue in respect of which there is no new material coming to the possession of the AO subsequently. He placed reliance on the decision of Hon'ble Delhi High Court in the case of Batra Bhatta Co. ( supra ). He further submitted that initiation of re-assessment proceedings on the basis of new material coming to the possession of the AO is sine qua non for assuming valid jurisdiction under sec. 147 of the Act, notwithstanding that re-assessment proceedings have been initiated pursuant to completion of regular assessment under sec. 143(3) or processing of return under sec. 143(1) of the Act. It was also submitted that all the material facts including the entry into the joint venture settlement agreement were fully and truly disclosed by the assessee in the notes to audited accounts for the Financial Year ending on 31st March, 2004 as also in the notes appended to computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to taxability of revenue receipts of Rs. 12,12,18,990/- received from SEI and second ground of appeal was taxability of PF ESI paid beyond the due date and was therefore, taxable under sec. 2(24)(x) read with sec. 36(1)(va). The assessee company had not challenged the second ground either before the CIT(A) or before the Tribunal. The learned CIT-DR has further submitted that the assessee's case fell under main provision of sec. 147 and therefore, in view of decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. , 291 ITR 500, processing of return under sec. 143(1) could not be treated as assessment. Therefore, there was no application of mind by the AO at the time of processing the return and hence question of change of opinion would not arise. The learned CIT-DR further submitted that the decision of Hon'ble Delhi High Court in the case of CIT v. Batra Bhatta Co. ( supra ) was not applicable to the facts of the assessee's case. In that case the reopening of assessment was made on the ground that the claim of the assessee required much deeper scrutiny. He further submitted that during the course of assessment proceedings for Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of intimation would be covered by the main provision of section 147 and not the proviso thereto. Only one condition has to be satisfied. Failure to take steps under sec. 143(3) will not render the AO powerless to initiate re-assessment proceedings when intimation under sec. 143(1) has been issued. The Hon'ble Supreme Court also held that the expression "reason to believe" in sec. 147 would mean cause or justification. If the AO has cause or justification that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression "reason to believe" cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount received by the assessee of Rs. 12,12,18,990/- was taxable as revenue receipt and not as capital gains. Hon'ble Delhi High Court in the case of Rakesh Aggarwal v. ACIT ( supra ) has held that findings in assessment for another year will constitute material for re-opening the case u/s 147. The facts of the assessee's case are squarely covered by the decision of Hon'ble Delhi High Court in the case of Rakesh Aggarwal ( supra ) and also by the decision of Hon'ble Delhi High Court in the case of Diwakar Engineers Ltd. ( supra ). In view of above, we are of the considered opinion that it is neither the case of change of opinion nor there is re-appraisal of the material available on record. If the contention of the assessee is accepted, then no proceedings under sec. 147 can be initiated where return of income has been processed under sec. 143(1) of the Act. Accordingly, we do not find any infirmity in the order of the CIT(A) confirming the reopening of assessment. Hence the grounds relating to reopening of assessment are dismissed. 9. Next issue for consideration relates to upholding the action of the AO assessing the receipts under sec. 28(va)(a) of the Act. Facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FIPB in the year 2002. Vide letter dated 24th February, 2003, FIPB directed Schneider not to undertake any activity detrimental to the interest of the assessee, until conclusion of proceedings initiated by FIPB. 10. Pursuant to the aforesaid directions by FIPB restraining Schneider from carrying on competing business in India, Schneider approached the assessee company to put an end to the impasse created by virtue of the direction issued by FIPB. After mutual discussion and negotiations, the parties entered into a Settlement Agreement on 10th April, 2003, whereby it was agreed as under:- (1) Schneider would pay compensation of Rs. 12,12,18,990/- to the assessee; (2) The assessee would give its no objection permitting Schneider to carry on competing business through its wholly-owned subsidiary company in India and communicate the same to FIPB. (3) Schneider agreed to exit from the assessee company as joint venture partner; (4) The assessee agreed not to use Telemecanique as part of its corporate name; (5) Both the parties agreed to put an end to all pending legal proceedings. 11. The Assessing Officer in view of the provisions of sec. 28(va)(a) inserted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct competition with the joint venture entity without obtaining a specific "No objection" from the Indian partner. When Schneider had set up business in India directly competing with the business of the assessee, the assessee company had lodged a complaint against Schneider India Pvt. Ltd. with the Government of India. The Government had advised SEIPL from operating its business till the decision was taken on a complaint lodged by the assessee company. As part of the Joint Venture the assessee company has agreed to give up its opposition to SEIPL operating its business in India. From the point of view of assessee, it lost a valuable association with SE/SEI and in addition to this, faced direct competition from them. This has resulted in impairing the profit earning apparatus of the assessee company. Therefore, the compensation for such impairment was a capital receipt since the receipt was not for transfer of any capital asset. 13. He has further submitted that the Assessing Officer had wrongly held that the amount was received for not carrying out any activity in relation to business and therefore, the amount was chargeable to tax u/s 28(va)(a) of the Act. Further the AO wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, of industrial control and automation and electrical distribution. SE/SEI agreed to exist from the joint venture with TC as a result of the expiry/termination thereof. TC admitted and acknowledged SEI's full ownership rights in the name and trademark "Telemacanique" and "TE". TC seized to use of "Telemecanique" as part of its corporate name and the new corporate name of "TC" was "Control and Switchgear Contractors Ltd" or such other corporate name which would not contain the name "Telemecanique" or "TE" or any other similar word or name. Upon TC's change of corporate name, TC and its affiliate companies would not use or make any reference to "Telemecanique", TE, its logo trade mark, copy right and design relating to the artistic work with respect of its logo, commercial references or use any word, name, logo or copy right/design similar or likely to be confused with them. In consideration and full compensation of TC's commitments and other undertakings with this Agreement, a sum of Euro 2,229.700 was paid as 'TC Settlement Sum'. The learned CIT(A) further noted that from the perusal of the Joint Venture Settlement Agreement, it was evident that by entering into this agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso to sub-clause (a) of clause (va) of sec. 28. Accordingly the assessee's claim for exemption u/s 54EC of the Act was not sustainable as there was no capital gain. The learned CIT(A), however, held that the AO was justified in invoking the provisions of sec. 28(va)(a) of the Act. She accordingly upheld the addition made by the AO. 17. Before us the learned AR of the assessee submitted that Press Note No.18 of 1998 issued by the FIPB created a right to object to the entry of Schneider in competing business in India. The right was vested in assessee and constituted valuable right in the hands of the assessee falling within the meaning of capital asset defined in sec. 2(14) of the Act. Relying on the decision of Hon'ble Bombay High Court in the case of CIT v. Tata Services Ltd. 122 ITR 595, the learned AR of the assessee submitted that the word "property" of any kind in sec. 2(14) of the Act was a word of the widest amplitude and the definition has re-emphasized this by the use of the words "of any kind". The Hon'ble Bombay High Court has held that any right which could be called "property" would be included in the definition of "capital asset". Reliance was also placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (SC); PNB Finance Ltd. v. CIT 307 ITR 75 (SC). 19. It was further submitted that the Department of Industrial Policy and Promotion (DIPP) vide Circular 1 of 2011, has abolished Press Note No.1 of 2005 (successor of erstwhile Press Note No.18 of 1998). As a consequent of the aforesaid amendment, foreign entities are no longer required to obtain approval of the Indian collaborator before entering competing business in India. The aforesaid valuable right vested in Indian businesses to object to the entry of foreign players with whom such businesses have existing business relationship, has been taken away by law. The aforesaid would go to show that the valuable right which vested in the assessee to object to entry of Schneider in competing businesses in India was vested upon the assessee by virtue of the then prevailing legal regulations and was, thus, a self-generated asset, which was not acquired by the assessee through payment but which vested in the assessee by virtue of the legal regulations. Thus it was not possible to determine the cost of acquisition of the aforesaid valuable asset, viz., the right to object to entry of Schneider in competing business in India. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he products manufactured by the assessee; (iii) The assessee had not to use "Telemecanique" as part of its corporate name; (iv) The entry of Schneider in the competing business in India was permitted. T he termination of collaboration with the foreign joint venture partner and exit of the joint venture partner altered the aforesaid basic structure of carrying business by the assessee in India inasmuch as post settlement and exist of the foreign collaborator, the assessee could not have continued access to the technology and band/trade name of such collaborator and, accordingly, was to manufacture new products by developing own technology. Therefore, post settlement/exist of the foreign collaborator business to be carried on by the assessee was different than that carried along with the foreign joint venture partner inasmuch as new products were to be manufactured by using indigenous technology. As a result of exit of foreign joint venture collaborator, there was complete loss/sterilization of existing profit earning apparatus/business of the assessee carried on along with the foreign joint venture partner. Further, by allowing the foreign joint venture partner to enter into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital receipt not liable to tax under the provisions of the Income-tax Act. 23. Further sec. 28(va) was inserted in the Statute by the Finance Act, 2002 w.e.f. 1st April, 2003, whereby compensation received by the assessee in lieu of undertaking negative/restrictive covenant by agreeing not to carry on, directly or indirectly, any business or any activity in relation to such business, in competition with the payer has been brought to tax as business income. In the case of the assessee the impugned amount of compensation was not received by the assessee in lieu of undertaking any negative/restrictive covenants not to engage in any competing business/activity with the existing foreign joint venture partner. On the contrary the assessee was still continuing in the said competing business of manufacturing electrical equipments, albeit in a varied form. The aforesaid compensation was received to obtain 'No Objection' from the assessee to allow entry of Schneider in competing business in India through its wholly owned subsidiary or otherwise. Therefore, the amount received by the assessee could not be said to be in the nature of non-compete fee covered under the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider India Ltd. and competing with them in the similar products. Submission of the assessee that the payment was received for giving "No Objection" certificate was not correct. Page 3 of Joint Venture Settlement Agreement dated 10.04.2003 shows that the serious disputes arose between TE on the one hand and TC and CS on the other in September, 1988. Schedule 1 of Joint Venture Settlement Agreement dated 10.04.2003 shows that Schneider India Ltd. had filed many cases in various Courts against the assessee company and there were counter cases by Assessee Company against Schneider India Ltd. which are evident from Schedule 2 of JV Settlement Agreement. 25. Referring to annual report for F.Y. 1988-89 the learned CIT-DR submitted that the assessee company was speeding up of essential indigenization of the company's product which had become necessary to mitigate the heavy cost of components imported from them. The foreign collaborator had been making attempts to do away with some of the existing agreements and understandings between the two Houses. It also mentioned that during the period of almost 4 years their engineers and other work force had become fully conversant with the techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently in their hands in an extremely short period. Therefore, the submissions of the learned AR that because of termination of the Licence Agreement and signing of the Joint Venture Agreement, the profit earning apparatus got impaired, is not correct. Schneider was granted permission to promote a 100% subsidiary in India by FIPB vide letter dated 31st August, 1994. Schneider Electric India incorporated a company in India in 1995 under the name Schneider Electric India Pvt. Ltd. (SEIPL) which has since then acquired the Low Voltage Control Gear Division of Crompton Greaves Ltd. The Press Note No. 18 was issued on 14.12.1998 i.e. more than 4 years after the Schneider was granted permission by FIPB to promote a 100% subsidiary in India. He further submitted that Para 7.1 of the JV Settlement Agreement dated 10.04.2003 provides that - "In consideration and full compensation for TC's commitments and other undertakings under this Agreement, a sum of Euro 2.229.700 (Euro two million two hundred twenty nine thousand seven hundred only) (the "TC Settlement Sum") shall be payable by SEI to TC subject to and strictly in accordance with the terms and provisions of this Agreement towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue nature. He also placed reliance on the decision of Hon'ble Delhi High Court in the case of JCIT v. Khanna and Anndhanam 305 ITR 336. 27. As regards the contention of the assessee that the impugned transaction was covered by the provisions of sec. 2(47) of the Income-tax Act and the resultant amount was taxable under the head "Capital gains" and since the assessee had deposited the capital gain in tax saving bonds as prescribed under sec. 54E of the Act, no tax was leviable, is not correct as the assessee is not the owner of the trade mark, logo, design for which licence agreement was granted. Therefore, there was neither a capital asset as defined in sec. 2(14) nor the same was treated by the assessee company. The AO has rightly rejected the claim of the assessee and the same was rightly upheld by the CIT(A). The learned CIT-DR finally concluded that payment received by the assessee from its foreign collaborator in pursuance of Joint Venture agreement was revenue receipt and rightly taxed by the AO and confirmed by the learned CIT(A). 28. In rejoinder the learned AR of the assessee submitted that it was not the case of assessee that the assessee was the owner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation was issue of no objection and not settlement of any other existing disputes which were pending for the last several years in various forums. It was reiterated that the immediate trigger/provocation for Schneider agreeing to enter the JV Settlement Agreement was to make FIPB to lift the restraint/injunction, which was not possible without the assessee company conveying its no objection. Therefore, the payment of compensation has direct, proximate and integral nexus with the issue of no objection certificate/letter by the assessee company to FIPB. It was further submitted that once company conveyed its no objection to Schneider carrying on business in India, prejudicial and detrimental to the interest of the assessee company, the joint venture arrangement could not have, in any case, continued and had to ipso facto be terminated. With the collapse/coming to an end of the joint venture agreement, the allied agreements, co-terminus with the joint venture agreement, automatically came to an end. It was therefore, submitted that the compensation received was in nature of capital receipt not liable to tax. The same was not subject to tax on capital gains under sec. 45 read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f termination of any regular business contract or to compensate any loss suffered in the ordinary course of business. However, if the same has been received to compensate any loss to the profit earning apparatus, then the same will be regarded as capital receipt notwithstanding that the assessee continues to carry on the business in altered/modified form. The cases relied upon by the learned CIT-DR are distinguishable on facts as in the present case there is complete sterilization of income earning apparatus in the form of business of manufacturing and sale of Telemecanique/Schneider range of products on account of- (a) termination of licence; (b) termination of agreement for supply of technical information; and (iii) termination of agreement for technical services, Name Licence Agreement, agency earning apparatus etc. 32. The learned AR of the assessee further submitted that the learned CIT-DR had not advanced any argument on applicability of sec. 28(va)(a) of the Act. On facts on the contrary it is conceded that the assessee had not undertaken any negative covenant under the agreement. A fresh plea/argument has been taken that the assessee continuous to carry on same bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TE) was acquired by another French company, viz. Schneider Electric Industries SAS (Schneider), pursuant to which TE got merged into Schneider. When Telemecanique Electrique SA (TE) merged into Schneider Electric Industries SAS (Schneider), the serious disputes arose between TE/Schneider on one hand and the assessee and CS on the other hand, which were subject matter of legal proceedings initiated by the parties against each other in various Courts. Subsequently, Schneider incorporated a wholly-owned subsidiary company in India to carry on competing business of manufacturing electrical equipments, pursuant to approval dated 31st August, 1994 granted by FIPB. FIPB issued Press Note No. 18 of 1998 on 14.12.1998 according to which foreign companies having an existing Joint Venture in India were allowed to set up wholly owned subsidiary company in India in the same field under automatic route. When FIPB granted approval on 31st August, 1994 to set up wholly owned subsidiary company in India, Press Note No. 18 of 1998 was not in existence. The assessee after issue of Press Note No. 18 of 1998 came into action and filed a complaint with FIPB stating therein that Schneider had incorporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed circumstances in which they find it necessary to set-up a new joint venture/enter into new technology transfer (including trade-mark). III. The onus is clearly on such investors/technology suppliers to provide the requisite justification as also proof to the satisfaction of FIPB/PAB that the new proposal would not in any way jeopardize the interests of the existing joint venture or technology/trade-mark partner or other stakeholders. It will be at the sole discretion of FIPB/PAB to either approve the application with or without conditions or reject in toto duly recording the reasons for doing so. 2. The above procedure will form part of the approval procedures contained in the "Manual on Industrial Policy Procedures in India" published by SIA, Ministry of Industries, Government of India, which shall stand clarified accordingly in respect of foreign/technical collaborators with previous joint ventures/tie-up in India. Sd/- (I. SRINIVAS) DIRECTOR New Delhi, dated the 14th December, 1998" On plain reading of Press Note No.18 one may find that it relates to foreign collaborators who had any previous joint venture or technology transfer/trade-mark agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by TC (the assessee) against TE/SE/SEI. Schedule 1 2 are reproduced as Under:- "SCHEDULE 1 ( i ) Arbitration proceeding bearing Reference No. 6694CI/ CK/AER/ACS before the International Court of Arbitration, Paris raising various claims against TC; ( ii ) Suit No. 1919 of 1999 before the Delhi High Court for permanent injunction against infringement of its Patents and Designs. ( iii ) Suit No. 2112 of 1999 before the Delhi High Court for permanent injunction against TC spreading marketing misinformation. ( iv ) Suit No. 2629 of 2001 before the Delhi High Court for permanent injunction against TC using "Telemecanique" as a part of its Corporate name. ( v ) Suit No. 444 of 2002 before the Delhi High Court seeking permanent injunction against TC holding any Board Meeting in violation of the quorum requirements laid down in the Articles of Association of TC. SCHEDULE 2 ( i ) SLP 8352of 2002 before Hon'ble Supreme Court of India against an Order dated 6.3.2002 passed by Hon'ble Delhi High Court in OMP No. 6 of 1989 filed by TC challenging the effect and scope of various arbitration agreements between TE and TC on the basis of which TE filed Reference fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlement of all past, present or future claim/s and potential claim/s made by TC to the Ministry of Commerce and Industries in the Government of India and satisfactory submission of those matters as set out in section 4 above and otherwise. ( ii ) Change of corporate name by TC to "Control Switchgear Contractors Ltd." ( iii ) On account of agency commission outstanding from SEI (amount into Euro 25.600) (equivalent to FFR Rs. 167.837.55), without any interest." "4. Alleged breach of exclusivity: TC hereby irrevocably and unconditionally confirms that upon issue of the Letter of Credit by Societe Generale Bank as envisaged in Section 7 herein, there shall not be or remain any past present or future claim/s or potential claim/s whatsoever against SE, SEI, SEIPL and/or their affiliates (present or future) to the alleged breach of exclusivity by SEI/SEIPL on the grounds that;- (i) SEI obtained approval of the Government of India on August 31, 1994 to set up a wholly owned subsidiary in India; (ii) SEI has incorporated a company in India in 1995 under the name "Schneider Electric India Private Limited" to undertake, inter alia, the business of industrial control, automa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The report also states that it was never the intention to depend on foreign technicians for all the time and the process of learning was expedited by the fact that the Indian engineers were found to be a complete match to the foreigners to imbibe the necessary skills and to successfully take up the required tasks independently in their hands in an extremely short period. Therefore, the submissions of the learned AR that because of termination of the Licence Agreement and signing of the Joint Venture Agreement, the profit earning apparatus got impaired, has no force. Likewise, in annual report for 1991-92 it has mentioned that there were dissensions between the assessee and its foreign collaborator Telemecanique Electrique, France. Both the parties were claiming that there had been breaches of agreements. There were consequent claims and counter claims against each other. The report also mentions about the application made by foreign collaborator to International Chamber of Commerce for arbitration. The assessee company had also initiated proceedings in the Delhi High Court. Identical remark has been made in annual report for 1995-96. From the annual reports it is evident that asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking any negative covenants not to compete with Schneider in India but on the contrary the assessee continues to carry on the same line of business. The learned AR of the assessee further submitted that the AO brought the impugned receipts to tax as business income under sec. 28(va)(a) of the Act on the ground that the same was received in lieu of undertaking negative covenants of not using trade mark of foreign collaborator, post settlement. It is a fact that assessee had given an undertaking not to use trade marks, designs, logo of Telemacanique and had accepted the ownership on such intellectual property of foreign collaborator. The learned AR further stated that the learned CIT-DR had not made any argument on applicability of sec. 28(va) of the Act. On the contrary he has conceded that the assessee had not undertaken any negative covenants under the agreement. A fresh plea for argument has been taken that since the assessee continues to carry on same business post settlement, the impugned compensation would be regarded as receipt in the ordinary course of business which shall be taxed as normal business income. The learned AR of the assessee placed reliance on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The Tribunal held that if the additional grounds which were pressed before it was in the nature of an alternative ground touching the interpretation of the law resulting in the same relief, the grounds would have been unexceptionable. But where the ground is a ground of additional nature involving a claim of a larger relief than that urged before the lower authorities, the same is impermissible. Though the Tribunal's order on the miscellaneous petition on the point is not very explicit, yet that is the idea beneath the statement that the ground would have been admissible as an alternative ground but not as an additional ground. The Tribunal found that ground not to be an alternative ground but to be an additional one." From the above observation of the Hon'ble Calcutta High Court it is clear that a ground which requires interpretation of law should be admissible. The decision of Hon'ble Calcutta High Court in our considered opinion supports the case of the Revenue because the learned CIT-DR has taken a legal issue and not an additional ground. The issue of assessability of compensation was before the AO as well as CIT(A). 38. Hon'ble Supreme Court in the case of Kapurcha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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