TMI Blog2016 (5) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, both the parties filed appeals before Hon ble High Court of Bombay. In the mean time, the assessee also filed a miscellaneous petition seeking rectification of mistakes found by it in the order passed by the Tribunal. Since the Miscellaneous petition was dismissed by the Tribunal, the assessee filed a writ petition challenging the said order. The Ld A.R stated that the appeal filed by the assessee was numbered as Income tax Appeal No.685 of 2010 and the Writ petition is numbered as Writ Petition No.1894 of 2010 in the Hon ble High Court. The appeal and the writ petition filed by the assessee were disposed of by the Hon ble High Court by a common order dated 20th September, 2010 with the following observations:- 2. Having heard both the above matters for some time, Mr. Sahadevan the Learned Counsel for the Revenue stated that the impugned orders in the appeal as well as Writ petition may be set aside without examining the merits and demerits of the impugned order and action and dispensing with the reasons in support of this order. The joint submission is that appeal as well as Writ petition be allowed and the matters may be remitted back to the Tribunal for afresh consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court has held that the appeals of the revenue have become infructuous, since the matters have been restored to the Tribunal for de-nova consideration. The reasoning given by the Hon ble High Court, in our view, shows that it has intended to restore all the issues to the file of the Tribunal. Accordingly, we are of the view that the issues urged by the assessee as well as by the Revenue have been restored to the file of the Tribunal and accordingly the Registry has posted the appeals for hearing. 5. The assessee is a Non-banking financial company. It has since been amalgamated with M/s Aditya Birla Nuvo Ltd. w.e.f. 30-06-2006. Since the appellate orders have been passed in the name of Birla Global Finance Ltd and the assessee is also prosecuting the appeals in the old name only. Since the Birla Global Finance Ltd has been merged with the above said company, the present orders are being passed in the name of the present company. The first issue urged in the appeal of both the parties relates to the taxability of ₹ 12.92 crores received by the assessee from M/s Sunlife Assurance company of Canada. 6. The assessee treated the above said amount as a receipt towards Good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons stated in the order. Accordingly, the Ld CIT(A) set aside the matter to the file of the AO with the direction to redo the assessment. The revision order passed by Ld CIT was challenged before the Tribunal and the ITAT quashed the revision order passed by the Ld CIT. The order passed by the Tribunal has since been upheld by the Hon ble Bombay High Court, vide its order dated 17-06-2011 passed in the appeal filed by the revenue in Income tax Appeal No.1099 of 2007. 9. During the year under consideration, the assessee received a sum of ₹ 12.92 crores as premium towards Strategic relationship entered by way of Joint venture agreement. The assessee offered the same as Long term capital gain, but the AO assessed the same as business receipts. The Ld CIT(A) accepted the contention of the assessee and accordingly held that the same is assessable as Long term capital gain. The revenue challenges the said order of Ld CIT(A). The assessee has taken a new stand that the same is not taxable as Long term Capital gain also, as there is no transfer of any capital asset, which is a primary condition for bringing a receipt under the head Capital gains . Accordingly, it is being conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of Goodwill as described in the accounts, but it is a payment received for establishing strategic relationship. The assessee has not transferred any assets and hence the said receipt is not chargeable as Capital gains. 12. We heard the parties on this issue. Article 3 of the Joint Venture Agreement deals with the Strategic Relationship As per Article 3.1, M/s Sunlife has agreed to pay a sum of CDN$7 million, termed as Premium in consideration of establishment of strategic relationship and joint venture. The parties has provided a cap in respect of payments made towards acquisition of shares and good will and hence, the amount paid in excess, if any, shall be adjusted against the premium stated above. The dispute is with regard to the nature or character of this premium amount. 13. The revenue s view is that the same is a business receipt chargeable under the head Income from business. The 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. 14. We notice from the order passed by the Tribunal in AY 2000-01 against the revision order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 16. 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 21. The next issue contested by the assessee pertains to the disallowance of claim relating to TDS certificates. The AO disallowed this claim and the Ld CIT(A) took the view that the assessee should seek remedy u/s 264 of the Act. The Ld A.R submitted that the tax has been deducted by the clients from out of business receipts and due to mismatch or other unavoidable reasons, the claim of TDS to the extent of ₹ 25.00 lakhs was not allowed. Since the assessee could not claim its r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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