TMI Blog2019 (3) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... not acquired for consideration, the cost of acquisition of the said marks could not be substituted as the market value as on 1st April, 1981 so as to attract capital gains. PNB Finance Limited v. CIT [2008 (11) TMI 7 - SUPREME COURT]followed - decided in favour of the Assessee The view taken by the AO on the nature of the non-compete fee and the consideration for assignment of trademark was a plausible one. There was no occasion for the CIT to assume jurisdiction under Section 263 of the Act. In PCIT v. Delhi Airport Metro Express Pvt. Ltd. [2017 (9) TMI 529 - DELHI HIGH COURT] it was held that the CIT had to come to a prima facie finding as regards the merits of an issue before seeking to set aside the same and remanding it to the AO for de novo adjudication. That is absent in the case on hand - answered in favour of the Assessee - ITA 465/2003 - - - Dated:- 20-3-2019 - MR S. MURALIDHAR AND MR SANJEEV NARULA, JJ. For The Appellant : Mr. Ashok Manchanda, Sr. Standing counsel with Mr. Pankaj Sinha, Advocate For The Respondent : Mr. Ajay Vohra, Sr. Advocate with Ms. Kavita Jha, Ms. Devika Jain Mr. Anant Mann, Advocates JUDGMENT Dr. S. Muralidhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Bombay, Kwality Restaurant at New Delhi and Kwality Ice Cream Company at New Delhi. 7. On 27th April, 1980 an Indenture was signed by the Ghai Group and Lamba Group for the final separation of the businesses including the assignment of use of trademarks. Clause 5 of the agreement read as under: 5) That pursuant to the said dissolution Unit Kwality Restaurant, New Delhi; Kwality Ice Cream Co., New Delhi and Gaylord Restaurant, Bombay allotted to be taken over by the Second Group shall belong to the Second Group together with exclusive right to use the said names Kwality restaurant and Kwality Ice Cream in and around New Delhi together with right to use the said name Gaylord Restaurant in and around Bombay as the name of the business together with assets and liabilities. 8. As part of the bifurcation agreement it was agreed between the parties that the mark Kwality would be assigned by Ghai group for exclusive use in the territories of Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Bihar, West Bengal, Karnataka, Tamil Nadu, Assam and Orissa. The Lamba Group could exclusively use the market Kwality in Jammu Kashmir, Punjab, Rajasthan, Haryana, Uttar Prade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that intangible assets like trademark, brand names etc. were self-generated and not acquired from others could be brought to tax only with effect from 1st April, 1998. 13. The CIT passed an order dated 29th March, 2000 setting aside the assessment order and observed as under: 1. Firstly, the trade mark of Kwality is not a self-generated asset of Shri Sunil Lamba, he was not at all associated with the trade mark when it was initially registered. 2. Secondly, M/s Pure Ice-cream Co., M/s. Pure Ice-cream Co. Pvt. Ltd. and M/s. Gaylord Pvt. Ltd. are separate legal entities quite distinct from Shri Sunil Lamba. He has acquired rights over the trade marks from these concerns. It is not clear whether any consideration has passed for acquiring the trade mark rights by Sh. Sunil Lamba. Even if no consideration was paid to these concerns for acquiring the trade mark rights, the cost of acquisition is clearly determinable for the purpose of computation of capital gains. I am not giving any direction regarding the other issue of the receipt of ₹ 1 crore on non-compete agreement. Since I am setting aside the order of the assessing officer, this issue may be decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of assignment dated 14th October, 1994 revealed that it was not merely the trademarks and brand names that had been transferred to DSPL. These were, together with goodwill, in relation to the trademarks and brand names. Both trademarks and brand names belonged to business of the Assessee. Any goodwill associated also belonged to the business. Goodwill of a business was taxable from 1st April, 1989 onwards. Inasmuch as the Assessee had not segregated his consideration by showing how much of the ₹ 1.85 crores was attributable to trademarks and brand names and how much to the goodwill, the entire consideration was taxable. Question No.2 18. The Court proposes to discuss the submissions qua Question No.2 first. been considered. It must be mentioned that during the pendency of the present appeal, the Assessee was permitted to bring on record documents which would go to show how the trademark and brand names had got transferred from 1942 onwards. This compilation was filed on 6th January, 2016. 19. These documents show that in 1942 trademark and brand name was with the Kwality Restaurant and Ice Cream Company constituted by Shri Ghai and Shri Lamba. Factually the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income, was held in Guffic Chem (P) Ltd. (supra) to be prospective. Till AY 2003-04, it was treated as a capital receipt. 24. Both receipts i.e. the non-compete fee and the payment towards assignment of trademark were disclosed by the Assessee in Part-IV of the return for the AY in question. With the trademark being self-generated and not acquired for consideration, the cost of acquisition of the said marks could not be substituted as the market value as on 1st April, 1981 so as to attract capital gains. In PNB Finance Limited v. CIT (2008) 307 ITR 75 (SC), the Supreme Court observed as under: 19. Before concluding, we may state that in this case, section 55(2) did not operationalize. Under section 55(2), fair market value as on 1- 1-1954could have substituted the figure of cost of acquisition provided the figures of both cost of acquisition and fair market value as on 1- 1-1954 were ascertainable. The letter dated 30-9-1970 does not indicate the choice. Even the working done by the Assessing Officer based on capitalization of last 5 years' profits would give the Enterprise Value of the Undertaking and not the cost of acquisition. Hence, section 55(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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