TMI Blog2022 (1) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction, is undoubtedly trying to make a complete volte face. Although, we are in agreement with the claim of the ld. A.R that the Tribunal is vested with the jurisdiction to examine a question of law which arises from the facts as found by the authorities below and have a bearing on the tax liability of the assessee, notwithstanding that the same was not raised before the lower authorities, however, the scope and realm of such jurisdiction can by no means be stretched or construed in a manner to change the entire complexion of the case and seek improving upon the assessment, which we are afraid is not permissible under Sec. 254 of the Act. Our aforesaid conviction is fortified by the order of the Special Bench of the ITAT, Mumbai in the case of ACIT Vs. Prakash L. Shah [ 2008 (8) TMI 387 - ITAT BOMBAY-K ] Backed by our aforesaid deliberations, we are of the considered view that as the revenue by raising the additional ground of appeal no.1 is trying to change the entire complexion of the case and improve upon the assessment by canvassing facts which clearly militate against the observations drawn by the A.O while framing the assessment, which as observed by us hereinabov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, imputing a mistake in computation of the value of the Essar brand, trademarks, copyrights under the DCF method, but as pointed out by the ld. A.R, and rightly so, there are no facts available on record regarding the alleged error on the part of the A.O. Apart from that, we also concur with the claim of the ld. A.R that the subject matter of appeal before the Tribunal is not regarding the valuation of the brand received by the assessee trust from EIL. Backed by the aforesaid facts, we are of the considered view that as neither the facts as regards the alleged error on the part of the A.O are discernible from the record, nor the valuation of the Essar brand, trademarks, copyrights is the subject matter of appeal before the Tribunal as the CIT(A) had not decided the question of valuation, therefore, the request of the department for admission of the additional ground of appeal no. 3 cannot be accepted and is accordingly rejected. Whether CIT(A) erred in admitting additional evidences under Rule 46A of the Income-tax Rules, 1962, ignoring that there was no sufficient cause for admitting the same? - HELD THAT:- EIL was the owner of the brand/trademarks since 1996 was a fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same formed its fixed capital. Accordingly, as the brand Essar (supra) was only a means by which the assessee had entered into non-exclusive brand licensing agreements with its operative group entities, therefore, it could not be anything but its capital asset. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Vazir Sultan and Sons [ 1959 (3) TMI 5 - SUPREME COURT ] The transaction in question does not involve any exchange of consideration between the parties, and is in the nature of a Gift of a profit-making apparatus which has huge potential to generate royalty income, which too is possible only when the group companies are willing to contribute, otherwise, it literally has no value. Therefore, in the backdrop of our aforesaid observations, we are of the considered view that as the transaction under consideration i.e contribution of the brand Essar as a gift by EIL to the corpus of the assessee trust does not fall under any category of income, therefore, we find no reason to interfere with the view taken by the CIT(A), who had rightly concluded that as the contribution of brand Essar as a gift by EIL to the corpus of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in terms of our aforesaid observations concur with the view taken by the CIT(A) that the brand Essar contributed as a gift by EIL to the corpus of the assessee trust could not have been brought within the meaning of any work of art as contemplated in the definition of property in Explanation (d) to Sec. 56(2)(vii) of the Act, and thus, on the said count be subjected to tax under the head Income from other sources . The Ground of appeal No. 4 is dismissed. Income from business - Whether provisions of section 28(iv) of the Act would not apply to the value of the Essar brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration? - HELD THAT:- As assessee is an irrevocable discretionary trust formed on 29thMarch 2012. The brands which are the property of the EIL were gifted to the assessee vide its board resolution and shareholders resolution dated 29th March 2012. In the backdrop of the fact that the assessee trust was formed on the same day when the brands were gifted to it by EIL, it cannot be held that they were generated out of the business carried on by the assessee. As per section 28(iv) of the Act, the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence. Hence, the argument put forth by the department representative has no force. Accordingly, the Ground of appeal No. 6 is dismissed. - ITA no.5139/Mum./2017 - - - Dated:- 25-11-2021 - Shri S. Rifaur Rahman, Accountantmember And Shri Ravish Sood, Judicial Member For the Assessee : Shri P.J. Pardiwala, Senior Advocate a/w Shri Hiten Chande For the Revenue : Shri Prakash Chhotaray a/w Shri Sanjay J. Sethi ORDER PER S. RIFAUR RAHMAN, A.M. The present appeal preferred by the Revenue challenges the order dated 31st March 2017 passed by the learned CIT(A) 30, Mumbai for assessment year 2013 14. 2. The brief facts of the case are, the assessee is a private discretionary trust settled on 29th March 2012 by the settlor, viz. Shashikant Ruia with an initial settlement of ₹ 10,000/-. The trust was created for the sole and exclusive benefit of the beneficiaries being the members of the Ruia Family i.e. the SNR family unit and the RNR family unit. M/s Essar Investments Limited (hereinafter referred to as 'EIL' ) was holding the Essar brand including all registered and unregistered trademarks, copyrights, service marks, certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 719.14 crores. 5. Aggrieved with the assessment order the assessee filed an appeal before the CIT(A). As the A.O had observed that the assessee had failed to establish that the trademarks and copyrights were owned by EIL, therefore, the assessee filed an application U/rule 46A(1) for admission of certain documents as additional evidence. The Ld. CIT(A) remanded the matter to the A.O, and the A.O vide his remand report dated 13thFebruary 2017 submitted that the receipt of Brand by the assessee was chargeable to tax under sections 28(iv) and 56(2)(vii) of the Act. The Ld. CIT(A) after considering the detailed submissions of the assessee and the remand report admitted the additional evidence and decided the appeal in favour of the assessee, holding as under: A. The additional evidence is crucial to the adjudication of the appeal and therefore, it requires admission. B. The receipt of the Brand is on capital account and, therefore, not covered within the definition of income in section 2(24) of the Act and, consequently, is not chargeable to tax under section 56(1) of the Act. C. The trademark and copyright are not chargeable to tax under section 56(2)(vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions wherein reliance was placed by him on various judicial pronouncements, as under : (i). National Thermal Power Co. Ltd. vs. Commissioner of Income-tax (1998) 229 ITR 383 (SC) (ii). PCIT (Central-1) vs. Grasim Industries Ltd( (2018) 256 TAXMAN 0079 (Bombay) (iii). CIT (Central)- 1 v. Pruthi Brokers and Shareholders Ltd. (2012) 349 ITR 336 (Bom) (iv). Commissioner of Income-tax v. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Delhi) 8. Per contra, the ld. Authorized Representative (for short A.R ) for the assessee, Shri. Percy Pardiwala, Senior Advocate vehemently objected to the admission of the aforesaid additional grounds of appeal as was sought by the department. Objecting to the additional ground of appeal no. 1, it was submitted by the ld. A.R that the same militated against the department s own stand that the assessee had received the brand Essar from EIL. It was submitted by the ld. A.R, that while for the very genesis of the controversy involved in the present case was the receipt of the brand Essar by the assessee trust from EIL, however, the department by raising the aforesaid additional ground of appeal and questioning the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. It was further submitted by the ld. A.R that the department by seeking admission of the additional ground of appeal no. 2 was trying to change the entire complexion of the case and improve upon the assessment, which was not permissible under Sec. 254 of the Act. Elaborating on his aforesaid contention, it was submitted by the ld. A.R that if any error had crept in an assessment order, then, the legislature in all its wisdom had provided for remedies to the department that can be traced in Sec. 147, Sec. 154 and Sec. 263 of the Act, and the same can be cured subject to satisfaction of the jurisdictional conditions therein prescribed within the time limitation provided under the said respective statutory provisions. It was submitted by the ld. A.R that the department by raising the additional ground of appeal had tried to set at naught compliance with the jurisdictional conditions and the timelines for exercise of the respective remedies. Backed by his aforesaid contention, it was submitted by the ld. A.R that in case if such improving of a case by the department in the course of the proceedings before the Tribunal is allowed then, the same would render the preconditions and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court of Delhi in the case of Commissioner of Income-tax v. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Delhi) had after, inter alia, drawing support from the judgment of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra), observed, that Tribunal is vested with the powers to allow deduction for expenditure to an assessee to which it was otherwise entitled even though no claim was made by him in the return of income. On a perusal of the aforesaid judicial pronouncements, it can safely be concluded that the issue that the Tribunal is vested with the jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee, notwithstanding that the same was not raised before the lower authorities is no more res integra . But then, in the present case before us, we find, that the revenue by seeking admission of the additional grounds of appeal raised before us, had in fact sought our indulgence for adjudication of issues which are either found to militate against the very foundation on the basis of which the A.O had framed the assessment, or are based on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative cannot be permitted to take a stand contrary to the one taken by the A.O. Also, we find that the Hon ble High Court of Punjab Haryana in the case of CIT(Central), Ludhiana Vs. S.A Builders Ltd. (2013) 38 taxmann.com 255 (P H), had held, that the Tribunal cannot allow a party to change its stance by referring to new facts that were not pleaded or asserted before the Assessing Officer or Commissioner (Appeals). Backed by our aforesaid deliberations, we are of the considered view that as the revenue by raising the additional ground of appeal no.1 is trying to change the entire complexion of the case and improve upon the assessment by canvassing facts which clearly militate against the observations drawn by the A.O while framing the assessment, which as observed by us hereinabove is not permissible as per the mandate of Sec. 254 of the Act, therefore, we decline to admit the same. B). Re : Admission of additional ground of appeal no. 2 : As regards the additional ground of appeal no. 2, we find that the revenue has sought our indulgence, for adjudicating, as to whether or not on the facts and circumstances of the case and in law the value of Essar br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion no question was raised by the A.O as regards the applicability of Sec. 69A of the Act, therefore, in the absence of there being any opinion of the A.O qua the explanation of the assessee on the nature and source of acquisition of the asset in question, the applicability of the provisions of Sec. 69A could not be looked into. In sum and substance, we concur with the ld. A.R that as the requisite facts for looking into the applicability of Sec. 69A of the Act qua the asset in question, viz. brand Essar are not borne from the record, therefore, on the said count itself the seeking of admission of the aforesaid additional ground of appeal no. 2 by the revenue is liable to be dismissed. Apart from that, we are also persuaded to accept the contention of the ld. A.R that the additional ground of appeal no. 2 raised by the department is in clear conflict with the observations arrived at by the A.O in the assessment order. As is discernible from the assessment order, the A.O had, inter alia, on the one hand invoked the provisions of Sec. 56(1) of the Act, on the ground, that the assessee had received a gift of the brand from EIL, while for in clear contradiction of his said stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C). Re : Admission of additional ground of appeal no. 3 : As regards the additional ground of appeal no. 3, we find that the revenue by seeking liberty to raise the same had sought restoration of the computation of the value of Essar brand, trademarks and copyrights to the file of the A.O, for the reason, that subsequent to the order passed by the CIT(A) it was discovered that there was a mistake in the computation of the value of Essar brand, trademarks, copyrights under the DCF method. We have given a thoughtful consideration to the aforesaid additional ground of appeal no. 3 raised by the revenue. Although, the department has sought liberty for admission of the aforesaid additional ground of appeal, imputing a mistake in computation of the value of the Essar brand, trademarks, copyrights under the DCF method, but as pointed out by the ld. A.R, and rightly so, there are no facts available on record regarding the alleged error on the part of the A.O. Apart from that, we also concur with the claim of the ld. A.R that the subject matter of appeal before the Tribunal is not regarding the valuation of the brand received by the assessee trust from EIL. Backed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 After submission of the aforesaid documents, the AO completed the assessment vide his order passed u/s 143(3) of the Act, dated 31.03.2016, observing as under : 5.3.1. In the instant case, in spite of repeated opportunities given, the Assessee has not brought any evidence on record to prove that EIL is the rightful owner of Essar brand along with trademarks and copyrights, which has now been purportedly settled in the Assessee. Similarly, the Assessee did not provide any registration details of Essar brand along with trademarks and copyright and the cost, if any, incurred in such 'registration'. In the submission dt. 15/03/16, the Assessee has annexed a paper (Annexure 2) purportedly containing 'evidence' in relation to the name EIL with Trade Mark Registry since 1996 However, on perusal of the said paper, it is seen that the said paper is the registration of a single Trade mark in respect of industrial oils and greases, lubricants, fuels etc. It is further seen that Annexure 3 of the aforesaid letter is the registration document in respect of various trade marks (numbering to around 80) in the name of Balaji Trust. The Assessee could not explain fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the products such as tobacco, agricultural, horticultural products, coffee, tea, honey, cereals, meat, fish, poultry, precious metals etc. d. It was further stated by the A.O that the assessee had failed to substantiate its claim that the Brand was self generated. In order to support his aforesaid claim, it was stated by the A.O that though EIL was under full control of Mrs. Manju Ruia who was holding 99.95% shareholding in the said company, but she did not have any major shareholding in any of the flagship companies belonging to the Essar group. It was, thus, on the basis of the aforesaid facts stated by the A.O that Mrs. Manju Ruia had not been shown to have made any contribution to the creation of the Brand. It was further stated by the A.O that the Brand was not recorded in the books of EIL; and EIL did not receive any income by way of royalty from the use of the Brand by the companies belonging to the Essar Group even though it was incurring losses. 13.4 After considering the submissions of the assessee and the remand report submitted by the A.O, the Ld CIT(A) came to the following conclusion on the additional evidence: a. The assessee trust had in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence furnished by him was inadequate, therefore, there were justifiable reasons for the assessee to conclude that the information so provided to the A.O was sufficient and nothingmore was required. c. It was further observed by the CIT(A) that the additional evidence furnished by the assessee in the course of proceedings before him did not bring any new facts on record, but only substantiated the fact that EIL was the owner of trademark and copyrights since 1996. It was, thus, observed by the CIT(A) that the assessee had during the course of assessment proceedings, submitted sample copy of registration certificate of trademark evidencing the ownership of the same with EIL, which had now further been substantiated by filing exhaustive evidence in the course of the appellate proceedings. d. It was observed by the CIT(A), that even if the additional evidence submitted by the assessee before him was to be considered as an additional evidence, it had to be admitted, because the same throws light on the fact of ownership of the Brand and subsequent gift of the same in favour of the assessee. 13.5 Aggrieved with the admission of the additional evidence by the CIT(A), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation. He observed as under: (para 5.3) In the instant case, in spite of repeated opportunities given, the assessee has not brought any evidence on record to prove that EIL is the rightful owner of the Essar brand along with trademarks and copyrights, which has now been purportedly settled in the assessee. Similarly, the assessee did not provide any registration details of the Essar brand along with trademarks and copyrights and the cost, if any incurred in such registration . In the submission dated 15.03.16, the assessee has annexed a paper (Annexure 2) purportedly containing evidence in relation to the name EIL with Trade Mark Registry since 1996. However, on perusal of the said paper, it is seen that the said paper is registration of a single trademark in respect of industrial oils and greases, lubricants, fuels etc.. It is further seen that Annexure 3 of the aforesaid letter is the registration document in respect of various trademarks (numbering to about 80) in the name of Balaji Trust. The assessee could not explain from where these trademarks have been transferred to the Balaji Trust or to furnish any evidence in this regard. The assessee has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tobacco -raw ormanufactured . 9 Agricultural, Horticultural and Forestry Products.. 11 Coffee, Tea, Cocoa, Sugar, Rice 13 Meat, Fish, Poultry 15 Games and Playthings, Gymnastics 17 Carpets, Rugs , Mats . 19 Lace and Embroidery . 21 Tissues,(piece goods) bed and table covers . 23 Yarns and Threads 25 Ropes, Strings, Nets Tents The above are samples. All the trade mark certificates bear similar product names which have no connection with the products of the companies with whom brand licence agreements were signed. It is not understood why such junk material was entertained by the CIT(A) and the Assessing Officer was burdened with verification of these material. (iv) It appears that the assessee did not deliberately furnished all these certificates before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was fully justified in admitting the additional evidence during the appellate proceedings. 2. It is further submitted that during the course of the assessment proceedings, after the assessee submitted evidence relating to ownership of EIL vide letter dated 15 March 2016, the AO did not raise any concern or doubt regarding the documents submitted. However, in the order dated 31 March 2016 the AO gave a finding that the ownership of the Brand by EIL was not proved by the assessee and, therefore, it was in response to the finding of the AO raising doubts about the ownership of the brand by EIL that the additional evidence was submitted by the assessee vide its letter dated 13 October 2016. Since, the additional evidence submitted by the assessee dispelled the doubts raised by the AO and proved the ownership of EIL to the Brand, the CIT(A) was correct in law to admit the additional evidence for the purpose of adjudication of the appeal. 3. Without prejudice to the above, it is also submitted that the CIT(A) under section 250(4) of the Act has the power to make further enquiry into the subject matter of appeal. Therefore, even if it is assumed that the appellant did not sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an do what the ITO can do. He can also direct the ITO to do what he failed to do. The power conferred on the AAC under sub-section (4) of section 250 being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. 4. On a conjoint reading of section 250 and rule 46A, it is clear that the restrictions placed on the appellant to produce evidence do not affect the powers of the AAC under sub-section (4) of section 250. The purpose of rule 46A appears to be to ensure that evidence is primarily led before the ITO. 5. Similarly, theDelhiHigh Court in the case of CIT vs. Virgin Securities and Credits (P.) Ltd. (332 ITR 396) has held that if additional evidence produced by the assessee is crucial to the adjudication of the appeal, the CIT(A) can admit the same under rule 46A of the Rules. The relevant portion of the judgment is extracted as under: 8. The aforesaid contention appears to be devoid of any merit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case afresh after affording a reasonable opportunity to the assessee of being heard. 7. Further, he submitted that similar view has been taken in the following judgments wherein the additional evidence was admitted as it was necessary for the adjudication of the appeal: a. CIT vs. Suretech Hospital Research Centre Ltd. (293 ITR 53) (Bom.) b. ACIT vs. Vikrant Puri (82 taxmann.com 48) (Delhi) c. Basir Ahmed Sisodia vs. ITO (424 ITR 1) (SC) 8. In view of the above, it is submitted that the CIT(A) had rightly admitted the additional evidence as:- a. the additional evidence was submitted in response to the allegations made by the AO in the assessment order dated 31 March 2016; b. the additional evidence was submitted since the AO did not raise any concern or doubt regarding the documents submitted vide letter dated 15 March 2016; c. the additional evidence submitted was crucial to the adjudication of the appeal and the CIT(A) is duty bound to consider such additional evidence in terms of the provisions of section 250(4) of the Act. 9. Without prejudice to the above, it is submitted that if the Department is right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.03.2016. [Page 206-208 of the APB ]. (iii). Copy of the shareholder and board of directors resolution dated 29th March, 2012 for the settlement of the Brand in the assessee, was filed by the assessee in the course of the assessment proceedings, vide its letter dated 18.01.2016. [Page 186-189 of the APB ]. 16. Notably, the A.O in his assessment order passed u/s 143(3), dated 31st March, 2016 observed, that the assessee in spite of sufficient opportunity had not brought any evidence on record to prove that EIL was the rightful owner of Essar brand alongwith trademarks and copyrights which thereafter were purportedly settled in the assessee trust. It was further observed by the A.O, that the assessee had not provided any registration details of Essar brand alongwith trademarks and copyright and the cost, if any, incurred in such registration. Further, referring to the details that were filed by the assessee alongwith its reply dated 15th March, 2016, it was observed by the A.O that the assessee had merely annexed a paper (Annexure 2) purportedly containing evidence in relation to the name EIL with the Trade Mark Registry since 1996, however, the same was only as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in documents evidencing that the brand Essar was registered in the name of EIL and the same thereafter was settled with the assessee trust vide EIL s board and shareholder s resolutions dated 29th March, 2012. After filing of the aforesaid reply dated 15th March, 2016, the A.O neither called upon the assessee to produce any further information in addition to what was already submitted before him, nor pointed out that the sample evidence furnished was inadequate. It was, thus, under the aforesaid circumstances that the assessee remained under an impression that the material provided to the A.O was sufficient for evidencing that ELI was the owner of Essar brand prior to its settlement in the assessee trust. On a perusal of the order of the CIT(A), we find, that he had while admitting the additional evidence observed, that a perusal of the remand report filed by the A.O nowhere revealed that he had in the course of the assessment proceedings after filing of the sample copy of the registration certificate of trademark in the name of EIL by the assessee vide its reply dated 15.03.2016, had thereafter issued any letter to the assessee, therein calling upon it to furnish more informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the value of the Essar brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration, was income as per section 2(24) of the Act. 20. Before us, the Ld D.R made elaborate submissions and submitted that the issues involved in the Ground no 2 and 3 are inter connected and he made the combined submissions on both the grounds which are as under: (i) The Assessing Officer proposed to tax the value of the brand calculated at ₹ 1668.10 crores as income from other sources. The assessee contended that it is a capital receipt not taxable. According to the assessee, the brand value could have been taxed u/s 56(2)(vii) but as it is not an individual or HUF and also the property does not fall in any of the items of property mentioned in the Explanation (d) to section 56(2)(vii), section 56(2)(vii) is not applicable. The status is no longer the issue as the CIT(A) has held that the status of the trust is Individual here and the assessee has not challenged it. The issue is now whether the brand would be taxable under section 56(1) or section 56(2). (ii)The Assessing Officer held that even though the taxability of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and save its rights and remedies under section 29 of the Act to be availed at a later stage, with the sole object of enabling the Corporation to recover its dues .. xxxxxxxxxxx 17. The relief available to the Corporation under section 29 of the Act to realise its dues in the manner prescribed therein is wider in scope than the limited reliefs available to it under section 31 of the Act and is not controlled by section 31 of the Act. The Legislature clearly intended to preserve the rights of the Corporation under section 29 of the Act, by expressly stating in section 31 of the Act that its recourse under the section is without prejudice of the provisions of section 29 of the Act .. xxxxxxxxxxxxx 18. There is no equity in favour of a defaulting party which may justify interference by the courts to exercise its equitable extraordinary jurisdiction under Article 226 of the Constitution of India to assist it in not repaying the debts. The aim of equity is to promote honesty and not to frustrate the legitimate rights of the Corporation which after advancing the loan has taken steps to recover its dues from the defaulting party. Thus the intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the appeal holding that it was a capital receipt. It inter alia, relied on the decision of the Hon ble ITAT, Mumbai in the case of DCIT -3(2) v. KDA Enterprises (P) Ltd. ITA No.2662/M/2013 dated 11.0.3.2015 AY 2009-10, 57taxman.com284 (2015). (vide p.87). A copy of the said judgment is placed in Departmental Paper Book No. III. (vii) A comparison of the case of the assessee under consideration here and the facts of the case in KDA Enterprises (P) Ltd.(supra) would show that there is no similarities between the case of the assessee and the case of KDA Enterprises (P) Ltd. as pointed out below: (a) In the case of KDA, the amount of gift received from 4 parties have been quantified at ₹ 161.87 crores (p.3 of the order of ITAT), whereas there is no valuation of the brand Essar received by the assessee. The assessee has received the brand without consideration. (b) In the case of KDA, the amounts were directly received from Reliance Industries Ltd. on account of dividend receivable by the said four companies against their shareholdings in Reliance Industries Ltd. The dividend was credited directly to the bank account of the assessee (p.3 of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the incomes generated in the subsequent years. Hence, the traditional approach to the problem is not applicable by citing the usual case laws. One has start from the basics and the first principles. (ix) The basic argument of the assessee is that the value of the brand is not income under the definition of income given under section 2(24) the Act. And hence, section 56(1) which speaks of income of every kind is not applicable. Conversely, if it is established that the value of the brand falls under the words income of every kind , the value of the brand would be taxable under section 56(1) of the Act. (x) Judgment of the Supreme Court in the case of Commissioner of Income-tax v. G.R. Karthikeyan, Coimbatore, 1993 AIR 1671, 1993 SCR (3) 328 [ Placed in Departmental Paper Book- II ]. This judgment of the Hon ble Supreme Court lays down the basic theory of income. The revenue strongly relies on this binding judgment of the Hon ble Supreme Court in support of its claim that the value of the brand is taxable as income of the assessee during the previous year. In that case, the assessee earned prize money of ₹ 22,000/-received from a motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed as income is taxable under the Act unless expressly exempted. P.5 Hon ble Supreme Court had to deal with the ambit of the expression income in Navin Chandra Mafatlal v. CIT Bombay, 26 ITR (SC). It rejected the challenge to imposition of a tax on capital gains on the ground that tax on capital gains is not a tax on income within the meaning of entry 54 of list 1, nor it is a tax on the capital value of the assets of individuals and companies within the meaning of entry 55 of list -1 of the seventh schedule to the Government of India Act, 1935, and upheld the order of the Bombay High Court. It observed: What, then, is the ordinary, natural, and grammatical meaning of the word income ?. According to the dictionary, it means a thing that comes in (See Oxford Dictionary, Vol. V p.162; Stroud, vol II pp 14-16). In the United States of America and in Australia both of which are also English speaking countries, the word income is understood in a wide sense so as to include a capital gain .in each of these cases a very wide meaning was ascribed to the word income as its natural meaning. P. 6. In Bhagwandas Jai. V. Union of India , 128 ITR 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession income . In our respectful opinion, the High Court having found that the receipt in question does not fall within sub-clause (ix) of section 2(24) erred in concluding that it does not constitute income. The High Court has read several sub--clauses in section 2(24) as exhaustive of the definition of income when, in fact, it is not so. In this connection, it is relevant to notice the finding of the Tribunal. It found that the receipt in question was casual in nature but - it opined it was nevertheless not an income receipt and fell outside the provision of section 10(3) of the Act. We have found it difficult to follow the logic behind the argument. 12. For the above reasons we hold that the receipt in question herein does constitute income as defined in clause (24) of section 2 of the Act. The appeal is accordingly allowed and the question referred to by the Tribunal under section 256(1) of the Act is answered in the negative i.e. in favour of the Revenue and against the assessee. (xi) The above judgment of the Hon ble Supreme Court is squarely applicable to the facts of the present case under consideration because of the following reasons: (a) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of CIT v. T.V. Sundaram Iyengar Sons 88 TAXMAN429 (SC) and the case laws cited there in the said judgment. [ Vide Departmental Paper Book II]. They are given below: (a) CIT v. T.V. Sundaram Ayengar Sons Ltd.88 TAXMAN429 (SC) Deposits were received from the customers in course of business originally as capital receipt. Unclaimed credit balances which were time barred were taken to the profit and loss account. The Assessing Officer added the receipts to the income of the assessee. The CIT(A) deleted the addition holding that these were not revenue receipts and were capital receipts. The ITAT dismissed the appeal of the Revenue. It was held by the Hon ble Supreme Court that these amounts, which were originally capital receipts, changed character and were taxable as income of the assessee in the year in which the amounts were taken to the profit and loss account. The Hon ble Supreme Court observed that if a common sense view of the matter is taken, the assessee because of the trading operation has become richer by the amount which it transferred to its profit and loss account . This observation of the Hon ble Supreme Court is most a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee as trade receipts. A review of the above judgments would show that there is no watertight division between capital and revenue receipts. Considering the inclusive definition of income under section 2(24) all the receipts first have to be taken as income and thereafter considering the facts and circumstances of the case some of the receipts may be held to be not taxable. But as explained earlier, the assessee is not at all entitled to such benefit, because its books of account do not record any receipt. (xiv) Capital Receipt taxed as income from other sources Sumati Dayal v. Commissioner of Income-tax [1995] 214 ITR 801(SC) (Departmental Paper Book II) The assessee showed receipts of ₹ 3,11,831/- and ₹ 93,500/- as winnings in races in assessment years 1971-72 and 1972-73 and claimed them as capital receipts not taxable. The Assessing Officer rejected the claim of the assessee that these amounts were receipts from races and taxed the amounts as income from other sources for both the years. The matter went to the Income-tax Settlement Commission. Before the Settlement Commission, the Commissioner submitted that the assessee lacked kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this context, reference is made to Paragraph 13 (iv) above enunciating the Principle of Updating Construction and Paragraph 13(v) above advising the approach of the Courts to deal with newer techniques of tax evasion. Those principles need to be applied here. It should be held that this is income pure and simple. (xvi). In view of the detailed discussion in the foregoing paragraphs, it is respectfully submitted that the value of the Essar brand constitutes income under section 2(24) of the Income-tax Act and has been rightly taxed by the Assessing Officer under section 56(1) of the Income-tax Act. Therefore, it is prayed that Grounds(2) and (3) of the Revenue may be allowed. 21. On the other hand, the Ld. Authorized Representative, in response to above made the following submissions: 1. It is submitted that section 56(1) of the Act taxes a receipt which falls within the meaning of the term income in section 2(24) of the Act. If a receipt by an assessee is not in the nature of income, then, the provisions of section 56(1) are not applicable as it does not bring to tax something which is not income in its normal parlance. It is a settled position in law t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oluntary payment, which can be regarded as having an origin, which a practicalman can regard as a real source of income, will fall in the category of income , which is taxable under the Act.Where, however, a voluntary payment ismade entirelywithout consideration and is not traceable to any source, which a practicalmanmay regard as a real source of his income, but depends entirely on the whimof the donor, cannot fall in the category of income . What we have to see, therefore, in the present case, is whether the payment made by the son Maharaja to the father Maharaja, though voluntary, could be regarded as having an origin in what might be called the real source of income. On the facts found in the present case, we cannot say that the payments would be referable to any such source. The department has not been able to show any material on record, from which such a conclusion can be drawn. 3. Similarly, in the case of Parimisetti Seetharamamma vs. CIT (57 ITR 532)(SC), the question arose whether the money and jewellery received by the assessee, who was alleged to be the secretary of the Maharani of Baroda, which was paid on account of natural love and affection was chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its view that the burden of proving that the receipts were not taxable lay upon the appellant. But a conclusion recorded by the Tribunal by wrongly throwing the burden of proof upon the assessee cannot be regarded as binding upon the High Court in a reference under section 66 of the Income-tax Act..... 4. In the case of Dilip Kumar Roy vs. CIT (94 ITR 1) (Born.) the question before the Bombay High Court was whether the amount received by the assessee from his devotees was of an income character. The High Court held that money received by the assessee was not on account of the vocation carried on by him but was in the nature of a gift in recognition of his personal qualities and, accordingly, the amount received by the assessee was not chargeable to tax. The relevant paras are reproduced below (Pg. 3): Without deciding the question whether the activities carried on by the assessee constituted a vocation within the meaning of section 10, for the purpose of the present case, we proceed on the assumption that the activities carried on by him constituted a vocation as we are of the view that the second contention urged by Mr. Palkhivala must be upheld. Having rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was in the nature of income in the hands of the assessee. The Bombay High Court decided the issue in favour of the assessee holding as under: ...the term income in the Act connotes a periodical monetary return, coming in with some sort of regularity or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return and, according to the Privy Council, anything in the nature of a windfall must be excluded from what may be properly regarded as income... ...Thus, it is clear that all receipts by the assessee would not necessarily be deemed to be income of the assessee and the question as to whether any particular receipt is income or not will have to be determined depending upon the nature of the receipts and the true scope and effect of the relevant taxing provision..... ...It is true that the object of the subsidy was to assist the producers (as annexure A shows) and to encourage future production of films of sufficiently high quality and which served a high social purpose. Bearing the factual position in mind, which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into by the assessee in the ordinary course of business and for the purpose of carrying on that business, it would fall into the latter category and the compensation or payment received for its cancellation would merely be an adjustment made in the ordinary course of business of the relation between the parties and would constitute a trading or a revenue receipt and not a capital receipt. In the case before us the agency agreement in respect of territory outside the Hyderabad State was as much an asset of the assessee's business as the agency agreement within the Hyderabad State and though expansion of the territory of the agency in 1939 and the restriction thereof in 1950 could very well be treated as grant of additional territory in 1939 and the withdrawal thereof in 1950, both these agency agreements constituted but one employment of the assessee as the sole selling agents of the company. There is nothing on the record to showthat the acquisition of such agencies constituted the assessee's business or that these agency agreements were entered into by the assessee in the carrying on of any such business. The agency agreements in fact formed a capital asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment. The relevant part from the judgment is reproduced as under (Pg.6): 11... However, the department submitted that if the cost of acquisition of a capital asset cannot be computed under the provisions of sections 45 to 55, then the capital gains which arise on transfer may not be chargeable under section 45 but they are chargeable under section 56 as income from other sources. For this purpose, the department has placed reliance on section 2(24). We do not find any merit in the above contentions. It is true that section 2(24) defines the word 'income. That, the definition is an inclusive definition. However, it iswell-settled that capital receipts do not come within the ambit of the Act except to the extent of any capital receipt being expressly sought to be covered by the act of the Parliament as in the case of section 2(24)(vi). In fact, in the present matter, the surrender value received by the assessee has accrued on transfer of the capital asset but it is not chargeable under section 45 for want of cost of acquisition. However, from that, one cannot bring such a receipt under section 10(3) because section 10(3) refers to types of income which do not form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares at a premium is on Capital Account and gives rise to no income. The submission on behalf of the revenue that the shortfall in the ALP as computed for the purposes of Chapter X of the Act give rise to income is misplaced. The ALP is meant to determine the real value of the transaction entered into between AEs. It is a re-computation exercise to be carried out only when income arises in case of an International transaction between AEs. It does not warrant recomputation of a consideration received/given on capital account. It permits recomputation of Income arising out of a Capital Account Transaction, such as interest paid/received on loans taken/given, depreciation taken on machinery etc. All the above would be cases of income being affected due to a transaction on capital account. This is not the revenue's case here. Therefore, although Section 56(1) of the Act would permit including within its head, all income not otherwise excluded, it does not provide for a charge to tax on Capital Account Transaction of issue of shares as is specifically provided for in Section 45 or Section 56(2)(viib) of the Act and included within the definition of income in Section 2(24) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai Tribunal in the case of DCIT vs. DP World Pvt. Ltd. (140 ITD 694) has held that the receipt of gift in the form of residential flats by the assessee from its sister concern was not in the nature of income and, consequently, was not chargeable to tax either under section 56(1) or section 28(iv) of the Act. 15. Further, the Mumbai Tribunal in the case of DCIT vs KDA Enterprises Ltd (68 SOT 349) again held that gift received by the assessee fromfour group concerns in the formof transfer of dividend receivable by themon the shares held in a company is not chargeable to tax as it was in the nature of capital receipt under the provisions of the Act. It has been held by the Tribunal that the provisions of section 56(2)(v), (vi), (vii) and (viia) specifically cover the instances of gift which are taxable under the provisions of the Act; and all other gifts received by the assessee other than those covered in other sections are not chargeable to tax being capital receipt in nature. 16. Similar view has been taken by the Tribunal in the following cases where gifts received by theassesse therein were held to be not chargeable to tax: a. Chennai Tribunal in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the sec.56(2) begins with In particular, and without prejudice to the generality of the provisions of sub-section (1), the following income shall be chargeable to Income-tax . . By relying on the case law, it is submitted that without prejudice provision cannot limit the operation of the other provision, accordingly, it is submitted that operation of sec 56(2) do not in any way restrict other provisions from the sweep and ambit of sec 56(1) of the Act, reliance is placed on G.R Karthigeyan case(Supra). 22.1 We have observed from a perusal of the material submitted before us, that EIL had transferred its brands along with the trademarks and copyrights to the assessee, as a gift, or akin to a gift, without any consideration. Admittedly, the aforesaid brands form the very basis for the assessee trust to generate substantial income from its operative group companies under the management of Ruia family. In our view, the brands a/w trademarks and copyrights did not carry any value in the books of accounts, may be, for the reason that they were acquired several years back, and also because they did not have any independent value outside the group since they were inextricably i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Sons (1959) 36 ITR 175 (SC). Also, support is drawn from the judgment of the Hon le Apex Court in the case of CIT Vs. Bombay Burmah Trading Corporation (1986) 161 ITR 386 (SC); and that of the Hon ble High Court of Bombay in the case of CIT Vs. Mahindra Mahindra (1973) 191 ITR 130 (Bom). It is in the backdrop of the aforesaid settled position of law, that we shall hereinafter deal with the issue before us, viz. whether the transaction in question i.e contribution of brand Essar as a gift by EIL to the corpus of the assessee trust, which thereafter formed the latters profit-making apparatus for generating income i.e license fees by granting of non-exclusive brand licenses to its group entities, involved any profit element which can be brought within the meaning of Income under Sec. 56(1) or Sec. 56(2) of the Act? We are in agreement with the revenue that once it is determined that there is an element of profit involved, then, if it does not fall under any head of income specified under Section 14 of the Act, items A to E, it can be brought to tax under the residual head of income i.e Other sources . Also, in case, the above said income does not fall under any specific categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of prize money in the income of the assessee by relying upon the definition of `income' in cl. (24) of s. 2. On appeal, the AAC held that inasmuch as the rally was not a race, the amount received cannot be treated as income within the meaning of s. 2(24)(ix). Further, the appeal preferred by the Revenue was dismissed by the Tribunal. On a reference by the revenue, the Hon ble Madras High Court answered the issue in favour of the assessee. On further appeal, the Hon ble Supreme Court did not concur with the view taken by the High Court, and held, that if the monies which are not earned in the true sense of the word, viz. winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever, constitute income, then, there is no reason as to why the monies earned by skill and toil would not constitute income. Concluding as hereinabove, the Hon ble Apex Court was of the view that the expression income must be construed in its widest sense and thus, even if a receipt does not fall within sub-cl. (ix), or for that matter, any of the sub-clauses in s. 2(24), it may yet constitute in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition that anything that can properly be described as income would be taxable under the Act unless expressly exempted, but then, the department as noticed by us hereinabove in the present case had utterly failed to discharge the burden cast upon it, and therein prove, that the contribution of brand Essar as a gift by EIL to the corpus of the assessee trust either fell within the meaning of Income as contemplated in Sec. 2(24) of the Act; or partook the nature of income Coming to the case of Bhagwandas Jai (supra), the Hon ble Supreme Court observed that the definition of Income as contemplated in Sec. 2(24) is inclusive and not exhaustive. It was observed by the Hon ble Apex Court, that the expression Income is of the widest amplitude and that it includes not merely what is received or what comes in by exploiting the use of property, but also that which can be converted into income. It was further observed by the Hon ble Apex Court that even if a receipt does not fall within any of the sub-clauses of Sec. 2(24) of the Act, it may still be income if it partakes the nature of income. Now, as per the settled position of law, in the present case before us, the important po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt. Observing, that the assessee lacked the knowledge of the race techniques, and her books of accounts did not indicate the expenses which were incurred by her for attending the races at Bangalore and Hyderabad, the Hon ble Apex Court having regard to the conduct of the assessee and the material on record, applied the principle of preponderance of human probabilities and, concluded, that it could reasonably be inferred that the winning tickets were purchased by the assessee after the event, and the majority opinion of the Settlement Commission that was arrived at by applying the test of human probabilities was right, i.e the assessee's claim about the amount being her winnings from races was not genuine. Ld D.R stressed that as in the present case before us, the assessee had not declared any expenditure, therefore, on a similar footing a similar conclusion as in the aforementioned case be taken. On careful consideration of the material placed on record, we notice that the assessee had commenced its operations and received the income only from this year, and the year under consideration was its first year of operation. As observed by us hereinabove, the assessee had receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground are, the Assessing Officer in his remand report, dated 27th March 2017 filed with the CIT(A) submitted, that as the registration of Essar brand that was gifted by EIL to the corpus of the assessee trust was done as an 'artistic work' under the Copyrights Act, 1957, therefore, the same falls within the category of any work of art contemplated in the definition of property under the Explanation to section 56(2)(vii) of the Act. Accordingly, the A.O was of the view, that the receipt of the Essar brand was taxable by virtue of section 56(2)(vii) of the Act as it was in the nature of any work of art . (refer para 8.2 of Page 68-69 of CIT(A) order) 25. On Appeal, Ld. CIT(A) held as under: h. The AO misunderstood the term 'artistic' referred to in the extracts from the register of copyrights issued by the Deputy Registrar of Copyrights, Government of India. The details available under the said extract is about the brand registered and not about the nature of property. Essar brand has nothing to do with artistic promotion. This is a brand promoted by EIL which is now being used by the group companies and for such use, royalty is paid by the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eans the following capital assets of the assessee namely (i)Immovable property being land or building or both; (ii) Shares and securities; (iii) Jewellery; (iv) Archaeological collections; (v) Drawings; (vi) Paintings; (vii) Sculptures; (viii) Any work of art; (ix) Bullion The registration of the brand Essar is done as artistic work in nature and, therefore, the same falls in the category of Any work of art in the definition of property as per section 56(2)(vii) of the I.T. Act as the assessee uses the same logo. Hence, the explanation of the assessee that the transfer of the brand does not fall in the definition of property as per the provision of section 56(2)(vii) is not acceptable. (ii) The assessee contended that the work of art mentioned in the section is a different concept and the brand does not fall under that. The CIT(A) accepted the contention of the assessee and rejected this ground raised by the assessee. Hence, the issue in the present appeal whether the brand is a property falling under clause 56(2)(vii)(c) Explanation (d). (iii)The Assessing Officer has relied on the extracts from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labels, symbols, marks or logos, associated with a brand or a business 3. How to differentiate between artistic works capable of being used in relation to goods or services and artistic works which are not capable of being used in relation to goods or services. Such artistic works which have potential to eventually turn into trademarks, or such marks which are outwardly associated with any brand identity represented by a business protected under trademarks, are treated as artistic works capable of being used in relation to goods or services, for Copyright registration purposes and require submission of search Certificate (TM-C) issued by the Trade Mark Registry, in pursuance to section 45 proviso of Copyright Act. 1957. These include, brand logos, labels, packaging, designs, potentially applicable in relation to goods or services, cartoon figurative drawings potentially applicable in relation to goods or services, and henceforth. Rest may be treated as Artistic works which are not capable of being used in relation to goods or services, for which Search certificate is not required to be submitted, such a paintings, drawings, sculptures, lithographs etc. Defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escription of the work Artistic Artistic Artistic 5 Title of the work ESSAR ESSAR with + sign and words POSITIVE ACTION 6 Language of the work English English 7 Name, address, nationality of the author and, if the author is deceased, the date of his death Sudarshan Dheer,6, Kartar Bhavan, Minoo Desai Road, Colaba,Bombai-400005 Indian Mr. Michael CurtisStart Creative Ltd., 2,Sheraton Street, Soho, London, U,K.Indian They are the artists 8 Whether it is published or unpublished Published Published 9 Year and country of first publication and name, address and nationality of the publishers 1993, India, Add. As in col.2 above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sign under the Designs Act, 2000, whether it has been applied to an article through an industrial process and , if yes, the number of times it is reproduced Not filled Not filled 17 Remarks A copy of the work is annexed A copy of the work is annexed AO observed that an examination of the above table would show the following: (a) There were two registrations made for two brands. One related to the publication in 1993, but registration no. was allotted in 1996. There the Title was ESSAR . The other related to publication in 2008, but the registration no. was allotted in 2009. Here the Title was different; it was ESSAR with + sign and words POSITIVE ACTION. Copies of both the works are annexed. The assessee has granted licence to different companies for using the second modified logo. (b) The class and description of the work is Artistic (c) Two different artists, Mr Sudarshan Dheer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) The above analysis would show that there is no doubt that since the brand has been registered as artistic work under the Copyright Act, ipso facto, it falls under the category of property under section 56(2)(vii) read with Explanation (d). (viii)Rule 11U defines valuation date as the date on which the property is received by the assessee. Here, in absence of any assistance from the assessee, the brand ESSAR has been valued at ₹ 1668.10 crore by the Discounted Cash Flow (DCF) method which is a recognised method of valuation. (ix)The assessee has cited case laws to narrow down the definition of artistic work. When we have a statutory comprehensive definition of artistic work which has been adopted in Income-tax Rules, there is no case for referring to case laws for definition. (x)In view of the above, it is respectfully prayed that the Ground No.4 may be allowed 27. In response, Ld AR submitted his submissions as under: 1. It is submitted that the definition of property in the Explanation to section 56(2)(vii) of the Act is restrictive in nature inasmuch as it is defined exhaustively as opposed to the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consequently, the Brand received by the assessee would not be taxable under the provisions of section 56(2)(vii) of the Act. 3. It is submitted that the definition of property is a restrictive definition and would include only those capital assets which are specifically covered under the definition of property within its domain in the Explanation to section 56(2)(vii) as it uses the word means . The term 'means' used in the definition of property in fiscal interpretation has to be understood in the sense indicated in the provision of the Act and it cannot go beyond or extend to what is defined specifically as meant . 4. In the present case what has been gifted by EIL to the assessee is the Brand as is borne out by the certificate of registration of the trademarks. The intellectual property in the brand is protected by registering it as a trademark and a copyright. Thus, the asset gifted is not property as defined in clause (d) of the Explanation. The mere fact that a trademark registration is obtained or a copyright protection obtained does not mean that what is transferred is a work of art. 5. The meaning of work of art in various dictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, drawings, engravings, photographs, works of architecture and means an artistic work which is an artistic innovation and is exceptional in its artistic quality. In general parlance, work of art is construed as coming into existence of new thing whereas brand is construed as promotion or marketing of a thing already in existence. It is submitted that the brand ESSAR is only a trademark created for the identifying the product and services which are marketed under the brand and is neither an artistic innovation nor possess any exceptional artistic quality and as such cannot be covered under the specific head of work of art . Therefore, the brand ESSAR cannot be considered as any work of art within the meaning of section 56(2)(vii) of the Act. 7. The term 'work of art' in the definition of property under section 56(2)(vii)(c) has not been defined under the Act. However, a similar term was used by the Legislature in section 5 of the Wealth-tax Act, 1957. A question arose before the Madras High Court in the case of M.A. Chidambaram vs. CWT (239 ITR 371) (Mad.) that the trophies and cups won by the assessee in races which were made of silver could be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation which would turn them into works of art. The Tribunal on inspection found that the trophies carry certain engraved markings of the occasion and events in which the assessee won the cups and trophies and there was no human skill applied on the said trophies or cups. Since the Appellate Tribunal has come to the above conclusion on visual inspection of the samples of articles produced before it, we are not in a position to accept the argument of learned counsel for the assessee that the cups and trophies of the assessee should be regarded as works of art. We are of the view that the finding recorded by the Appellate Tribunal is a finding recorded on an examination of the materials and the findings should be regarded as a finding of fact. The assessee has not established that there has been human skill employed which made the article to be regarded as awork of art. 8. Similarly, the Gujrat High Court in the case of Shantadevi P. Gaekwad v Wealthtax Officer [2017] 82 taxmann.com 460 (Guj.) was concerned with the issue as to whether horse chariots, referred to as Baggi , having exquisite engraving and embossing on the gold panels attached to it could be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the purpose of the Copyrights Act is to protect the rights of an artist who has created artistic work so that it cannot be reproduced by any other person without his permission. Therefore, the purpose for which the definition artistic work is used under the Copyright Act is different from the purpose with which work of art is used by the Legislature in section 56(2)(vii) of the Act. It is further submitted that all works of art are artistic works but however, all artistic works are not works of art . As held by Madras High Court in M.A.Chidambaram (supra) and the Gujarat High Court in Shantadevi P. Gaekwad (supra) a work of art means something which represents artistic innovation and is rare and/or possesses exceptional aesthetic beauty with artistic input. This has also been confirmed by Hon'ble Delhi High Court in the case of Societe Des Produits Nestle v. Continental Coffee Ltd as under: 9.. in fact, the definition of artistic work given in Section 2(c) of Copyrights Act makes it evident that a drawing would be an artistic work irrespective of whether the work possesses any artistic quality or not. Thus, based on above it is submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as being in the nature of personal effects considering that any work of art is specifically excluded from the category of capital assets treated as personal effects . On the other hand, as a Brand is an intangible asset which is associated with the business of an assessee, therefore, it cannot be brought within the meaning of personal effects which, inter alia, includes any work of art . Our aforesaid observations are relevant for distinguishing any work of art as against a brand . As the term any work of art as used in Sec. 2(14) of the Act or Explanation (d) to Sec. 56(2)(vii) had not been defined in the Act, therefore, we shall look into its dictionary meaning, as under : 5. The meaning of work of art in various dictionaries is as under: Corpus Juris Secundum-Volume 6A Work of art. As generally used, it has been said that the termis difficult to define, but the definitions of artists and lexicographers are any human work made with the specific purpose of stirring human emotions; something displaying artistic merit; anything in the formation or into the accomplishment of which art in any sense has entered; specifically, a production of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man skill which on a mere look up can be regarded as a work of art. It was further observed by the Hon ble High Court that every ordinary article is not a work of art and theremust be some artistic innovation for regarding the same as a work of art. The observations of the Hon ble High Court are culled out as under : 5. We have carefully considered the submissions of the learned counsel for the parties. Sec. 5 of the WT Act provides that wealth-tax should not be payable in respect of the assets mentioned in various sub-clauses. Sub-cl. (xii) of cl. (1) of s. 5 of the WT Act reads as under: any works of art, archaeological, scientific or art collections, books or manuscripts belonging to the assessee and not intended for sale; The expression works of art is not a term of art, however, its meaning has to be construed in the context of the provisions of s. 5(1)(xii) of the Act and the expression works of art is employed along with other expressions like archaeological, scientific or art collections, books or manuscripts belonging to the assessee. Therefore, there must be an element of human skill involved or applied in the manufacture of the product which on a me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee in the horse races, we are of the view that the articles cannot be regarded as works of art and the Tribunal was right in holding that the assessee is not entitled to claim exemption under s. 5(1)(xii) of the Act. Hence, we are of the view that both the questions of law are liable to be answered against the assessee. On somewhat similar facts, the Hon ble High Court of Gujarat in the case of Shantadevi P. Gaekwad Vs. Wealth tax Officer (2017) 82 taxmann.com 460 (Guj) ,was seized of the issue as to whether horse chariots referred to as Baggi , having exquisite engraving and embossing on the gold panels attached to it could be considered as a work of art . Answering the said issue in the affirmative, it was observed by the Hon ble High Court that since the Baggi contained exquisite designs which had an aesthetic quality to it, the same was in the nature of a work of art . The relevant observations of the Hon ble High Court are as under : 17. We may advocate perhaps not so restrictive understanding of the term work of art as to confine it to the work of greatest of the artists of the bygone era. The examples cited in the Madras High Court decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : 9. in fact, the definition of artistic work given in Section 2(c) of Copyrights Act makes it evident that a drawing would be an artistic work irrespective of whether the work possesses any artistic quality or not . (emphasis supplied by us) On the basis of our aforesaid observations, we are of the considered view that as the brand Essar is neither an artistic innovation nor possesses any artistic quality for being brought within the meaning of any work of art as contemplated in the definition of property in Explanation (d) to Sec. 56(2)(vii) of the Act, the same, merely for the reason that it was registered under the Copyright Act, 1957 as an artistic work could not be held to be in the nature of a work of art . 28.1 Alternatively, we find that the methods for valuing the Fair Market Value (FMV) as specified U/rule 11UA(1)(b), inter alia, for any work of art are only three, i.e. (i) the estimated price it would fetch if sold in the open market on the valuation date; (ii) if purchased on the valuation date from a registered dealer, the invoice value of such artistic work; and (iii) if received by any other mode and the value invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee without making any payment towards cost of acquisition is taxable u/s 28(iv) as any benefit, whether convertible into money or not, arising from the business as taxable under the head Income from Business or Profession b) The assessee had obtained the benefit on acquiring the ESSAR brand without making any payment towards its cost of acquisition and the assessee had even not shared its royalty receipts with M/s EIL, thus the assessee has obtained the benefit on obtaining the ESSAR brand free of cost. c) Such benefit has arisen in course of assessee s business since the assessee has been assessed at royalty of ₹ 29.59 crores under the head Income from Business or Profession (ii) The CIT(A) in paragraph14 (p94 of his order) rejected this ground. He observed that prior to the settlement of the ESSAR brand and its exploitation, the assessee trust had not commenced any business operation. It was not carrying on any business whatsoever in connection with which it received the brand. The said brand constituted the business generating apparatus and was anterior to the receipt of the brand name; there was no business of any sort bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Essar brand without making any payment towards its cost of acquisition and the assessee had not even shared its royalty receipts with EIL, thus, the assessee had obtained the benefit on the Essar brand free of cost. Such benefit has arisen in the course of assessee's business since the assessee has disclosed the royalty of ₹ 29.59 crores under the head 'Profits and gains from business or profession'. 31. Ld. A.R further submitted that the CIT(A) had rejected the contentions of the A.O with the following observations: The CIT(A) observed that section 28(iv) of the Act was not invoked by the AO in the assessment order. The CIT(A) held that section 28(iv) of the Act taxes the value of any benefit or perquisite, whether convertible into money or not, arising from the business or exercise of any profession. Before the settlement of brand was made by EIL, the assessee has not commenced its business and was not carrying on any business operations or any business activity. In the absence of a business being carried on by the assessee, mere receipt of settlement of the brand will not trigger section 28(iv) of the Act. The CIT(A) held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arising out of a business carried on by the assessee, until pursuant to the licence the new business was set up. The benefit conceived under cL (iv) of s. 28 has to be related to the business carried on by the assessee, which, in our view, is not possible to be broughtwithin the scope of the said provision. The intention of the Legislature that capital receipts were not intended to be covered by section 28(iv) of the Act is gathered from subsequent amendments made in the section. Section 28(iv) of the Act was introduced by Finance Act 1964, the Circular No. 20D dated 7 July, 1964 issued by CBDT, explaining the provisions of section 28(iv) is extracted as under: Assessment of the value of any benefit or perquisite arising from business or exercise of a profession, as income from business or profession. A new clause (iv) has been inserted in section 28 with effect from 1-4-1964 by Section 7 of the Finance Act, 1964, under which the value of any benefit or perquisite (whether convertible in money or not) arising from business or exercise of profession will be chargeable to tax under the head Profits and gains of business or profession . The effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexus has been established by any tangible material brought on record by the Ld. CIT(A). Simply because both the donor and the donee happen to belong to the same group cannot ipso facto establish that they have any business dealings. As we have held that it is a case of a valid gift which is to be treated as capital receipt in the hands of the assessee, in the absence of any specific provision taxing a gift as a deemed business income, provisions of section 28(iv) cannot be applied to the facts of the case. The CIT(A) erred in taxing the value of the stamp duty as income under section 28(iv) of the Act. b. DCIT vs Nerka Chemicals Pvt Ltd (Para 43 to 47 of ITAT Order] So far as the taxability of gifted shares under section 28(iv) of the Act is concerned,we are of the viewthat the provision of section 28(iv) can be invoked to bring to tax the amount or benefit, if the three conditions are fulfilled; viz (i) the assessee has to receive a benefit or a perquisite; (ii) the benefit or perquisite must be in a form other than cash; (iii) such receipt must arise from the carrying on of the business. Admittedly in the present case the assessee has received the shares in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be chargeable to income-tax under the head Profit gains of business or profession. However, as in the case before us, the brand Essar was contributed as a gift by EIL to the assessee trust on the same day on which the assessee trust had commenced its operations, therefore, it cannot be considered that the brands are the benefit which arose from the business carried on by the assessee. Apart from that, as we have categorized the receipt of brand by the assessee from EIL as a profit-making apparatus i.e a capital asset and a capital transaction, therefore, on the said count also we are inclined to reject the arguments of the revenue qua the present ground and, accordingly, dismiss the same. The Ground of appeal No. 5 is dismissed. Ground no. 6: Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred that only tax deducted at source of ₹ 2,95,91,725 is income of the assessee for FY 2012-13 and not the aggregate amount of ₹ 29,59,17,233/ . 33. The brief facts relating to this ground are, that this being the first year of the operation of the assessee, it had adopted the cash systemof accounting i.e one of the method permitted u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees are following accrual basis of accounting while the assessee is following cash method of accounting and both are separate taxable entities. c. AS-9 issued by the ICAI, requires royalty to be accounted on an accrual system of accounting does not apply to the assessee as, there is an exception provided for some entities including a trust. Therefore, AS-9 is not applicable to the assessee. 35. Before us, the Ld DR had filed the following submissions: (i) The assessee has received total royalty amount of ₹ 29,59,17,233/ from seven companies. The companies had deducted TDS of ₹ 2,95,91,725/- Vide 26 AS Paper book. No.1 (p 119 of the appeal memo). The details are given below: Sl.no. Name of Deductor Amt. credited (Rs.) Tax deducted (Rs.) 1 Essar Projects (India) Ltd. 8,00,00,000 80,00,000 2. Bhander Power Ltd. 1,09,38,273 10,93,828 3 Vadinar Power Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly recognised on that basis unless, having regard to the substance of the transaction, it is more appropriate to recognise revenue on some other systematic and rational basis. Thus, the assessee has flouted all norms by not recognising the revenue this year. (v) The Licensees are group companies. If they could be commanded to sign the brand licence agreement on the same day, it is not understandable why they were not asked to make the payment to the assessee when they credited the amounts to the account of the assessee. The obvious conclusion is that it is a preplanned design whereunder the companies and the assessee would follow different methods of accounting and the companies would be asked to defer the actual payment of royalty. By this arrangement the whole group would dodge payment of tax. (vi) The assessee has made a false claim that it is following cash system of accounting. A copy of the return of income (Vide DPB-3) would show that the assessee has not shown any expenses. The assessee would have incurred expenses like, telephone, conveyance, stationery, salary and payment to trustees etc. Expenses are also required to meet the obligations and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with avoiding taxation on ₹ 222,34,40,491/- over the past 7 years. The gap would widen over the years and there would be great scope for manipulation for tax evasion. There would also be serious problem of reconciliation when most of the returns centrally processed on computer and are accepted. ASSESSMENT YEAR Brand License Income as per Return of Income Brand License Income as per 26AS Difference (26AS - ITR) 2013-14 29591725 295917237 266325512 2014-15 1074570749 1039208633 35362116 2015-16 757650460 994822833 237172373 2016-17 781851421 1721716509 939865088 2017-18 3027033370 3065287196 38253826 2018-19 3181848370 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial statements, filed with the AO vide submission dated 3 August 2015 (at Annexure A and Annexure B), wherein, the method of accounting is reflected as cash method. Further, the said cash method of accounting has been regularly followed by the assessee in the subsequent years. In fact, the AO in the assessment for A.Y. 2014-15 has accepted the cash method of accounting followed by the assessee. (Refer paperbook pg. 230, para 13.1) 2. Considering the above, in the year under consideration, although, an income of ₹ 29,59,17,233/- had accrued to the assessee, since the same was not received, basis the cash method of accounting adopted, income of ₹ 2,95,91,725/-, being the taxes deducted at source by the licensees which was deemed to be received during the year was offered to tax as income by the assessee in accordance with section 198 of the Act. 3. In this regard, the assessee submits that as per section 145 of the Act, income chargeable under the head Profits and gains from business or profession or Income from Other Sources shall be computed based on the accounting method regularly followed by the assessee. The provisions of section 145(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, reliance can be placed on the following decisions which have held that the loss of revenue to the Department cannot be the basis for rejecting the method of accounting followed by an assessee: Indo Commercial Bank Ltd. vs. CIT (44 ITR 22) (Mad.) (Para 1.1 2.1] It should be taken as well settled that person engaged in business, who adopts the mercantile system of accounting is bound to value his unsold stock at the end of this year of account to balance his books. But he has the option of valuing the closing stock either at cost or atmarket value, if themarket value is lower than the cost price.... That the option exercised by an assessee is detrimental to revenue can never be the basis for denying him that option... The valuation of the closing stock at cost instead of at market value was the method adopted by the assessee bank down to the end of 1950. It was a method of accounting within the meaning of section 13. The question is, whether section 13 or any other concept of revenue law bars an assessee from changing his method of accounting. As has been repeatedly pointed out by courts, it is the assessee and not the department that has the choice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come fromother sources'. Option regarding adoption of system of accounting is with the assessee and not with the Income-tax Department. The assessee is indeed free even to follow different methods of accounting for income from different sources in an appropriate case. The department cannot compel the assessee to adopt themercantile system of accounting. As a matter of fact, it was not adopted. Under the circumstances, the income from lease rent could not be taxed on accrual basis.... it was open to the assessee to follow any system of accounting in respect of that source. It is further held that the assessee may follow even different systemof accounting in respect of different sources.... CIT vs. Pondicherry Industrial (254 ITR 748) (Mad.) (Para 3 4] CIT vs. Bikaner Trading Co. (180 ITR 286) (Raj.) (Para 5] 7. The AO in his remand report has alleged that method of accounting followed by the assessee in the subsequent years cannot be taken as base to establish method of accounting in the impugned year. The said allegation has not been substantiated and has been made without considering the rulings referred to by the assessee in the CIT(A) submission wherein it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after 1.4.1991 for companies governed by the Companies Act, 1956 as well as for other enterprises except the following- (a) Sole proprietary concerns/individuals (b) Partnership firms (c) Societies registered under the Societies Registration Act (d) Trusts (e) Hindu undivided families (f) Associations of persons. (Emphasis applied) 11.With regard to AO's observation regarding mandatory nature of AS-9 to record brand license fees on accrual method of accounting, it is humbly submitted that only AS-I relating to disclosure of accounting policies and AS-II relating to disclosure of Prior period and Extraordinary items and changes in accounting policies have been notified under section 145 of the Act for the year under consideration. The AS-9 issued by ICAI is not specifically notified for tax purposes. The same is not relevant for determining total income under the Act for the assessee following cash method of accounting. In this regard, reliance can be placed on the decision of the Mumbai tribunal in the case of DCIT vs Stup Consultants P Ltd (13 ITR 468) (Mum tribunal). The relevant extract of the same is as under:- E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contentions raised above, the assessee submits that even assuming the value of the brand is taxable, it cannot be taxed in the AY 2013-14 as the assessee became the owner of the Brand on 29 March 2012 when the Brand was transferred by EIL to the assessee. Further, the department's counsel in his written submissions at para 31 mentions that no cross objection has been filed by the assessee and hence the assessee cannot raise this issue now is factually incorrect as an application under rule 27 has been made with regard to this specific ground. Further, the department's counsel stated that since no cross objection has been filed by the assessee, it is now settled that the year of taxability is AY 2013-14 is without any basis and factually incorrect. Without prejudice to the above, the assessee submits that the value of brand could have been subject matter of adjudication for taxation only in AY 2012-13 and not in AY 2013-14. ii)On facts and in circumstances of the case and in law, the CIT(A) erred in holding that the Respondent has to be treated and assessed as an 'individual' for the purpose of determining applicability of section 56(2)(vii) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The department's counsel has also raised several doubts regarding why no value was accorded to the Brand by EIL or the assessee. 4.In this regard it is submitted that the registration certificate issued under the Trademarks Act, 1999 and Copyrights Act, 1957 clearly show that EIL was the owner of the Brand. In this regard, reference is made to section 6 and section 18 of the Trademark Act, 1999 which reads as under:- 6. The Register of Trade Marks -(1) For the purposes of this Act, a record called the Register of Trade Marks shall be kept at the head office of the Trade Marks Registry, wherein shall be entered all registered trade marks with the names, addresses and description of the proprietors, notifications of assignment and transmissions, the names, addresses and descriptions of registered users, conditions, limitations and such other matter relating to registered trade marks as may be prescribed... 18. Application for registration.-(1) Any person claiming to be the proprietor of a trade mark used or proposed to be used by him, who is desirous of registering it, shall apply in writing to the Registrar in the prescribed manner for the registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was transferred to the assessee free of cost, the assessee had paid no consideration for acquisition of the same and, hence, the same was not recorded in the books of accounts of the assessee. 8. The department's counsel has indicated that suicidal steps were taken by EIL in dealing with the Brand by Mrs. Manju S. Ruia. Accordingly, the department's counsel alleged that the transaction is not genuine, not bonafide and against human probabilities. 9. The allegations regarding suicidal steps taken by EIL or Mrs. Manju S. Ruia are not relevant to the assessment made in the hands of the assessee trust wherein the revenue is seeking to assess the value of an asset received which, it is submitted, is a capital receipt not chargeable to tax. 10.Further, as stated earlier assuming the transaction between EIL and the assessee is not genuine and not bonafide as alleged, then, there is no gift of the Brand to the assessee. Accordingly, the assessee has not received the asset. Therefore, the AO cannot assess the assessee for the value of the Brand of which it is not an owner. 11.Hence, the argumentsmade by the department's counsel are without anymeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attendance. In this regard it is submitted that such argument is without any merits as the department's counsel has not brought any material on record to prove that the agreements executed by the assessee with licensee companies are invalid in law and in any event, what would be the consequence if such an argument is to be accepted is already explained. 16.Further, the department's counsel has also alleged that only one of the licensees has passed a resolution for payment of license fees to the assessee. In this regard, without going into the correctness of the statement, it is submitted that the signatories to the brand licensing agreements had acted well within their powers to enter into such agreement. Further, it is submitted that as a result of such agreements the licensees have paid brand license fees to the assessee. In this regard, the department is seeking to tax the capital amount in the hands of the assessee as a consequence of the resolutions not being passed by the licensees/ on account of agreements alleged to be signed in a casual manner by the licensees, which is clearly impermissible and beyond the scope of assessment in the case of the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 wherein the said transfer of the Brand to the assessee was indicated and necessary approval of the shareholders was sought and appropriate authorization of the director and the company secretary of EIL was given. Accordingly, the resolution passed by EIL was a valid resolution under the provisions of the Companies Act, 1956. Further, there is also no requirement in law to notify the department of transfer of such asset by EIL to the assessee. Therefore, the argument put forth by the learned department's counsel does not hold good. 19.The department's counsel arguments under sub-head N. Motive of his paperbook no. 5 has alleged that the motive of all the transactions was removal/extraction of funds from the companies for the benefit of the Ruia family. 20.It is submitted that if the allegedmotive is held to be true, it is not a ground on the basis of which the AO assumes jurisdiction to tax the value of the capital asset received by the assessee through which the assessee is receiving income. But the so called funds extracted from the companies by way of brand license fees suffers tax in the hands of the assessee and so the same is notwithout a tax cost. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Department Counsel that the definition of artistic work in Rule 11 UA is pari materia with the definition of artistic work under Copyrights Act is incorrect. Secondly, under the Copyrights Act, as per definition of artistic work , a work is considered as artistic work even if it does not have any artistic quality. Therefore, it is submitted that the definition of artistic work under the Copyrights Act is not relevant to decide the issue at hand. it is also submitted that the provisions of section 56(2)(vii) use the words work of art which as explained by Madras High Court in M.A. Chidambaramam (supra) and Gujrat High Court in Shantadevi P. Gaekwad (supra) represents artistic innovation or something which is rare and/or exceptional aesthetic beauty with artistic input. Since the brand ESSAR is only a trademark created for the identifying the product and services which are marketed under the brand, it does not fall within the meaning of work of art consequently, the provisions of section 56(2)(vii) are not applicable. 26. The department's counsel has also alleged that the assessee has evaded tax by adopting cash method of accounting. Additionally, the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting, which is regularly followed by the assessee in the present case. Accordingly, no tax is sought to be evaded by the assessee by following cashmethod of accounting and the argument of the department's counsel is incorrect. 30. Further, it is submitted that since AY 2013-14 is effectively the first year when the assessee had carried out its operations and since the assessee followed cash system of accounting, no expense amount was debited in the books of accounts as actual payments were not made for any expenses incurred during the year. Attention is brought to assessment order for AY 2014-15 which is at page 209-232 of the assessee paper book no.1, wherein the assessee has claimed expenditure under several heads in its return of income and which have also been dealt with by the AO in his order for the AY 2014-15. Hence the argument of the department's counsel that no method of accounting is followed by the assessee as no expenditure is debited in the books of accounts is factually incorrect. 31.The department's counsel at para 24(x) of his written submission has relied on Section 145(3) of the Act, stating that the power is bestowed on the AO to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e' when the statute expressly says that it is inclusive. It would be a wrong approach to try to place a given receipt under one or the other sub-clauses in section 2(24) and if it does not fall under any of the sub-clauses, to say that it does not constitute income. Even if a receipt does not fall within the ambit of any of the sub-clauses in section 2(24), it may still be income if it partakes of the nature of the income. (emphasis added) 33. Thus, in the above case the prize money earned represents income in its normal connotation viz., a return for skill and endurance. Thus, the Supreme Court held that if the receipt is in the nature of income as generally understood, then even if it does not fall within one of the specific sub-clauses of section 2(24) of the Act, it shall still be chargeable to tax. The Supreme Court in no manner has held that everything that is received is income. 34. Thus, the decision of the Supreme Court was applicable to the specific facts of the case and the same has been distinguished by the various decisions of several courts as illustrated below (Pg 1): 35. The decision of the Supreme Court in Travancore Rubber vs. CIT (243 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remitted TDS aggregating to ₹ 2,95,91,725/-. It is also a fact borne from the record, that the assessee who during the year under consideration i.e the first year of its operations, and consistently thereafter in the subsequent years, was following the cash system of accounting for recognizing its revenue, had during the year under consideration not received any amount out of the aforesaid license fees from any of the group companies. However, in order to claim the TDS credit for the year, the assessee had offered for tax the aforesaid TDS amount as its income for this year, even though it had not received/collected any part of the aforesaid amount. As noticed by us hereinabove, it is the first year of the assessee s operation, and it was following cash method of accounting i.e one of the method prescribed u/s 145 of the Act. It is also a matter of fact borne from the record, that that the revenue is not disputing the fact that assessee had not collected any funds during this year from any of the group companies. Also, it is discernible from the record that the assessee had declared its license income based on the amounts that was received by it from its group companies in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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