TMI Blog2001 (10) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount received by it was not exigible to capital gains as no consideration had been paid by the assessee-company to ICI UK for acquisition of the said right to use the trade mark 'Savlon'. In support of its contention, the assessee-company placed reliance on the decision of the Supreme Court in the case of CIT v.B.C. Srinivasa Setty [1981] 128 ITR 294. However, the Assessing Officer did not accept the contention of the assessee. Being aggrieved, the assessee filed appeal before the First Appellate Authority. 4. The assessee contended that the said trade mark 'Savlon' was always remained the property of ICI UK and had not been sold or transferred to the assessee-company for any consideration and the assessee-company had been only permitted to use the trade mark and that too because of the relationship between ICI UK and the assessee-company. Hence, the consideration received for the extinguishment or termination of such right was a capital receipt but not liable to capital gains. The assessee contended that the amendment made in 1987 to bring in goodwill to capital gain tax and further amendment in 1993 to include tenancy rights, stage carriage permits or loom hours within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age permits or loom hours within the scope of capital gain tax liability by specific amendment under section 55(2) of the Act but the legislature have made the amendment to make the amount of compensation received on trade mark or brand name associated with the business within the ambit of capital gain tax when there is no cost of acquisition only by making amendment with effect from 1-4-2002 by the Finance Act, 2001. He submitted that prior to the said amendment made by the legislature the principle as, laid down by the Supreme Court in the case o f B.C Srinivasa Setty applied to the compensation received on surrender of trade mark when there was no cost of acquisition of it. He submitted that the amount of Rs.112.99 lacs as received by the assessee would not be subject to capital gain tax. On the other hand, the Ld. D.R. relied on the order of the authorities below and submitted that after the amendments made by the Finance Act, 1987 with effect from 1-4-1988 to make the goodwill of a business subject to capital gain, the compensation received by the assessee on surrender of its right to use the trade mark is liable for capital gain tax. 6. We have carefully considered the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 55(2) of the Act, with effect from 1-4-1988 by which the consideration received on transfer of a goodwill of a business even if there was no cost to acquire it was incurred exigible to tax, we are of the view that the principle as laid down by the Apex Court in the said case still holds good that no capital gain tax could be levied under section 45 of the Act in respect of those capital asset for which no cost of acquisition is incurred by the assessee. In order to bring the other capital asset viz. tenancy right, stage carriage permits or loom hours within the ambit of section 45 for the purpose of charging capital gain tax, the legislature included the above asset by making further amendments by Finance Act, 1994 with effect from 1-4-1995. He further observe that the list was further expanded by inserting further capital assets viz. their right to manufacture, produce or process any article or thing by the Finance Act, 1997 with effect from 1-4-1998. 9. There is no dispute to the fact that a licence to use trade mark is a capital asset under section 2(14) of the Act. There is also no dispute to the fact that surrendering of the said right to use trade mark 'Savlon' i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing recoveries from employees for their stay in Guest Houses to be deducted from Guest House Expenses." 12.1 The tax audit report pointed out that a sum of Rs.87,72,610 had been incurred as expenditure on maintenance of guest house. The assessee added back an amount of Rs.46,86,923 in the computation of income. The assessee stated that the difference of the amount of Rs.32,62,602 had been accounted for as there was notional recoveries for employees stayed in guest house while on official tour. The assessee explained the procedure before the Assessing Officer in respect of the recovery of Rs.32,62,602 which is as under:-- "The procedure generally is that if an employee goes on tour he draws as advanced for the purpose and when he submits his expenses sheet later, if he has used outside accommodation the charge for the same is debited to Travelling Account. If, however he has used the accommodation of a Division, other than his own, a recovery then is made by the guest house of the Division where he stayed against the Division from where the employee came. This is done by the guest house at quarterly intervals by drawing recovery bills against the particular Division from wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Paper Mills Ltd. [1988] 171 ITR 181. On the other hand, the Ld. DR. placed reliance on the decision of the authorities below. 12.5 We have carefully perused the orders of the authorities below and have considered the submissions of the Ld. representatives of the parties. The facts as stated hereinabove that the said recovery of Rs.32,62,602 was shown by the assessee by way of adjustment in the book entries. There is also no dispute that the said recovery made by the assessee-company was from the employees when they went on official duty and stayed in the guest house of the assessee-company and the recovery was also restricted to the prescribed rates under Rule 6D of the I.T. Rules, 1962. There is also no dispute to the fact that the assessee recovered the said aggregate amount of Rs.32,62,602 when the employees stayed in the guest house on official duty outside their Headquarters. It is not the contention of the department that the recoveries was shown to be made from the employees by providing the accommodation in the guest house of the assessee-company on account of any entertainment or relaxation. We observe that the said amount was recovered for providing the facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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