2010 (2) TMI 861 - AT - Income Tax

Capital gain - cost of trade mark and design - it is noticed that this Tribunal fell into error in assuming that the consideration specified in the agreement was the cost of trade mark and design Held that - error has crept into the order of this Tribunal insofar as the unworkable direction has been given in para 11A and consequently, the order of this Tribunal stands modified and the para 11A starting with the words as s. 2(42) and ending with the words the various trade marks stands expunged, the miscellaneous application as filed by the assessee stands allowed, application of the assessee stands allowed. B.C. Srinivasa Setty(1981 - TMI - 5845 - SUPREME Court)

Summary

Issues:
1. Typographical error in the order regarding para numbering.
2. Determination of short-term capital gain on the transfer of trade mark and design.
3. Interpretation of the consideration specified in the agreement for trade marks.
4. Application of the decision in the case of B.C. Srinivasa Setty to the assessee's case.

Analysis:
1. The miscellaneous application was filed by the assessee against the order of the Tribunal, pointing out a typographical error in para numbering. The Tribunal acknowledged the error and corrected it from para 11 to para 11A for further reference in the order.

2. The issue of determining short-term capital gain on the transfer of trade mark and design arose. The Tribunal directed the Assessing Officer (AO) to verify if any trade mark or design had been registered within a specific period and to tax the same as short-term capital gain. However, the Tribunal realized that the cost of the trade mark and design was indeterminable, following the decision of the Supreme Court in the case of B.C. Srinivasa Setty. Consequently, the Tribunal found the direction unworkable and modified the order to delete the direction regarding short-term capital gain levy.

3. The consideration specified in the agreement for the trade marks was interpreted by the Tribunal. It was noted that the agreement only mentioned the consideration for the sale without determining the actual cost of the trade mark and design. The Tribunal recognized that the consideration specified in the agreement did not represent the cost, leading to the conclusion that the direction given in the order was erroneous.

4. The Tribunal applied the decision of the Supreme Court in the case of B.C. Srinivasa Setty to the assessee's case. It was observed that the Tribunal had mistakenly assumed that the consideration specified in the agreement represented the cost of the trade mark and design. As the cost was neither determined nor determinable, the Tribunal concluded that the direction regarding short-term capital gain levy was not applicable. Therefore, the order was modified, and the erroneous direction was expunged, allowing the assessee's miscellaneous application.