2015 (12) TMI 48 - HC - Income Tax

Taxability of income - provisions of Block assessment could not be invoked as per ITAT? - sum paid by Sharp Corporation, Japan to the assessee for transfer of the right to use the trade mark SHARP which consisted of both goodwill as well as the right to use associate with 14 items out of 21 items did not attract capital gains tax - Held that - From the record it is clear that the return of income for the relevant assessment year 1996-97 was filed by the assessee on 2/12/1996, which was nearly a year before the search was conducted. A categorical finding of fact has been recorded by the Tribunal with regard to the disclosure of the receipt of such amount through banking channels by the assessee, which is to the effect that, When the amount has been received through banking channels and has been shown as part of the cash and bank balances, it is not possible to say that the transaction has not been or would not have been disclosed for the purposes of the Act within the meaning of Section 158-B(b) . As the appellants has not been able to satisfy us that there was non-disclosure of the aforesaid amount having been received by the assessee in the returns filed by the assessee for the relevant assessment year. - Decided against the Revenue.

Summary

Issues Involved:
1. Whether the Tribunal correctly held that the payment received for transfer of trademark did not attract capital gains tax?
2. Whether the provisions of Block assessment could be invoked for the payment received through proper banking channel before a search was conducted?

Analysis:

Issue 1:
The first issue pertains to the Tribunal's decision on the tax implications of the payment received by the assessee for the transfer of the trademark. The Tribunal held that the sum paid by "Sharp Corporation, Japan" did not attract capital gains tax. The Court examined whether the Tribunal's decision was correct considering the agreement and assignment deed. The Court observed that the Tribunal's finding was based on the disclosure of the amount through banking channels by the assessee. The Tribunal noted that the amount was part of the cash and bank balances, indicating disclosure. The Court emphasized that the appellants failed to demonstrate any non-disclosure of the amount in the returns filed for the relevant assessment year. Consequently, the Court ruled in favor of the assessee on this issue.

Issue 2:
The second issue revolves around the invocation of Block assessment provisions for the payment received through proper banking channels before a search was conducted. The Court analyzed whether the amount received by the assessee from "Sharp Corporation, Japan" was disclosed in the return filed for the assessment year before the search took place. The Court noted that the return for the relevant assessment year was filed almost a year before the search. The Tribunal's factual finding confirmed the disclosure of the amount through banking channels. As a result, the Court answered the second question of law in favor of the assessee and against the Revenue. Given the resolution of the second issue, the Court deemed the first question to be academic and did not delve into it, leading to the dismissal of the appeal without costs.

In conclusion, the High Court of Karnataka upheld the Tribunal's decision regarding the tax treatment of the payment received for the transfer of the trademark, emphasizing the importance of disclosure through banking channels. The Court's analysis focused on the factual findings and legal implications, ultimately ruling in favor of the assessee on both issues raised in the appeal.