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TMI Blog2012 (6) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue receipt or capital receipt – Held that:- Considering the details furnished by the assessee that the compensation received by the assessee was for phasing out the use of CTC as the Govt. of India issued a memorandum to all companies which were producing or consuming 85% of Carbon Tetra Chloride, requesting them to phase out the consumption as required under the multilateral fund of the Montreal Protocol the provisions of the second proviso to section 28(va) have been fulfilled and therefore the assessee is entitled to the benefit - although the assessee has not filed full details as alleged by the A.O. in the body of the assessment order, we find the assessee filed full details before the ld. CIT(A) – compensation was not liable to be taxed as income as proposed by AO - against revenue. Disallowance towards expenses attributable to the earning of dividend income – Held that:- As the assessment year involved is 2006-07, the case is to be restored to the file of the A.O. for fresh adjudication in the light of the ratio laid down by the GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 (HC)] stating that Rule 8D is applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Year 2006-07. All these appeals were heard together and are being disposed of by this common order for the sake of convenience. ITA No. 4131/Mum/2008 (By the Revenue for A.Y. 2004-05) 2. The Revenue in its only effective ground has challenged the order of CIT(A) in treating the non-compete fees of ₹ 1,75,00,000/- as capital gains as against business income treated by the A.O. 3. Facts of the case in brief are that during the previous year relevant to A.Y. 2004-05 the assessee company has sold its entire Sofoin-DS business to Transpek Silox Industry Ltd. (TSIL) vide agreement entered into by the assessee company and ISIL for a total consideration of ₹ 19.50 million to be payable by TSIL to the assessee company in the following manner:- Trade marks 1,00,000 Non-compete clause 175,00,000 Scientific and Technology know-how transfer 14,00,000 Plant and machinery 5,00,000 1,95,00,000 The sum of ₹ 1,75,00,000/- received by the assessee from T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so received technical know-how fees, trade mark fees and sale consideration on sale of plant and machinery of the same division. He, therefore, treated the non-compete fees of ₹ 1,75,00,000/- as business income. 3.2 The assessee made detailed submission before the ld. CIT(A) based on which the ld. CIT(A) directed the A.O. to treat the receipt on account of noncompete clause as capital gains and not as income under the head profits and gains of business or profession . While doing so he noted that any consideration received or receivable in any kind under an Agreement for not carrying out any activity in relation to any business is chargeable to income tax under the head 'profits and gains of business or profession. But the sub clause (a) is restricted in its operations by the proviso that if any sum received or receivable is on account of transfer of right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable to tax under the head capital gains would not be taxable as 'profits and gains of business or profession'. According to him this proviso has not been taken into consideration by the assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er:- Sec. 28. The following income shall be chargeable to income-tax under the head profits and gains of business or profession (va) any sum, whether received or receivable, in cash or kind, under an agreement for- (a) not carrying out any activity in relation to any business; or (b) not sharing any know-how, patent, copyright, trade-mark, lincence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services; Provided that sub-clause (a) shall not apply to (i) any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business; which is chargeable under the head Capital gains ; In view of the clear-cut provisions of proviso to section 28(va)(a) and the clauses of the agreement, we concur with the findings of the ld. CIT(A) that the A.O. has not correctly appreciated the facts and the provisions of law before disallowing the claim of the assessee. When the assessee has transferred the entire business and has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also filed during appellate proceedings. It was submitted that the phase out plan was rolled out under the World Bank's CTC sector plan implementation project and in order to implement that, the G01 nominated IDBI Bank for monitoring the compliance of the terms and conditions of the grant by all companies. The grants were claimed to be released by the IDBI only after it was satisfied that the companies had fulfilled their obligations of phasing out the use of CTC. It was argued that the necessary funds had been released by the IDBI only in its capacity as representative of G01 in the matter. A copy of the communication sanctioning the release of funds to the assessee was also filed in the paper book. Accordingly it was submitted that the assessee company had entered into the agreement with IDBI (duly authorized agent of GOI) and received the compensation for phasing out the use of CTC, as required under the multilateral fund of the Montreal Protocol. In view of the same it was stated that the provisions of the second proviso to sec. 28(va) had been duly fulfilled and accordingly it- was stated that the said compensation was not liable to be taxed as income. 5.3 Based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and accordingly the order of the ld. CIT(A) is upheld. The ground raised by the Revenue is accordingly dismissed. ITA 6537/Mum/2009 (By the assessee for A.Y. 2006-07) 7. Ground of appeal No. 1 by the assessee reads as under:- That on the facts and in the circumstances of the case and in law, the Learned Commissioner (Appeals) erred in confirming the disallowance of ₹ 71,214 made by the Assessing Officer towards expenses attributable to the earning of dividend income under the provisions of Section 14A against the dividend income of only ₹ 11,210 earned by the appellant. 7.1 After hearing both the sides we find the A.O. made disallowance of ₹ 71,214/- u/s 14A read with rule 8D by following the decision of the Special Bench of the Tribunal in the case of Daga Capital Management Pvt. Ltd. In this case the assessment year involved is 2006-07. The dividend income received by the assessee is only ₹ 11,210/-. Both the parties fairly agreed that the matter needs fresh adjudication at the level of A.O. in view of the decision of the Hon'ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT reported in 328 ITR 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.4 The ld. Counsel for the assessee submitted that the assessee claimed the expenditure for repairs and maintenance of the existing roads and not for new roads made. He, however, was unable to furnish the details of any such old road on the ground that the same is not readily available and submitted that the matter may be restored to the file of the A.O. with a direction to verify whether the earlier road was there and whether the expenditure incurred by the assessee was for repairs of old roads or construction of new roads. 8.5 The ld. D.R., on the other hand, while supporting the order of the ld. CIT(A) submitted that he has no objection if the mater is restored to the file of the A.O. for verification. 8.6 We have considered the rival arguments made by both the sides. Since the dispute in the impugned ground is regarding whether the expenditure incurred is for repairs of existing road or construction of new roads and since the full facts are not coming out of the records, therefore, we deem it proper to restore the issue to the file of the A.O. with a direction to verify as to whether there was existence of road in the past. If there was road earlier and if the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the correct amount charged to the PandL account and make the disallowance accordingly. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before us. 9.2 After considering the rival arguments made by both the sides and on perusal of the orders of the Assessing Officer and the CIT(A) we do not find any infirmity in the order of the ld. CIT(A). The ld. Counsel for the assessee has made only legal arguments without giving any factual data. Nothing was brought to our notice to establish that the consultancy charges have been paid for new products for existing business of the assessee. The argument of the ld. Counsel for the assesse that the consultancy charges have been paid to find out some new area for existing business is also a mere submission without any documentary evidence. Under these circumstances we do not find any infirmity in the order of the ld. CIT(A) and accordingly uphold the same. The ground raised by the assessee is accordingly dismissed. 10. Ground of appeal No. 4 by the assessee reads as under:- That on the facts and in the circumstances of the case and in law, the Learned Commissioner (Appeals) erred in not deleting the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of the A.O. for fresh adjudication. Since in the instant case the ld. CIT(A) without going through the assessment records did not accept the additional evidence filed before him, therefore, we, in the interests of justice, deem it proper to restore the issue to the file of the A.O. with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. The A.O. is also directed to keep in mind the order of the Tribunal in assessee's own case for A.Y. 2003-04 while deciding the issue. We hold an direct accordingly. The ground raised by the assessee is allowed for statistical purpose. 11. Ground of appeal No. 5 by the assessee reads as under:- That on the facts and in the circumstances of the case and in law, the Learned Commissioner (Appeals) erred in confirming the entire ad-hoc disallowance of ₹ 255,425 made by the Assessing Officer in respect of miscellaneous expenses and in respect of which full details were submitted by the appellant during the course of the assessment as well as the appellate proceedings. 11.1 After hearing both the sides we find the A.O. made an adhoc disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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