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TMI Blog2014 (11) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of three brands referred above. (e) Taxability of Rs. 2.75 crores received on transfer of brand of "Animal Husbandary Division". (f) Taxability of Rs. 2.25 crores received on transfer of marketing know how (wrongly mentioned as Non-compete fees in the grounds) relating to the transfer of brand of "Animal Husbandary Division". 3. The assessee company is engaged in the business of manufacturer and sale of bulk formulations of pharmaceutical products. During the year under consideration, the assessee transferred the trade marks, self generated technical know-how, self generated marketing know-how pertaining to the products named "Alex, Flucort and Sensur" to M/s Glenmark. The assessee had also sold trade marks purchased by it earlier. The assessee offered the amount received on sale of "purchased trade marks" for taxation. However, the assessee claimed that the amount received on sale of self generated technical know-how, self generated marketing know-how, self generated trade mark and non-compete fee as exempt from taxation, since the self generated assets do not have cost. The assessee placed reliance on the decision rendered by Hon'ble Supreme Court in the case of B.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation thereof is not taxable as it constitutes capital receipt not exigible to taxation in those years. The Ld A.R submitted that the consideration received on transfer of technical know was made taxable only in subsequent years only. 6. On the contrary, the Ld D.R placed strong reliance on the order of Ld CIT(A) and submitted that the assessee has only shared the technical know how and marketing know-how, but did not transfer them. 7. We have heard the rival contentions and perused the record. All the case law relied upon by the assessee related to the transfer of "technical know-how" and "marketing know-how". However, in the instant case, the Ld CIT(A) has given a clear finding, after going through the terms of agreement entered by the assessee with M/s Glenmark, that the assessee has only shared the technical know-how and marketing know-how, but did not transfer them. It is a well settled proposition of law that the consideration received on cessation of source of income shall constitute capital receipt. In the instant case, the findings given by Ld CIT(A) show that there was no cessation of source of income. Hence the amount of Rs. 20.00 crores received on transfer of technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Ld CIT(A) has rendered his decision on the understanding that the good will and trade mark may mean one and same. Thus, there is clear misunderstanding on the part of Ld CIT(A). The above said amount of Rs. 3.00 crores pertain to transfer fo trade mark with good will. Hence the considerations pertaining to "trade mark" and "Good will" have to be considered separately. However, the assessee has not given any basis for bifurcation of the consideration between "trade mark" and "good will". Under these circumstances, in order to put the issue to rest, we are of the view that the consideration of Rs. 3.00 crores be divided between the "trade mark" and "good will" in the ratio of 75% and 25%. We have assigned more weightage to the trade mark on the reasoning that the trade name of the product "sensur" shall normally carry more weightage in the commercial circles. The ld A.R submitted that the consideration received on self generated trade mark was made taxable from AY 2002-03 only. Hence the 75% portion of Rs. 3.00 crores pertaining to trade mark shall not be taxable during the year under consideration. The balance amount pertaining to good will shall be taxable as Capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue and direct the AO not to assess the non-compete fee received by the assessee. 14. The next issue relates to the taxability of Rs. 5.00 crores (Rs.2.75 crores received on transfer of trade mark and Rs. 2.25 crores received on transfer of marketing right) of animal husbandary division to M/s Lyka Exports Ltd. The AO held that the consideration of Rs. 2.75 crores was received in respect of transfer of good will and the consideration of Rs. 2.25 crores received on transfer of marketing right is taxable as business receipt. 15. The Ld CIT(A) has noticed that the amount of Rs. 2.75 crores was received for transfer of trade marks with good will. While considering an identical issue in respect of transfer of product named "Sensur", we have held that the consideration can be bifurcated between "trade mark" and "good will" in the ratio of 75% and 25% on the reasoning that the trade name generally carry more weight in trade circles. We are of the view that the same ratio can be applied in the instant issue also in order to put the dispute at rest. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to bifurcate the amount of Rs. 2.75 crores between "trade mark" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 1994-95 and 1995-96 and in those years, the assessee had own funds to the tune of Rs. 25.80 crores. These factual findings have not been controverted by the revenue. Since the Ld CIT(A) has rendered his decision by considering the facts prevailing in the instant case, we do not find any reason to interfere with his decision on this issue. 21. The next issue relates to the assessment of notional interest on the deposit of Rs. 75.00 lakhs given towards flat taken in rent for the residence of the Managing Director of the assessee company. We notice that the co-ordinate bench of Tribunal has considered identical issue in the assessee's own case in ITA No.2146/Mum/2008 and ITA No.2147/Mum/2008 relating to the AY 2003-04 and 2004-05 and has upheld the order of the Ld CIT(A) in deleting the notional interest assessed in those years. We notice that the Tribunal had placed reliance on the decision rendered in earlier years in the following appeals:- (a) ITA No.223/Mum/2003 dated 19-01-2006 (b) ITA Nos. 40/Mum/04 & 8172/Mum/2003 dated 23.11.2007 (c) ITA No.995/2008 dated 30-03-2009. Respectfully following the above said decisions, we uphold the order of Ld CIT(A) on this issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requires fresh examination. Accordingly, we set aside this issue to the file of AO with the direction to examine this issue afresh by duly considering the contentions of the assessee and the case laws cited by it and take appropriate decision in acccordance with law. Accordingly the order of Ld CIT(A) on this issue is set aside. 25. The next issue relates to the taxability of Rs. 7.40 crores received on transfer of Scientific know-how and technical information. The Ld CIT(A) has given a finding that the assessee has only shared the information and not transferred any right to LHHCL. Accordingly, the Ld CIT(A) has held that the above said amount of Rs. 7.40 crores is taxable as business receipt. Under identical set of facts, we have upheld the view taken by the Ld CIT(A) in the immediately preceding year. We have also followed the co-ordinate bench decision rendered for AY 1998-99. Consistent with the view taken therein, we uphold the view taken by Ld CIT(A) on this issue. 26. We shall now take up the appeal filed by the revenue, wherein following issues are contested. (a) Disallowance of interest expenditure u/s 14A of the Act. (b) Assessment of notional interest on the deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO with the direction to examine the same afresh by having regard to the accounts of the assessee and also by duly considering the explanation of the assessee. 30. The next issue relates to the taxability of Rs. 20.00 crores claimed to have been received on transfer of market information and technical know how. During the year under consideration, the assessee transferred its export business to a newly formed joint venture company named Lyka BDR International Ltd and received a sum of Rs. 42.50 crores, which included a sum of Rs. 20.00 crores towards market information/technical know-how & Non-compete fees. The assessee claimed the same to be capital receipt. The AO did not agree with the assessee and accordingly assessed the above said amount of Rs. 20.00 crores as business income of the assessee. The Ld CIT(A) noticed that the assessee has only agreed not to carry out business of export of certain products. However, there was no mention in the agreement that any consideration has been received by the assessee for transfer of marketing information and technical know how. The Ld CIT(A) noticed that the agreement did not restrict the assessee to manufacture and market the products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Charbhuja Industries P Ltd Vs. Addl CIT (2014)(31 ITR (Trib) 89(Mum) 34. However, we are unable to agree with the contentions of Ld A.R. The decision in the case of Kwality biscuits Ltd (supra) was rendered in the context of Sec. 115J of the Act, whereas the decision in the case of Rolta India Ltd was rendered in the context of sec. 115JA/115JB of the Act. The provisions of sec. 115JA/115JB contain saving clause, viz., sec. 115JA(4) and sec. 115JB(5), where as the provisions of sec. 115J does not contain the same. Hence, the decision rendered under sec. 115, in our view, will not apply to the provisions of sec. 115JA/115JB of the Act. Further, the Hon'ble Supreme Court does not enact any law, but it only interprets the law, meaning thereby the interpretation given by the Hon'ble Supreme Court shall be applicable from the date of inception of the relevant provision. Accordingly, we are of the view that the tax authorities are justified in charging interest u/s 234B of the Act for non-payment or under payment of advance tax on MAT tax payable u/s 115JA/115JB of the Act. 35. The last issue relates to validity of including Rs. 20.00 crores claimed to have been received on transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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