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TMI Blog2014 (12) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... cy to MAERSK and that is referable to the initial Sub-Agency Agreement dated 8.11.1992 - Section 28(ii)(2) would come into play and the income received by the assessee has to be certainly treated as profits and gains of business - it can partake the character of transfer of capital asset, as what is transferred is the sub-agency and goodwill attached. The Tribunal was rightly of the view that the AO has not applied the correct provision of law and the CIT was justified in invoking Section 263 of the Act to revise the erroneous order - Insofar as prejudice to the interest of the revenue is concerned, it is apparent on the face of the record that but for the application of Section 28(ii)(c) of the Act, the assessee would be entitled to the benefit of claiming the receipt of the amount as capital gains under Section 45 of the Act and the consequent exemption that they have sought for. Therefore, the claim of the assessee would certainly be prejudicial to the interest of the revenue – the order of the Tribunal is upheld – Decided against assessee. - T. C. (A). No. 1279 of 2007 - - - Dated:- 2-12-2014 - R. Sudhakar And R. Karuppiah,JJ. For the Appellant : Mr. C. V. Rajan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trade name Maersk Sealand with effect from 11.12.1999. MAERSK was desirous of purchasing the shipping sub-agency business of the appellant with goodwill, which the appellant was willing to sell and, therefore, they entered into an agreement for sale of shipping sub-agency business in relation to Sealand with goodwill. The relevant portion of the said agreement dated 1.6.2000 reads as under: SALE OF SHIPPING SUB-AGENCY BUSINESS IN RELATION TO SEALAND WITH GOODWILL CHAKIAT hereby transfers to MAERSK the shipping sub-agency business related to Sealand and covered by the Sub-Agency Agreement dated 8th November 1992 along with goodwill in relation thereto. It is made clear that no assets of any description than those specified herein belonging to CHAKIAT are the subject matter of sale. Consequent to this agreement, a sum of US$ 650,000/- (equivalent to ₹ 2,98,33,700/-) was received as consideration by the appellant from Maersk India Ltd., which became the agent of A.P.Moller. 2.5. In the return filed, the appellant offered the consideration received by it on transfer of goodwill as capital gains and claimed exemption under Section 54EC of the Act on the premise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny compensation or other payment due to or received by,-- (a) **** (b) **** (c) any person, by whatever name called, holding an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modification of the terms and conditions relating thereto. Section 45. Capital gains.- (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place. (1A) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of-- (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or (ii) riot or civil disturbance; or (iii) accidental fire or explosion; or (iv) action by an enemy or action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) of sub-section (1) of section 2 of the Depositories Act, 1996. (3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. (4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head Capital gains of such other person. (6) Notwithstanding anything contained in sub-section (1), the difference between the repurchase price of the units referred to in sub-section (2) of section 80CCB and the capital value of such units shall be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place or the plant referred to in that section is terminated and shall be taxed accordingly. Explanation.--For the purposes of this sub-section, capital value of such units means any amount invested by the assessee in the units referred to in sub-section (2) of section 80CCB 7. In the light of the above provisions, we consider the nature of agreement entered into by the appellant with MAERSK on 1.6.2000. Originally, by Sub-Agency Agreement dated 8.11.1992, Sea Land (I) Ltd. appointed CHAKIAT as their sub-agents in South India for all cargoes carried by Sea Land Service Inc., USA. On 11.12.1999, A.P.Moller of Copenhagen, Denmark took over the business of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other person in connection with the termination of the agency shall be chargeable to income-tax under the head profits and gains of business. This appears to be the intention of Clause (1) of the agreement dated 1.6.2000. Therefore, Section 28(ii)(c) of the Act gets squarely attracted. 11. In such view of the matter, the finding of the Commissioner of Income Tax, as upheld by the Tribunal, holding that the order passed by the Assessing Officer is erroneous is justified. In our considered opinion, the Assessing Officer has not applied the correct provision of law and the Commissioner of Income Tax was justified in invoking Section 263 of the Act to revise the erroneous order. Insofar as prejudice to the interest of the revenue is concerned, it is apparent on the face of the record that but for the application of Section 28(ii)(c) of the Act, the assessee would be entitled to the benefit of claiming the receipt of the amount as capital gains under Section 45 of the Act and the consequent exemption that they have sought for. Therefore, the claim of the assessee would certainly be prejudicial to the interest of the revenue. We hold accordingly. For the foregoing reasons, we di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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