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TMI Blog2010 (7) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of Healthcare Journals Communications including activities such as publication of Medical Journals for the Medicine Industry and Professionals and production of customized print, audio and video Healthcare Communications. On 10th March 2006, the appellant company entered into a Specified Assets Transfer Agreement with M/s. CMP Medica India Private Limited, Bangalore for the sale of all its rights, titles and interests in the specified assets of its Healthcare Journals Communications business. These assets, as narrated in para 2 of the aforesaid agreement were (a) the periodicals (b) the products (c) the business intellectual property rights along with the goodwill and all rights, interests and benefits appurtenant to the business intellectual property rights (d) the customer database (e) the records (f) the editorial materials and (g) the contracts. Through two separate deeds of the same date, namely the Deed of Assignment of Copyrights and the Deed of Assignment of Trademarks , the appellant company also assigned the copyrights and trademarks pertaining to its Healthcare Journals Communications business. In short, the appellant by the said agreements transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 7 of the assessment order that the assessee has not sold whole of its business but only surrendered his rights regarding publication og journal and hence provisions of Section 28(va) of the I. T. Act are applicable and hence the A.O. was justified in assessing its receipt of ₹ 380.02 lacs as business income , as against the long term capital gain treated by the assessee. Our attention was drawn to Para 5 of the order of Ld. CIT(A) and in particular to Para 5.1 of his order wherein a finding is given by him that there is no co-relation between the two businesses i.e. the business of healthcare journals and communication and the business of clinical trial. It is submitted by him that there is no basis for this finding given by the Ld. CIT(A). It is also submitted by him that the assessee has also given an undertaking to the buyer that it will not compete with the buyer i.e. CMP Medica India Pvt. Ltd. for a period of 6 years and hence some portion of the sale consideration should be allocated towards non compete fee and that portion must be assessed as business income. He strongly supported the assessment order and it is urged by him that the order of Ld. CIT(A) should be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this undertaking was given by the assessee in addition to the transfer of intangible assets and hence the consideration received by the assessee has to be appropriated towards these intangible assets and, therefore, should be assessed as long term capital gain and not as business income. Reliance was placed on the Tribunal decision rendered in the case of Rohan software Pvt. Ltd. Vs ITO as reported in 304 ITR (AT) 314. 6. We have considered the rival submissions, gone through the material on record, orders of authorities below and the Tribunal decision followed by the Ld. CIT(A), which is also cited before us. We find that in the present case, the A.O. has invoked the provisions of Section 28(va) of the Act. For the sake of ready reference, the provisions of Section 28(va) are reproduced herein below: S.28(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, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in fact the assessee has received this amount of ₹ 380.02 lacs on account of transfer of right to carry on business of healthcare journals and communication and hence this proviso is applicable in the present case and the impugned receipts of the assessee are not hit by Section 28(va) (a) of the Act. At this juncture, we feel that the findings of Ld. CIT(A) on these aspects as contained in paras 5.0, 5.1 and 5.2 are relevant and for the sake of ready reference, the same are reproduced herein below: 5.0 I have considered the submissions of the learned Authorised Representative of the appellant company. I have also gone through the various agreements produced by the appellant during the course of the present proceedings. It is found that the appellant company was incorporated in the year 1995 to conduct the business of Healthcare Journals and Communications such as publications of the medical journals activities for the pharmaceuticals industry and professionals and production of customized, print audio and video healthcare communications. It is also a matter of fact that all the journals published by the appellant company was obtained from the office of the Registrar o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... started clinical trials and earning income therefrom. With above facts in mind, I am of considered view that in giving up its entire Healthcare Journals and Communications business, the appellant has lost the source of income and section 28(va) of the Act therefore has no application to the facts of the case. 5.2 It is also quite clear that giving up the right to carry on the Healthcare Journal Communications Business was only one part of the agreement. The main part of the agreement was the transfer of all intangible assets being trade marks, brands, copyrights and the associated goodwill of its Healthcare Journals and Communications business. It follows that the consideration of ₹ 3,80,02,500/- was not received; only for giving up the right to carry on the Healthcare Journals and Communications business but was mainly for the transfer of all intangible assets being trade marks, brands, copyrights and the associated goodwill of the Healthcare Journals Communications business. As per the law, the consideration for the transfer of intangible assets being trade marks, brands, copyrights and the associated goodwill of Healthcare Journals and Communications business is ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis that the promoter of the assessee company could not associate themselves directly or indirectly with any business similar to or identical with the business carried on either by it or the transferee. In the present case also the facts are similar, although the reasoning given by the A.O. for assessing the impugned receipts as business income are different. But still the facts remain similar and same, receipts under similar circumstances were held to be assessable as capital gain by the tribunal in that case, in the present case also, the receipt is assessable as capital basis only. 9. One more objection is there in the present case of the revenue that the assessee has not transferred to the buyer, the total business and even after the sale, the assessee was doing the business of clinical trial. The case of the revenue is that both these businesses i.e. the business of healthcare journal and communication and the business of clinical trial are interconnected and composite and hence the assessee has not transferred the business as a whole but only one activity of the said business was transferred. The contention of the assessee is that both the businesses are not at all con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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