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TMI Blog2017 (1) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... on-compete. The parties agreed that the consideration for the transaction shall be a sum of Rs. 6 crores. For the assessment year 2003-04, CLL took a stand in its Income Tax Assessment that the amount of Rs. 6 crores related solely to the transfer of business under the Brand Acquisition Agreement and no part thereof was attributable to non-compete. The Assessing Authority, however, held that part of the consideration of Rs. 6 crores would be attributable to non-compete as well. According to him, the bifurcation could be made on the basis of the instalments set out in the agreement, being upfront payment of Rs. 4 crores upon execution of the agreement, Rs. 1 crore upon transfer to SPIL of necessary registration under the Drug Laws and Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amble to the Brand Acquisition Agreement as follows: "4. CLL intends to sell and SPIL intends to acquire the entire Brands and any and all rights related thereto, past, present and future and whether or not registered, free of all encumbrances, claims, etc, and to this end the Parties wish to enter into an Agreement on the terms and conditions specified herein;" 5. The parties specified the terms and conditions for the sale of Brands, Assignment of Trade Marks, Copy Rights, Designs etc and interestingly, the Non-compete Agreement dated 06.02.2003 was specifically telescoped and made an integral part of the Brand Acquisition agreement by virtue of clause 4 thereof as follows: "4.Non-compete covenants SPIL and CLL hereby agree and conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term of this Agreement, CLL shall not compete with SPIL and/or any of its Affiliates in the business in the Territory nor shall it commence, engage in, be interested in or carry on the business or any business similar to that of the business. Provided that, nothing herein shall be construed to restrict CLLs rights to compete in any other commercial activities, not similar to the business. 2.2. CLL also undertakes to SPIL that it will not either on its own or in conjunction with others whether directly or indirectly:- (i) at any time do or attempt to do anything to disparage or otherwise injure the reputation of the business or the manner in which the business is conducted, (ii) do anything which might prejudice the good will of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits placed with the Bank for a tenure of one year, on the said sum of Rs. 10,000,000/- from the date of the agreement until the date of registration under the new Drug rules or until February 28, 2003, whichever is earlier. c.A sum of Rs. 10,000,000/- (Rupees Ten Million Only) upon the completion of one year from the date of execution of this agreement. SPIL shall pay simple interest at a rate lower of 7% p.a. and the rate offered by ICICI Bank on deposits sum of Rs. 10,000,000/- from the date of the agreement until the end of one year from the agreement." 8. In this background, the question before us is, whether any part of the consideration of Rs. 6 crores would relate, and be attributable to, the activity of non-compete. We dont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction was one of transfer of a right to carry on any business falling within the purview of the exclusion in the Proviso to section 28(va) of the Act, stood accepted. We differ with this conclusion. 10. Section 28(va)(a), inserted by Finance Act 2002, w.e.f. 1.4.2002, reads as follows: "(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 profession] or 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 [or profession], which is chargeable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t involves cutting edge technology wholly inaccessible to CLL in the absence of the brands transferred. The products sold by CLL constitute harmones utilized for infertility treatment under prescription, close monitoring and in controlled conditions. They were: Brand name Generic name 1.Puregon Pure FSH 2.Nugon HMG 3.Life HCG 4.Adractim Dihydrotestesterone Gel 5.Uterogestan Micronised Progesterone 13. He would explain that only three companies in the World were engaged in the manufacture of the aforesaid biological products viz. Viz Serono, Switzerland, Organon, Holand and Instituto Massone, Argentina. The third entity which was under exclusive agreement with CLL now stood transferred to SPIL under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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