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TMI Blog2018 (7) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Financial Year 2002-03 for a consideration of ₹ 88,29,925/- and the said consideration paid by the assessee for acquisition of rights to manage asset was in the nature of payment for acquiring the right/license to manage to schemes, the same mere capitalized as intangible asset and claimed depreciation @ 25%, the transfer of whole business by the assessee in terms of agreement dated 3.6.2004 to the Principal Asset Management Company and Principal Trustee Company Ltd. by virtue of the agreement, the consideration of ₹ 53768659/- received by the assessee is for transfer of the management rights to the transferee free company which cannot be treated as ‘Retiring fees’ because while acquiring management rights by the assessee company of two schemes acquired from J.F. Mutual Funds, assessee itself admitted by claiming the depreciation on the consideration of ₹ 88,29,925/- @ 25% with Written Down Value of such right at ₹ 49,66,833/- as on 31.3.2005. When the assessee itself has admitted acquisition of management right qua two schemes acquired from J.F. Mutual funds as intangible assets, the assessee is estopped by its own act and company from denying the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to appreciate that the compensation received by the assessee is business income being revenue in nature as it was received as a compensation for not carrying out the business of Management of Mutual Fund Scheme. 3(b) The Ld. CIT(A) failed to appreciate that the compensation received by the assessee is business income under the provisions of section 28(va)(a) of the IT Act as it was received for not carrying out a business. 4. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored. 3. The Appellant, SGE Advisors [India] Private Limited (hereinafter referred to as the Assessee ) by filing the present Cross Objection bearing CO. No. 94/M/2012, sought to set aside the impugned order dated 19.08.2010 qua Assessment Year 2005-06 by the Ld. CIT(A)-6, Mumbai, on the grounds that:- 1. Retirement Fees of ₹ 263,151/- a. The learned CIT(A) erred in partly confirming the order of the Assistant Commissioner of Income-tax 2(3), Mumbai ( ACIT ) in treating the retirement fees to the extent of ₹ 2,63,151/- as chargeable under the head Capital Gains . b. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Company Ltd., as consideration for retiring as an Principal Asset Management Company of Sun F C Mutual Fund. Aforesaid arrangement has been approved by the Securities and Exchange Board of India (SEBI). It is the case of the assessee that aforesaid amount was paid for acquisition of the rights to manage assets, which was in the nature of payment for acquiring the right/license to manage the schemes, which was capitalized by the assessee as intangible assets and depreciation was claimed u/s 32 of the Income-tax Act, 1961 (for short the Act ) in respect of such Retirement fees paid. AO considered the Retirement Fees as capital asset of which assessee had been claiming depreciation @ 25% of the written down value year after year. The Assessing Officer accordingly tax the capital gains as the management right was a capital asset, which has been accepted by the company itself and the management rights have been transferred to the Principal Asset Management Company and Principal Trustee Company Ltd., and has declined the contentions of the assessee that the consideration is called Retiring Fees . So, the AO accordingly treated ₹ 5,37,68,659/- (after reducing WDV of ₹ 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of assessee is not covered u/s 55(2)(a) it is covered u/s 28(va)(a) of the Act as per ground no. 3(b) raised in this case. 11. However, on the other hand, Ld. AR for the assessee in order to repel the arguments addressed by Ld. DR for the Revenue contended that the 12 schemes were floated by the company and no cost of acquisition was there. That there was no such condition in the agreement to attract provisions contained u/s 55(2)(a) and 28(va)(a) as the case may be which are not applicable to the case of the assessee. 12. In the backdrop of the aforesaid facts and circumstances of the case, order passed by the lower revenue authorities, and argument addressed by the Ld. Authorized Representatives of the parties to the appeal, the question arises for determination in the case is:- As to whether the cost of acquisition of a right to carry on any business shall be taken as nil, if no cost was incurred for its acquisition as per provisions contained u/s 55(2)(a) or that the compensation received by the assessee is to be treated as business income under the provision of section 28(va)(a) of the Act, as the same was received for not carring out the business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Retiring fees because while acquiring management rights by the assessee company of two schemes acquired from J.F. Mutual Funds, assessee itself admitted by claiming the depreciation on the consideration of ₹ 88,29,925/- @ 25% with Written Down Value of such right at ₹ 49,66,833/- as on 31.3.2005. When the assessee itself has admitted acquisition of management right qua two schemes acquired from J.F. Mutual funds as intangible assets, the assessee is estopped by its own act and company from denying the management rights transfer for a consideration of ₹ 5,37,68,659/- transfered by it to Principal Mutual Funds as intangible asset/good will. 17. So, we are of the considered view that B.C. Srinivasa Shetty (Supra) case as relied upon by the Ld. CIT(A) is not applicable to the facts and circumstances of this case, in the face of the provisions contained u/s 55(2)(a) of the Act. Thus question framed is determined in affirmative. In these circumstances, findings returned by the Ld. CIT(A) granting relief to the assessee, that no capital gain is leviable on the retirement fees received by the assessee in this case is not sustainable in the eyes of the Law, hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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