9911796707
TMI Blog2025 (4) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, constituted capital receipt not liable to tax in the hands of the appellant. 1.1 That the CIT(A) erred on facts and in law in bringing to tax the aforesaid sum under section 28(ii)(b) of the Income-tax Act, 1961 ("the Act"), not appreciating that the said section was not applicable in the appellant's case, as, there did not exist any managing agency relationship between Disney and the appellant. 2. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in holding that the loss on sale of shares of Rs. 41,79,00,000 incurred by the appellant was loss from speculation business in terms of Explanation to section 73 of the Act. 2.1 That the CIT(A) erred on facts and in law in not appreciating that the sale and purchase of shares did not form part of the business of the appellant and the shares were held as investment and, therefore, provisions of Explanation to section 73 of the Act were not applicable on the facts of the case." 4. Both the learned representatives next take us to the CIT(A)'s detailed discussion affirming the assessment findings making section 28(ii)(b) addition of Rs. 40,85,84,700/-, as under: 3. I have carefully go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in his assessment order. The AO has further relied on provisions of section 28(ii)(b) for taxing the same as revenue receipts. In the light of this background I am convinced that this receipt of 10 million US Dollars equivalent to Rs. 40.85 crores, which has been called a compensation for erosion in the value of investment in Abraxas, cannot certainly be called a capital receipt as argued by the assessee company. It is quite obvious from the facts of the matter that money has been received by the assessee company as compensation from Disney because the latter Company was interested in incorporating a wholly owned subsidiary in India. And since there were rights and privileges which otherwise belonged to the assessee company and which would not allow Disney to go ahead with its plans, it was necessary for Disney to compensate assessee company for the same and thus the assessee company received this amount as a compensation for profits which would otherwise accrue to it. The assessee company has countered the argument of AO by saying that provisions of Section 28(ii)(b) are not applicable here as there does not exist any Managing Agency relationship between Disney and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vert to the basic relevant facts. The assessee herein namely M/s Modi Entertainment Ltd. (with its related group parties) had joined hands with M/s Disney Enterprises to form a new venture in the name and style of M/s Abraxas Media Pvt. Ltd. (is known as WB India Pvt. Ltd.) vide agreement dated 10.06.1992. It is in this factual backdrop that the assessee's stake in the said JV reached as it 49% i.e. remaining stake from group concerns/persons by way of a supplementary agreement dated 29.05.2002. Balance 51% equity in the said JV remained with "Disneys". Learned Assessing Officer even is very fair in his assessment discussion at page 2 that on 18.10.1992 and 13.04.1993, the foregoing Disney group entered into a marketing license agreement and television distribution agreement with "Abraxas" wherein the latter was granted various licenses qua consumer products merchandising and distribution of television programs of "Disneys" in India. The said license(s) allegedly expired in the month of February 2003. The assessee's stand adopted throughout is that the said alleged termination of license by M/s Disney was in violation of the agreement regarding "Abraxas". It appears to have filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT-DR's attention to the fact that the assessee is not "managing the whole or substantially the whole of the affairs of an Indian company" in clause (a) to (b) or otherwise in clause (c) so as to render its compensation as taxable under the head business income. Ms. Kaur invited our attention to the assessee's agreement clause (10) at page 8 that both the above parties had decided about "expert professional, technical and managerial advice and services" by the former to the latter entity. We are of the considered view that neither the agreement clause between assessee and "Disneys" nor the assessment order and the CIT(A), as the case may be, have proved the assessee to be a managing agency qua "whole or substantially whole......." in the foregoing terms. This is indeed coupled with the fact that case law (1978) 115 ITR 190(AP) J.R. Kimtee & Sons Vs. CIT and (1999) 239 ITR 471 (Mad.) CIT Vs. Seshasayee Bros. (P) Ltd have settled the issue in assessee's favour and against the department that foregoing statutory provision covers the specified managing agency(ies) under clauses (a) to (c) than having any general applicability in all situations. 10. Learned CIT-DR at this stage als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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