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TMI Blog1989 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Mills Co. Ltd. (hereinafter referred to as the 'vendor') to buy the textile money an amount of Rs. 5 lakhs by cheque which the solicitor of the vendor was to hold as stake holder. By another agreement dt. 19th Aug., 1980 the assessee also acquired the right to use the trade marks of the vendor and for that the assessee was to pay royalty at a percentage fixed in the agreement. 4. The Hon'ble Gujarat High Court vide its order dt. 12th Aug., 1980 on a winding up petition against the vendor restrained it from dealing with its properties including the amount received as earnest money or encashing the cheque for the earnest money. This order was continued on the 14th of August, and thereafter on the 3rd of Nov., 1980. The Hon'ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court decision in the case of CIT vs. B.C. Sreenivasa Shetty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC) on which the assessee had inter alia relied was not applicable. The ITO added up the said amount of Rs. 5 lakhs to the amount of Rs. 9 lakhs and from the total of Rs. 14 lakhs deducted a total of the said amounts of Rs. 5 lakhs and Rs. 2,05,768 i.e., Rs. 7,05,768 holding the balance to be taxable as short term capital gains. the CIT has confirmed the ITO's order, observing that the Supreme Court decision in the case of Sreenivasa Shetty was not applicable because it could not be said that the value of the right transferred was Nil and the said case related to transfer of goodwill of import entitlement, etc. 5. On behalf of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly a case of substitution of the old contract between the assessee and the New Commercial Mills by the new contract i.e. the contract between the assessee and the Bharat Vijay Mills. He submitted that the issue was settled by the assessee itself business in the statement of income filed by the assessee the assessee had stated in the notes as follows: "During the year under assessment the assessee has received Rs. 9 lakhs from Bharat Vijay Mills Ltd. being the right assignment charges and incurred the total expenditure of Rs. 2,05,768 in connection with assignment of such rights." Thus, according to the assessee itself there was an assignment of the rights an it was not open for the assessee now to say that there was no such assignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. It is said that there was a frustration of the contract of sale of the Mill. However, it is clear from the Court's order which has been referred to above that it was only a temporary injunction and ultimately that injunction was vacated, although after the second agreement of October, 1980 with the Bharat Vijay Mills. The Supreme Court decision in the case of In re H.H. Nizam's Jewellery Trust does not help the assessee because in that case the Court has held that there was a frustration of the agreement because even after the injunction was vacated the High Court had ordered restoration of status quo ante. In that case there was a sale of jewellery by tenders and the contract could not be performed not only because there was an interi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was built up over a course of time in a newly established business. That is not the situation her. The right to acquire a property not only can have a cost but does have a cost. 11. The only fact on which the assessee's claim that it was acquired free of cost is based is that the cheque for the earnest money was returned by the vendor. The apparent here is not real. this is so because the real nature of transaction is not fully exposed. What has happened is that the vendor agreed to sell his mill for Rs. 2,75,00,000 to the assessee who incurred a liability to pay that amount. The consideration, therefore, was that liability or obligation to pay that amount. For failure to discharge that liability or fulfil that obligation the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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