M/s. ABB Ltd., Bangalore V. The Addl. CIT, Bangalore

ITA 1281/BANG/2010

• Counselvise Citation: 128121114 RSA 2010
• Duration Of Justice: 4 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 22-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V ARVIND SR
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Capital asset; Gift; Business income; Depreciation; Retrospective amendment; Cost of acquisition; Capital receipt; Revenue expenditure
• Section: 244A; 2(14); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER ITA NO.1281/BANG/2010 ASSESSMENT YEAR : 1997-98 ABB LIMITED, KHANIJA BHAVAN, RACE COURSE ROAD, 2 ND FLOOR, EAST WING, BANGALORE 560 001. PAN: AAACA 3834B VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX (LTU), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI P.J. PARDIWALLA, SR. ADVOCATE RESPONDENT BY : SHRI K.V. ARVIND, SR. COUNSEL DATE OF HEARING : 08.05.2015 DATE OF PRONOUNCEMENT : 14.05.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 30.09.2010 OF CIT(A), LTU, RELATING TO AY 1997-98. 2. DURING THE PREVIOUS YEAR RELEVANT TO AY 1997-98 , THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G. THE ASSESSEE AS ITA NO.1281/BANG/2010 PAGE 2 OF 45 PART OF ITS BUSINESS ACTIVITIES WAS ALSO ENGAGED, I N SEVERAL YEARS IN THE PAST, IN THE BUSINESS OF MANUFACTURE AND SALE OF AN D DISTRIBUTION OF MACHINERY AND COMPONENTS FOR ELECTRIC LOCOMOTIVES, SIGNALLING SYSTEMS AND ELECTRIFICATION FOR RAILWAYS (THE BUSINESS FOR COMP ONENTS FOR ELECTRIC LOCOMOTIVES, SIGNALLING SYSTEMS AND ELECTRIFICATION FOR RAILWAYS HEREINAFTER COLLECTIVELY REFERRED TO AS THE TRANSPORTATION BUS INESS/UNDERTAKING). BY AN AGREEMENT DATED 28.6.1996, THE ASSESSEE AGREED TO T RANSFER AND SELL TO ABB DAIMLER BENZ TRANSPORTATION (INDIA) LTD., THE T RANSPORTATION BUSINESS/ UNDERTAKING FOR A SALE CONSIDERATION OF RS.53,10,00 ,000/-. THE TRANSFER WAS WITH RETROSPECTIVE EFFECT FROM 1.1.1996. THE TE RM UNDERTAKING WAS DEFINED TO MEAN THE OPERATIONS AND ACTIVITIES OF TH E TRANSPORTATION BUSINESS OF THE ASSESSEE AS A GOING CONCERN ON AN AS IS WHER E IS BASIS AND INCLUDED ALL PLANT, MACHINERY, CURRENT ASSETS, INDU STRIAL AND OTHER LICENSES, ALL INTANGIBLE ASSETS, ALL BENEFITS AND OBLIGATIONS OF ALL CURRENT AND PENDING CONTRACTS, TECHNOLOGY FOR DESIGN MANUFACTURE, TEST, QUALITY ASSURANCES AND SERVICING FOR ALL RAILWAY EQUIPMENT AND PARTS/COMPO NENTS THEREOF AS EXISTING WITH THE ASSESSEE, ALL LIABILITIES RELATIN G TO PERTAINING TO THE OPERATIONS AND ACTIVITIES OF THE ASSESSEES TRANSPO RTATION BUSINESS. 3. UNDER ANOTHER AGREEMENT DATED 24.6.1996, THE AS SESSEE AGREED WITH ABB BAHNBETEILIGUNGEN GMBH, HEREINAFTER REFERR ED TO AS DEBAB, WHICH EFFECTIVELY HELD ALL THE SHARES OF ABB DAIMLE R BENZ TRANSPORTATION (INDIA) LTD., TO WHOM THE TRANSPORTATION BUSINESS U NDERTAKING OF THE ASSESSEE WAS SOLD, THAT NEITHER THE ASSESSEE OR ITS AFFILIATES SHALL ENGAGE ITA NO.1281/BANG/2010 PAGE 3 OF 45 IN ANY WAY DIRECTLY OR INDIRECTLY, IN ANY INDUSTRIA L ACTIVITY WHICH COMPETES IN INDIA WITH THE ACTIVITIES OF THE BUSINESS THAT IS T RANSFERRED. IN RESPECT OF THIS COVENANT NOT TO COMPETE, THE ASSESSEE WAS PAID A SU M OF RS.30,00,00,00 BY DEBAB. 4. BOTH THE AFORESAID RECEIPTS WERE CLAIMED AS NOT TAXABLE IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR AY 97-98 . THE NOTE GIVEN BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME READS THUS : NOTES: 1. DURING THE YEAR VIDE AN AGREEMENT DATED 28 TH JUNE, 1996 THE COMPANY HAD SOLD AND TRANSFERRED ITS ENTIRE UND ERTAKING RELATING TO THE TRANSPORTATION BUSINESS AS A GOING CONCERN, AT A LUMPSUM PRICE OF RS.54,62,49,000 TO ABB DAIMLER BEN Z TRANSPORTATION (INDIA) LIMITED ON 1 ST AUGUST, 1996. THE ASSET THAT WAS TRANSFERRED WAS THE UNDERTAKING AS SUCH AN D NOT INDIVIDUAL ASSETS OF THE UNDERTAKING. THE COST OF ACQUISITION OF THE ASSET AND THE COST OF IMPROVEMENT THEREOF CANNO T BE ASCERTAINED. ACCORDINGLY NO CAPITAL GAINS HAVE BEE N OFFERED IN RESPECT OF THE SALE OF THE UNDERTAKING AS A GOING C ONCERN. AS THE UNDERTAKING HAS BEEN TRANSFERRED FOR A LUMP SUM CONSIDERATION, NO PART OF CONSIDERATION CAN BE ATTR IBUTABLE TO ANY INDIVIDUAL ASSETS WHICH IS COMPRISED IN THE UNDERTA KING. ACCORDINGLY, NO ADJUSTMENT HAS BEEN MADE IN COMPUTI NG W.D.V. FOR THE BLOCK OF ASSETS. 2. DURING THE YEAR COMPANY HAS RECEIVED A SUM OF RS.33,21,00,000 UNDER AN AGREEMENT FROM M/S.ABB BAHNBETILIGUNGEN GMBH, GERMANY, FOR FURNISHING NON- COMPETE COVENANT IN RESPECT OF TRANSPORTATION BUSINESS. TH E AMOUNT RECEIVED IS ON CAPITAL ACCOUNT AND AS THERE IS NO T RANSFER OF CAPITAL ASSETS, THE AMOUNT HAS NOT BEEN OFFERED FOR TAX. ITA NO.1281/BANG/2010 PAGE 4 OF 45 5. THE FIGURES AS GIVEN IN THE AGREEMENTS AND THE F IGURES GIVEN IN THE NOTES REFERRED TO ABOVE VARIES. BUT THIS IS DUE TO SOME OTHER ADJUSTMENTS BETWEEN THE PARTIES TO THE AGREEMENT. THE VARIATIO N IS NOT VERY MATERIAL FOR THE PRESENT CASE. THE VARIATION IN THE CONSIDERATIO N FOR TRANSFER OF TRANSPORTATION BUSINESS/UNDERTAKING IS BECAUSE OF A N AGREEMENT BETWEEN THE ASSESSEE AND THE TRANSFEREE TO THE EFFECT THAT THOUGH THERE IS TRANSFER OF BUSINESS WITH EFFECT FROM 1.1.1996 THE ASSESSEE WILL CONTINUE TO RUN THE BUSINESS AND THE ASSESSEE WILL ALSO BE ENTITLED TO PROFITS OF THE BUSINESS UP TO 31.7.96. THE VARIATION IN THE FIGURE OF NON-CO MPETE FEE IS BECAUSE OF PAYMENT OF INTEREST BY DEBAB AT 18% ON THE SUM OF RS.30 CRORES WHICH IS THE NON-COMPETE FEE FROM 1.1.96 TO 31.7.1996 WHICH COMES TO RS.3,21,00,000/-. 6. PRIOR TO THE INSERTION OF SECTION 2(42C) OF THE INCOME TAX ACT, 1961 (ACT), DEFINING SLUMP SALE, COURTS HAVE HELD THAT SLUMP SALE IS A SALE OF A BUSINESS ON A GOING CONCERN BASIS WHERE THE LUMP SU M PRICE CANNOT BE ATTRIBUTED TO INDIVIDUAL ASSETS OR LIABILITIES. TH E CONCEPT OF SLUMP SALE GOT ITS RECOGNITION IN THE ACT BY THE FINANCE ACT, 1999 BY INSERTION OF SECTION 2 (42C) (WHICH DEFINES THE TERM SLUMP SALE) AND SEC TION 50B, WHICH LAYS DOWN A SPECIAL COMPUTING MECHANISM FOR COMPUTING TH E GAINS THEREFROM. GAIN FROM SLUMP SALE HAS BEEN HELD BY JUDICIAL DECI SIONS TO BE NOT TAXABLE NEITHER AS BUSINESS INCOME U/S. 41 (2) NOR AS CAPIT AL GAINS U/S. 45 OF THE ACT. TO ATTRACT SECTION 41 (2), THE SUBJECT MATTER SHOULD BE DEPRECIABLE ASSETS AND THE CONSIDERATION RECEIVED SHOULD BE CAP ABLE OF ALLOCATION ITA NO.1281/BANG/2010 PAGE 5 OF 45 BETWEEN VARIOUS ASSETS. IN CASE OF A SLUMP SALE, AN UNDERTAKING IS TRANSFERRED INCLUDING DEPRECIABLE AND NON-DEPRECIAB LE ASSETS AND IT IS NOT POSSIBLE TO ALLOCATE SLUMP PRICE TO DEPRECIABLE ASS ETS AND THEREFORE, THE SAME CANNOT BE TAXED U/S. 41 (2). TAXING GAIN ON SL UMP SALE AS CAPITAL GAIN IS ALSO NOT POSSIBLE BECAUSE THE APEX COURT FO LLOWING THE DECISION IN CIT V. B. C. SRINIVASA SETTY (128 ITR 294) HELD THAT THE CHARGING SECTION AND THE COMPUTATION SECTIONS ARE INTEGRATED CODE AND IF ONE FAILS OTHER FAILS. IF THE COMPUTATION SECTIONS FAIL THEN EVEN THE CHARGING SECTION FAILS. IN CASE OF SLUMP SALE, THERE ARE BUNDLE OF A SSETS (INCLUDING INTANGIBLE ASSETS LIKE GOODWILL) THAT ARE TRANSFERRED AND IN A BSENCE OF ANY SPECIFIC PROVISION LIKE SECTION 50B, IT IS NOT POSSIBLE TO D ETERMINE THE COST OF THE SAID ASSETS AND THUS, THE COMPUTATION MECHANISM FAI LS AND SO DOES THE CHARGING SECTION. THEREFORE, IT WAS HELD THAT THE G AIN FROM THE TRANSFER OF A BUNDLE OF ASSET ON A SLUMP BASIS IS NOT CHARGEABLE TO CAPITAL GAIN ALSO. THUS, SLUMP SALE WAS HELD TO BE NOT CHARGEABLE TO T AX PRIOR TO INSERTION OF SECTION 50B. IN THE PRESENT CASE, WE ARE CONCERNED WITH AY 97-98 PRIOR TO INSERTION OF SEC.50-B OF THE ACT. 7. THE CLAIM OF THE ASSESSEE REGARDING NON-TAXABIL ITY OF CONSIDERATION RECEIVED ON SALE OF TRANSPORTATION BUSINESS /UNDERT AKING AS WELL AS NON- COMPETE FEE WAS CONSIDERED AND DECIDED BY THE HONB LE ITAT MUMBAI BENCHES (THE ASSESSEE WAS ASSESSED AT THAT POINT OF TIME AT MUMBAI) IN ITA NO. 2555/MUM/2003 ORDER DATED 5.4.2007. ITA NO.1281/BANG/2010 PAGE 6 OF 45 8. ON THE NON-TAXABILITY OF CONSIDERATION RECEIVED ON SALE OF TRANSPORTATION BUSINESS/UNDERTAKING, THE TRIBUNAL H ELD THAT THE TRANSFER IN QUESTION WAS NOT A SLUMP SALE AND THAT IT WAS CAS E OF ITEMIZED SALE OF ASSETS AND LIABILITIES. THE FINAL CONCLUSIONS IN T HIS REGARD ARE AT PARA-92 OF THE TRIBUNALS ORDER. THE TRIBUNAL THEREAFTER GAVE DIRECTIONS AS TO HOW PROFIT/GAIN ON THE TRANSFER IN QUESTION HAS TO BE B ROUGHT TO TAX. 9. THE PURCHASER OF THE TRANSPORTATION BUSINESS/UN DERTAKING HAD IN HIS BOOKS ASSIGNED VALUES FOR THE DIFFERENT BLOCK O F ASSETS THAT WERE SUBJECT MATTER OF SALE BY THE ASSESSEE. THE FOLLOWING WERE THE VALUES SO ASSIGNED BY THE PURCHASER: PARTICULARS NET BLOCK AS ON 31.12.1996 PLANT AND MACHINERY RS. 1,08,31,000 FURNITURE AND FIXTURES RS. 30,34,000 TOOLS & MOULDS RS. 17,95,000 VEHICLES RS. 3,58,000 TECHNICAL KNOW-HOW RS.43,17,62,000 BUILDING NIL INVENTORIES RS. 3,09,000 10. THE AO COMPUTED LONG TERM CAPITAL GAIN OF RS.46 ,30,45,000 BY REDUCING FROM THE FULL VALUE OF CONSIDERATION RECEI VED ON TRANSFER OF RS.53,10,00,000 THE NET VALUE OF FIXED ASSETS OF RS .68,02,000 AND CURRENT ASSETS OF RS.6,11,53,000. THE ENTIRE SUM OF RS.33, 21,00,000 RECEIVED TOWARDS NON-COMPETE FEE AND INTEREST WAS BROUGHT TO TAX AS INCOME FROM OTHER SOURCES. ITA NO.1281/BANG/2010 PAGE 7 OF 45 11. THE CIT(A) HELD THAT THE CONSIDERATION OF RS. 53.10 CRORES, AFTER REDUCING THE COST OF THE ASSET, WHICH WAS DETERMINE D BY THE ASSESSING OFFICER AT RS. 6.79 CRORES, WAS CHARGEABLE TO TAX A S SHORT-TERM CAPITAL GAIN IN TERMS OF SECTION 50 AND NOT AS LONG-TERM CAPITAL GAIN AS HELD BY THE ASSESSING OFFICER. AS REGARDS THE TAXABILITY OF RS. 33.21 CRORES BEING THE AMOUNT RECEIVED FOR FURNISHING RESTRICTIVE COVENANT , THE LD. CIT(A) HAS TAKEN THE VIEW THAT THE SAID AMOUNT REPRESENTED CON SIDERATION FOR THE TRANSFER OF GOODWILL AND HENCE HE DIRECTED THE ASSE SSING OFFICER TO CHARGE THE SAME AS LONG TERM CAPITAL GAIN. HE HAS FURTHER HELD THAT THE INTEREST THAT WAS PAYABLE TO THE ASSESSEE OWING TO THE DELAY IN R ECEIPT OF THE SALE CONSIDERATION WAS LIABLE TO BE APPORTIONED IN TWO P ARTS AND ACCORDINGLY THE INTEREST FOR THE FROM 1.1.1996 TO 31.3.1996 WAS CHA RGEABLE IN THE ASSESSMENT YEAR 1996-97 WHILE THE BALANCE OF THE IN TEREST RECEIVED FOR THE PERIOD COMMENCING ON 1.4.1996 WAS CHARGEABLE TO TAX IN AY L997-98. 12. THE TRIBUNAL MODIFIED THE ABOVE DIRECTIONS OF THE CIT(A) AS FOLLOWS:- 96. WE HAVE HEARD BOTH THE PARTIES. THERE ARE THR EE DISTINCT CATEGORIES OF ASSETS WHICH HAVE BEEN TRANSFERRED UN DER THE AGREEMENT AND TO WHICH VALUES HAVE BEEN ASSIGNED BY THE PURCHASER, NAMELY, (I) VALUE ASSIGNED TO THE INVENT ORY SOLD; (II) VALUE ASSIGNED TO THE DEPRECIABLE ASSETS SOLD; AND (III) VALUE ASSIGNED TO THE OTHER ASSETS SOLD. WE SHALL NOW DEA L WITH EACH OF THEM. ITA NO.1281/BANG/2010 PAGE 8 OF 45 13. WITH REGARD TO THE TAXABILITY OF PROFITS AND GA INS ARISING ON TRANSFER OF INVENTORIES THE CIT(A) HELD THAT THE SAME WILL HAVE TO BE ASSESSED AS BUSINESS PROFITS. THIS DIRECTION OF THE CIT(A) IS NOT RELEVANT FOR RENDERING DECISION IN THE PRESENT APPEAL. WITH REGARD TO TAX ABILITY OF PROFITS/GAINS ARISING ON TRANSFER OF DEPRECIABLE ASSETS, THE CIT( A) GAVE DIRECTIONS IN PARA-98 OF HIS ORDER. THIS DIRECTION OF THE CIT(A) IS ALSO NOT RELEVANT FOR DISPOSAL OF THE PRESENT APPEAL. WE ARE ONLY CONCER NED WITH THE DIRECTION WITH REGARD TO TAXABILITY OF PROFITS OR GAINS ARISI NG ON TRANSFER OF OTHER ASSETS IN THIS APPEAL. ON THE ABOVE ASPECT THE ITAT GAVE THE FOLLOWING DIRECTIONS IN PARA 99 & 100 OF ITS ORDER AS FOLLOWS: 99. IN VIEW OF OUR AFORESAID DIRECTION MODIFYING THE ORDER OF THE LEARNED CIT(A) REGARDING THE COMPUTATION OF CAP ITAL GAINS U/S 50 IN RESPECT OF DEPRECIABLE ASSETS ONLY, A CONSEQU ENTIAL ISSUE ARISES AS TO WHAT TREATMENT SHOULD BE GIVEN TO THE REMAINING AMOUNT OF SALE CONSIDERATION, I.E., SALE CONSIDERAT ION NOT ALLOCABLE TO INVENTORIES AND NON-DEPRECIABLE COMPONENT OF THE ASSETS TRANSFERRED. IT CAN BE CONSIDERED FOR TAXATION EITH ER AS CAPITAL GAINS OR AS BUSINESS PROFITS DEPENDING UPON WHETHER IT IS IN CAPITAL FIELD OR REVENUE FIELD. IF IT IS NOT IN ANY OF THE AFORESAID FIELDS, IT CAN STILL BE CONSIDERED FOR TAXATION AS A CASUAL OR NON- RECURRING RECEIPT U/S 56 READ WITH SECTION 10(3). LEARNED COMMISSIONER (DR) HAS POINTEDLY SUBMITTED THAT THE ASSESSEE HAS ALREADY CLAIMED COST OF ACQUISITION/IMPROVEMENT/DEV ELOPMENT OF NON-DEPRECIABLE ASSETS IN ITS ACCOUNTS AND HENCE CA NNOT AGAIN CLAIM DEDUCTION ON THE SAME ACCOUNT. HE HAS ALSO SU BMITTED THAT THE ASSESSEE HAS NEITHER CAPITALIZED THOSE EXPENSES NOR SHOWN THEM AS INVESTMENT OR AS CAPITAL ASSETS IN ITS ACCO UNTS NOR CLAIMED ANY DEPRECIATION THEREON. ACCORDING TO HIM, IT IS T HE TOTAL AMOUNT OF SALE CONSIDERATION NOT ALLOCABLE TO INVENTORIES AND DEPRECIABLE ASSETS THAT SHOULD BE BROUGHT TO TAX WITHOUT ANY DE DUCTION TOWARDS COST OF ACQUISITION/IMPROVEMENT/DEVELOPMENT , AS SUCH COST ALREADY STOOD CLAIMED BY THE ASSESSEE IN ITS A CCOUNTS AND ALLOWED BY THE DEPARTMENT. THE ASSESSEE HAS NOT REB UTTED THE ITA NO.1281/BANG/2010 PAGE 9 OF 45 AFORESAID SUBMISSION, I.E., THAT THE EXPENSES TOWAR DS ACQUISITION/IMPROVEMENT/DEVELOPMENT ALREADY STOOD C LAIMED AS REVENUE EXPENSES IN THE ACCOUNTS, MADE BY THE LEARN ED CIT-DR, IN ITS SUBMISSIONS INCLUDING THE WRITTEN SUBMISSION S. WE FIND THAT THIS ASPECT HAS NOT BEEN LOOKED INTO BY THE LEARNED CIT(A) BUT ADJUDICATION ON THIS ISSUE OF TAXABILITY OF PROFITS OR GAINS ARISING ON TRANSFER OF NON-DEPRECIABLE ASSETS IS A NECESSAR Y CONSEQUENCE OF OUR DIRECTIONS TO THE AO TO SPLIT THE SALE CONSI DERATION INTO THREE PARTS. 100. WE FIND THAT THE PURCHASER HAS ALLOCATED RS.4 3.17 CRORES OUT OF TOTAL SALE CONSIDERATION TO TECHNICAL KNOW-H OW. THE ASSESSEE HAS NOT PURCHASED THE TECHNICAL KNOW-HOW. IT HAS DEVELOPED THE TECHNICAL KNOW-HOW IN-HOUSE. IT IS UN BELIEVABLE THAT THE ASSESSEE COULD HAVE DEVELOPED THE TECHNICA L KNOW HOW IN-HOUSE WITHOUT INCURRING ANY EXPENDITURE OR COST. THERE IS NOTHING BEFORE US TO INDICATE THAT THE ASSESSEE HAS CAPITALISED THE EXPENSES TOWARDS ACQUISITION/IMPROVEMENT/DEVELOPMEN T OF TECHNICAL KNOW-HOW IN ITS ACCOUNTS OR CLAIMED DEPRE CIATION THEREON. THE ONLY INFERENCE THAT CAN BE DRAWN IS TH AT THE EXPENSES INCURRED TOWARDS ACQUISITION/IMPROVEMENT/DEVELOPMEN T OF TECHNICAL KNOW-HOW HAVE BEEN CLAIMED AS REVENUE EXP ENDITURE IN WHICH SITUATION THE ENTIRE RECEIPT WOULD ALSO BE TA XABLE IN REVENUE FIELD. HOWEVER, THE POSITION WOULD BE DIFFE RENT IF THE ASSESSEE HAS CAPITALIZED THE EXPENSES/COSTS INCURRE D TOWARDS ACQUISITION/IMPROVEMENT/DEVELOPMENT OF TECHNICAL KN OW-HOW IN ITS ACCOUNTS IN WHICH CASE THE PROFIT OR GAIN ARISI NG ON THEIR TRANSFER WOULD BE CHARGEABLE TO TAX AS CAPITAL GAIN S U/S 45 AFTER ALLOWING DEDUCTION FOR THE COSTS OF THEIR ACQUISITI ON / IMPROVEMENT/DEVELOPMENT. THE ASSESSEE CANNOT ARGUE, AFTER CLAIMING DEDUCTION TOWARDS THE EXPENSES/COSTS OF TH EIR ACQUISITION/IMPROVEMENT/DEVELOPMENT AS REVENUE EXPE NDITURE, THAT THE GAINS ARISING THERE-FROM WOULD NOT BE EXIG IBLE TO CAPITAL GAINS TAX AS THEIR COST OF ACQUISITION/IMPROVEMENT/ DEVELOPMENT ARE NOT AVAILABLE FOR DEDUCTION U/S 48 OF THE INCOM E-TAX ACT. IF THE ASSESSEE HAS TREATED THE COST/EXPENSES RELATING TO ACQUISITION/IMPROVEMENT/DEVELOPMENT OF INTANGIBLE N ON- DEPRECIABLE ASSETS IN THE REVENUE FIELD, THE GAINS ARISING AS A RESULT OF SALE THEREOF WILL HAVE TO BE NECESSARILY TREATED IN REVENUE FIELD EITHER U/S 28 OR SECTION 56 AND NOT A S CAPITAL GAINS. THE PROVISIONS OF SECTION 56 READ WITH SECTION 10(3 ) ARE QUITE APPOSITE. ENTIRE SALE CONSIDERATION NOT ALLOCABLE T O INVENTORIES AND NON-DEPRECIABLE ASSETS CAN ALSO BE CONSIDERED F OR TAXATION AS ITA NO.1281/BANG/2010 PAGE 10 OF 45 A RECEIPT OF CASUAL AND NON-RECURRING NATURE UNDER SECTION 56 OF THE I-T ACT IF THE ASSESSEE IS NOT IN A POSITION TO ESTABLISH THAT THE INCOME ACCRUING TO IT ON ACCOUNT OF THE IMPUGNED TR ANSFER IS NOT EXEMPT FROM TAX OR IS NOT LIABLE TO BE TAXED U/S 28 . HOWEVER, NEITHER THE AO NOR THE LEARNED CIT(A) HAS RECORDED ANY FINDING OF FACT IN THIS BEHALF. THEREFORE, THE ISSUE REGARD ING THE TAXABILITY OF THE REMAINING AMOUNT OF SALE CONSIDERATION IS RE STORED TO THE FILE OF THE AO WITH THE DIRECTION TO VERIFY ALL THE AFORESAID ASPECTS, APPLY HIS MIND AFRESH AND DECIDE THE TAXAB ILITY OR NON- TAXABILITY OF THE REMAINING AMOUNT OF SALE CONSIDER ATION IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE. 14. ON THE QUESTION OF TAXABILITY OF NON-COMPETE FE E, THE TRIBUNAL HELD AS FOLLOWS:- 129. IN VIEW OF THE FOREGOING, WE ENDORSE THE ORD ER OF THE DEPARTMENTAL AUTHORITIES THAT THE IMPUGNED AMOUNT R ECEIVED BY THE ASSESSEE IS NOT IN LIEU OF RESTRICTIVE COVENANT AND THAT THE SAID COVENANT IS A COLOURABLE DEVICE TO PASS OFF THE IMP UGNED RECEIPTS AS NON-TAXABLE. 130. LD. CIT(A) HAS NOTED IN PARA 21.3 (PAGE 26) O F HIS ORDER THE DECISION OF THE ASSESSING OFFICER THAT THE IMPU GNED RECEIPTS ARE TAXABLE EITHER U/S. 28 OR U/S. 10(3) OR, IN THE ALTERNATIVE, AS ATTRIBUTABLE TO TRANSFER OF GOODWILL. IN OTHER WORD S, THE ID. CIT(A) WAS WELL-AWARE OF THE FACT THAT THE ASSESSING OFFIC ER HAS TAXED IT FIRSTLY AS REVENUE RECEIPTS U/S. 28 AND THEN AS INC OME OF CASUAL AND NON-RECURRING NATURE UNDER SECTION 10(3)/56 OF THE L-T ACT AND IT WAS ONLY IN THE ALTERNATIVE THAT HE RECORDED THE FINDING THAT THE IMPUGNED RECEIPT IS ALSO LIABLE TO TAX ON ACCOU NT OF TRANSFER OF GOODWILL. AT PARA 21.7 (PAGE 28) OF HIS ORDER THE L D. CIT(A) HAS HELD THAT THE RECEIPT DOES NOT HAVE THE CHARACTER O F INCOME AND HENCE CANNOT BE TAXED AS SUCH AND THEREAFTER PROCEE DED TO DECIDE THAT THE IMPUGNED RECEIPT WAS TAXABLE AS LONG TERM CAPITAL GAIN ON THE GROUND THAT THE IMPUGNED AMOUNT REPRESENTED RECEIPT ON ACCOUNT OF TRANSFER OF GOODWILL TO THE PURCHASER. T HE ORDER OF THE LD. CIT(A) IS QUITE CRYPTIC IN AS MUCH AS HE HAS NO T GIVEN A WELL- REASONED CONSIDERATION TO THE RELEVANT ASPECTS OF T HE ISSUE. HE HAS ITA NO.1281/BANG/2010 PAGE 11 OF 45 NOT RECORDED ANY FINDING AS TO HOW THE IMPUGNED REC EIPT FAILED TO PASS THE TEST OF BEING BUSINESS PROFITS OR BEING TH E INCOME OF CASUAL AND NON-RECURRING NATURE U/S 10(3)/56. HE O UGHT TO HAVE FIRST EXAMINED THE CORRECTNESS OF THE DECISION OF T HE ASSESSING OFFICER AS TO WHETHER THE IMPUGNED RECEIPTS WERE IN THE NATURE OF BUSINESS PROFITS U/S 28 OR INCOME IN THE NATURE OF CASUAL AND NONRECURRING RECEIPT U/S 10(3)/56 IF SO, WHETHER T HEY WERE TAXABLE UNDER THE AFORESAID PROVISIONS INSTEAD OF S UMMARILY REJECTING IT AND PROCEEDING TO TAX IT AS LONG TERM CAPITAL GAIN ON THE BASIS THAT THE ASSESSEE HAS TRANSFERRED THE GOO DWILL. HE SEEMS TO HAVE LOST SIGHT OF THE FACT THAT IT WAS THE GOOD WILL OF ABB GROUP WHICH WAS COMMON BOTH TO THE ASSESSEE-COMPANY AND THE PURCHASER-COMPANY AND HENCE THE ASSESSEE COULD NOT POSSIBLY HAVE ITS OWN GOODWILL INDEPENDENT OF THE ABB GROUP FOR TRANSFER TO THE PURCHASER-COMPANY. IN ANY CASE, THE GOODWILL OF ABB GROUP WAS EQUALLY AVAILABLE TO THE PURCHASER-COMPAN Y. SINCE THE LEARNED CIT(A) HAS FAILED TO CONSIDER THE RELEV ANT ASPECTS OF THE CASE AND PASS A WELL-REASONED ORDER IN THIS BEH ALF, IT IS CONSIDERED APPROPRIATE TO SET ASIDE HIS ORDER. IN N ORMAL COURSE, WE WOULD HAVE RESTORED THE MATTER TO HIS FILE. HOWE VER, WE ARE NOT DOING SO BECAUSE WE HAVE RESTORED OTHER ISSUES TO THE FILE OF THE AO. WE THEREFORE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION IN ACCORDANC E WITH LAW KEEPING IN VIEW THE OBSERVATIONS MADE BY US EARLIER IN THIS ORDER. GROUND NO. 11 THUS STANDS RESTORED TO THE FILE OF T HE ASSESSING OFFICER. 15. THE PRESENT APPEAL ARISES OUT OF THE ORDER OF T HE AO AND CIT(A) ON REMAND PURSUANT TO THE AFORESAID ORDER OF THE TRIBU NAL. TAXABILITY OF CONSIDERATION RECEIVED ON TRANSFER OF TRANSPORTATION BUSINESS/UNDERTAKING: 16. THE AO IN THE PROCEEDINGS PURSUANT TO THE ORDER OF THE TRIBUNAL HELD THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE TOW ARDS SALE OF TECHNICAL KNOW-HOW WAS CAPITAL RECEIPT IN THE NATURE OF GOODW ILL LIABLE TO TAX U/S.45 OF THE ACT AS CAPITAL RECEIPT AT THE VALUE GIVEN BY TH E PURCHASER IN ITS ITA NO.1281/BANG/2010 PAGE 12 OF 45 FINANCIALS. HE ALSO HELD THAT SUCH GAIN WAS LONG T ERM CAPITAL GAIN BECAUSE THE BUSINESS UNIT BEING SOLD WAS VERY OLD. THE AO WAS OF THE VIEW THAT THE CASE OF THE ASSESSEE FITS MOST SUITABLY WITH THE DE CISION IN THE CASE OF CIT VS. MANGALORE GANESH BEEDI WORKS 264 ITR 142 (KARN) . IN THE AFORESAID DECISION, THE HONBLE KARNATAKA HIGH COUR T TOOK THE VIEW THAT TRADEMARK, TRADE NAME ETC., ARE INDISTINGUISHABLE, INSEPARABLE AND PART OF GOODWILL. HE HELD THAT THE COST OF ACQUISITION WAS NIL AND THEREFORE BROUGHT THE ENTIRE SUM EARMARKED FOR TECHNICAL HOW BY THE P URCHASER OF THE TRANSPORTATION BUSINESS/UNDERTAKING IN HIS BOOKS AS LONG TERM CAPITAL GAIN. 17. BEFORE CIT(A) THE ASSESSEE CONTENDED THAT THE REVENUE IN COMING TO THE CONCLUSION THAT SALE OF THE TRANSPORTATION B USINESS/UNDERTAKING BY THE ASSESSEE WAS NOT A SLUMP SALE HAD PLACED STRONG RELIANCE ON THE CLASSIFICATION AND ALLOCATION OF CONSIDERATION AS R ECORDED IN ITS BOOKS OF ACCOUNTS BY THE PURCHASER. HOWEVER WHEN IT COMES T O TAXING THE CONSIDERATION ALLOCATED BY THE PURCHASER TOWARDS T ECHNICAL KNOW-HOW, THE REVENUE CLAIMS THAT IT WAS TOWARDS GOODWILL. I T WAS FURTHER ARGUED THAT THE REVENUE HAS NOT ACCEPTED THE CORRECTNESS OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANGALORE GANESH BEEDI WORKS (SUPRA) EQUATING TRADEMARK, TRADE NAME ETC., AS INDISTINGU ISHABLE, INSEPARABLE AND PART OF GOODWILL, IN AS MUCH AS C OST OF ACQUISITION IN THE CASE OF SELF-GENERATED ASSETS LIKE GOODWILL WAS AME NDED BY THE FINANCE ACT, 1987 W.E.F. 1.4.1989 BY LAYING DOWN THAT COST OF ACQUISITION OF GOODWILL ITA NO.1281/BANG/2010 PAGE 13 OF 45 WOULD BE NIL. BY THE FINANCE ACT, 2002 W.E.F. 1- 4-2003 A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY O N ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, WERE ALSO INCLUDED IN SEC.55(2)(A) OF THE ACT AND THE COST OF ACQUISITION OF THESE ASSETS WERE DEEMED TO BE NIL. THEREFORE THE LEGISLATURE DID NO T EQUATE GOODWILL WITH THAT OF A TRADE MARK OR BRAND NAME, OR RIGHT TO MA NUFACTURE, PRODUCE OR PROCESS ANY ARTICLE. HAD THE LEGISLATURE THOUGHT THE TWO THINGS TO BE ONE AND THE SAME THERE WAS NO NECESSITY FOR THE SUBSEQU ENT AMENDMENT TO SEC.55(2)(A) OF THE ACT BY THE FINANCE ACT, 2002. THE ASSESSEE ALSO INVITED THE ATTENTION OF THE CIT(A) TO CBDT CIRCULA R NO.14 OF 2001 DATED 12.12.2001 252 ITR (ST.) 65 WHICH ALSO CLARIFIES TH AT GOODWILL OF A BUSINESS IS AN ASSET SEPARATE AND DISTINCT FROM A TRADE MARK THAT IS USED IN THE BUSINESS. IT WAS ARGUED THAT TECHNICAL KNOW HOW WAS ALSO TO BE REGARDED AS AN ASSET SEPARATE AND DISTINCT FROM GOO DWILL. IN THE ABSENCE OF ANY COST OF ACQUISITION BEING INCURRED FOR ACQUI RING SUCH TECHNICAL KNOWHOW, WHICH FACT WAS, ACCORDING TO THE ASSESSEE NOT DISPUTED BY THE AO, THE ENTIRE CONSIDERATION COULD NOT BE BROUGHT T O TAX HAVING REGARD TO THE PRINCIPLE ENUNCIATED BY THE HONBLE SUPREME COU RT IN CIT VS. B.C.SRINIVASA SETTY 128 ITR 294 (SC) . THE ASSESSEE REITERATED THAT TECHNICAL KNOW HOW WAS A SELF-GENERATED ASSET AN D THE ASSESSEE INCURRED NO COST BUT DEVELOPED IN THE COURSE OF CON DUCTING ITS BUSINESS. IT WAS ALSO ARGUED THAT IF TECHNICAL KNOW-HOW IS TO BE REGARDED AS RIGHT TO ITA NO.1281/BANG/2010 PAGE 14 OF 45 MANUFACTURE AN ARTICLE OR THING OR A RIGHT TO CARRY ON BUSINESS EVEN THEN THE AMENDMENT TO SEC.55(2)(A) OF THE ACT DEEMING COST OF ACQUISITION OF THESE ASSETS AS NIL WAS EFFECTIVE ONLY FROM 1.4.2 003 AND PRIOR TO THAT THE CAPITAL GAIN ON TRANSFER OF THESE ASSETS WAS INCAPA BLE OF BEING DETERMINED AND THEREFORE THE CHARGING PROVISIONS OF SEC.45 REA D WITH SEC.48 OF THE ACT WERE NOT CAPABLE OF BEING APPLIED AND THE CHARGE TO TAX WOULD FAIL ON THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF B.C.SRINIVASA SETTY (SUPRA) . 18. THE CIT(A) ON THE ABOVE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE, FIRSTLY OBSERVED THAT THE ASSESSEE DID NO T PRODUCE BEFORE THE AO IN THE PROCEEDINGS AFTER THE TRIBUNALS ORDER DE TAILS OF TECHNICAL KNOW- HOW TRANSFERRED ALONG WITH DOCUMENTARY EVIDENCE REL ATING TO ITS ACCOUNTING TREATMENT, ENTRIES PASSED IN ITS BOOKS OF ACCOUNTS RELATING TO THE TRANSACTION, COPIES OF RELEVANT LEDGER/EXTRACT/ACCO UNTS ETC., BUT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN THIS REGA RD BEFORE THE AO. THE CIT(A) THEREAFTER REFERRED TO A DECISION OF THE ITAT CHENNAI BENCH IN THE CASE OF INDO TECH ELECTRIC CO. VS. DCIT (2006) 282 ITR (A.T .) 197 (CHENNAI) WHEREIN IT WAS HELD, AT THE TIME OF TRANSFERRING TH E FIRM AS A GOING CONCERN FOR A CONSIDERATION, WHAT WAS SOLD UN DER THE GUISE OF TECHNICAL NOW-HOW WAS NOTHING BUT GOODWILL WITH THE SOLE INTENTION OF EVADING TAX. IN THE ABSENCE OF ANY EVIDENCE OF WHA T WAS THE TECHNICAL KNOW-HOW TRANSFERRED, THE CIT(A) WAS OF THE VIEW TH AT WHAT WAS TRANSFERRED WAS IN FACT GOODWILL. THE CIT(A) ALSO HELD THAT JUST BECAUSE THE ITA NO.1281/BANG/2010 PAGE 15 OF 45 DEPARTMENT HAS ACCEPTED THE ALLOCATION OF CONSIDERA TION FOR TRANSFER OF BUSINESS BY THE PURCHASER WHILE COMING TO THE CONCL USION THAT THE TRANSFER OF THE BUSINESS WAS NOT A SLUMP SALE, IT CANNOT B E SAID THAT THE DEPARTMENT CANNOT DISPUTE THE CONSIDERATION ALLOCAT ED BY THE PURCHASER AS TOWARDS TECHNICAL KNOW-HOW WHEN CONSIDERING THE T AXABILITY OF CONSIDERATION RECEIVED TOWARDS TRANSFER OF TECHNIC AL KNOW-HOW UNDER THE HEAD CAPITAL GAIN. ACCORDING TO THE CIT(A) THE CON SIDERATION RECEIVED BY THE ASSESSEE IN THE GUISE OF TRANSFER OF TECHNICAL KNOW-HOW IS NOTHING BUT A RUSE TO AVOID TAX LIABILITY THAT WOULD CLEARL Y ARISE OTHERWISE. THE CIT(A) THEREFORE AGREED WITH THE ORDER OF THE AO. 19. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE APART FROM REITERATING ARGUMENTS AS WERE PUT FORTH BEFORE THE CIT(A), FURTHER SUBMITTED THAT THE TRIBUNAL WHILE DECIDING THE APPEAL NEVER E XPRESSED ANY DOUBT AS TO WHAT WAS TRANSFERRED WAS TECHNICAL KNOW-HOW. THE TRIBUNAL ONLY OBSERVED THAT IF THE COSTS INCURRED TO DEVELOP TECH NICAL KNOW-HOW WERE ALREADY CLAIMED AS REVENUE EXPENSES THAN THE GAINS ARISING AS A RESULT OF SALE THEREOF WILL HAVE TO BE NECESSARILY TREATED IN REVENUE FILED U/S.28 OF THE ACT AS BUSINESS INCOME OR SEC.56 OF THE ACT READ WITH SEC.10(3) OF THE ACT, AS OTHER INCOME OF A CASUAL OR NON-RECURRING N ATURE. IF THE EXPENDITURE ON DEVELOPMENT OF TECHNICAL KNOW-HOW HAD BEEN CAPIT ALIZED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS, THAN THE GAIN ON THEIR TRANSFER WOULD BE TAXABLE AS CAPITAL GAIN U/S.45 OF THE ACT. THE I SSUE WITH REGARD TO ITA NO.1281/BANG/2010 PAGE 16 OF 45 TAXABILITY OF CONSIDERATION RECEIVED ON TRANSFER OF KNOW-HOW WAS REMANDED TO THE AO ONLY FOR THE LIMITED PURPOSE SET OUT ABOV E. ACCORDING TO HIM IT WAS NOT OPEN TO THE AO IN THE REMAND PROCEEDINGS TO HOLD THAT THE CONSIDERATION RECEIVED FOR TRANSFER OF KNOW-HOW WAS IN FACT FOR TRANSFER OF GOODWILL. IT WAS POINTED OUT BY HIM THAT THE AO, IN THE PROCEEDINGS AFTER THE ORDER OF THE TRIBUNAL, CAME TO THE CONCLUSION T HAT THE RECEIPT NEEDS TO BE TREATED AS CAPITAL RECEIPT SUBJECT TO TAX U/S.45 OF THE ACT AS CAPITAL RECEIPT AT THE VALUE GIVEN BY THE PURCHASER. HE POI NTED OUT THAT THE AO IN HIS ORDER HAS ATTEMPTED TO GIVE AN IMPRESSION THAT THE ASSESSEE HAS AGREED TO TREAT THE RECEIPT ON TRANSFER OF TECHNICA L KNOW-HOW AS GOODWILL. HE POINTED OUT THAT IN THE ASSESSEES LETTER DATED 7.12.2009, THE CONTENTIONS WERE MADE WITHOUT PREJUDICE AND THEREFO RE THE OBSERVATIONS OF THE AO IN THIS REGARD ARE NOT CORRECT. IT WAS SUBMI TTED BY HIM THAT THERE WAS NO BASIS FOR THE AO TO COME TO A CONCLUSION THA T IT WAS POINTED OUT BY HIM TECHNICAL KNOW-HOW CANNOT BE EQUATED WITH GO ODWILL. IT WAS ALSO POINTED OUT BY HIM THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANGALORE GANESH BEEDI WORKS (SUPRA) HAS SINCE BEEN SET ASIDE AND REMANDED TO THE HONBLE HIGH COURT FOR FR ESH CONSIDERATION BY THE HONBLE SUPREME COURT AS REPORTED IN 273 ITR 15 AND 56(SC) . IT WAS HIS SUBMISSION THAT ALLOCATION OF THE CONSIDER ATION FOR TRANSFER OF BUSINESS BY THE TRANSFEREE/PURCHASER OF THE BUSINES S CANNOT BE DISREGARDED AND IT HAS TO BE HELD THAT THE CONSIDER ATION OF RS.43,16,62,000/- IS TOWARDS TRANSFER OF TECHNICAL KNOW-HOW. HE ITA NO.1281/BANG/2010 PAGE 17 OF 45 REITERATED THE ARGUMENT THAT TECHNICAL KNOW-HOW D OES NOT HAVE A COST OF ACQUISITION AND THEREFORE COMPUTATION OF CAPITAL GA IN ON SUCH TRANSFER IS NOT POSSIBLE PRIOR TO 1.4.2003 AND THEREFORE THE CHARGI NG PROVISIONS FAIL. 20. HE PLACED RELIANCE ON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. FERNHILL LABORATORIES AND INDUSTRIAL ESTABLISHMENT 348 ITR 1 (BOM.) . THE ASSESSEE IN THAT CASE SOLD TRADEMARK AND DESIGNS FOR THE CONSIDERATIONS OF RS. 15 CRORES AND RS. 20 LAKHS, BUT DID NOT OFFER THE SAME TO TAX IN HIS RET URN. THE AO HELD THAT CONSIDERATION RECEIVED BY ASSESSEE WAS CHARGEABLE T O CAPITAL GAIN TAX. THE CIT(A) REVERSED THE FINDING OF AO. THE TRIBUNA L HELD THAT TRADEMARK WAS SELF- GENERATED ASSET OF ASSESSEE AND COST OF A CQUISITION WAS NIL, SECTION 48 IS NOT APPLICABLE. THE TRIBUNAL FURTHER HELD THAT TRADEMARK BECAME CHARGEABLE TO TAX W.E.F 1ST APRIL 2003 BY VI RTUE OF AMENDMENT OF SECTION 55(2)(A). FOR THE PERIOD PRIOR TO 1-4-2003 THE SALE OF SELF-GENERATED TRADEMARK WAS NOT LIABLE TO CAPITAL GAIN TAX. IT W AS ONLY BY AMENDMENT OF SECTION 55 (2)(A) WORDS TRADE MARK OR BRAND NAME A SSOCIATED WITH THE BUSINESS WAS INTRODUCED. THE AMENDMENT DOES HAVE P ROSPECTIVE OPERATION. THE HONBLE BOMBAY HIGH COURT UPHELD TH E VIEW OF THE TRIBUNAL. 21. THE LEARNED DR SUBMITTED THAT THE AO IN THE PR OCEEDINGS AFTER THE ORDER OF THE TRIBUNAL REMANDING THE ISSUE ON TAXABI LITY OF RECEIPT ON TRANSFER OF TECHNICAL KNOW-HOW, THE TRIBUNAL ONLY OBSERVED T HAT IF THE COSTS INCURRED ITA NO.1281/BANG/2010 PAGE 18 OF 45 TO DEVELOP TECHNICAL KNOW-HOW WERE ALREADY CLAIMED AS REVENUE EXPENSES THAN THE GAINS ARISING AS A RESULT OF SALE THEREOF WILL HAVE TO BE NECESSARILY TREATED IN REVENUE FILED U/S.28 OF THE ACT AS BUSI NESS INCOME OR SEC.56 OF THE ACT READ WITH SEC.10(3) OF THE ACT, AS OTHER IN COME OF A CASUAL OR NON- RECURRING NATURE. IF THE EXPENDITURE ON DEVELOPMEN T OF TECHNICAL KNOW-HOW HAD BEEN CAPITALIZED BY THE ASSESSEE IN THE BOOKS O F ACCOUNTS, THAN THE GAIN ON THEIR TRANSFER WOULD BE TAXABLE AS CAPITAL GAIN U/S.45 OF THE ACT. ACCORDING TO HIM THE AO HAS NOT CARRIED OUT THE DIR ECTIONS OF THE TRIBUNAL PROPERLY AND THEREFORE THE ISSUE SHOULD BE REMANDED TO THE AO FOR FRESH CONSIDERATION TO COMPLY WITH THE DIRECTIONS OF THE TRIBUNAL. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F KAPURCHAND SHRIMAL VS. CIT 131 ITR 451 (SC) WHEREIN THE HONBLE SUPREME COURT HELD THE APPELLATE AUTHORITY HAS THE JURISDICTION A S WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEEDINGS UNDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUT E. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, IT WAS SUBMITTED BY HIM THAT EXPENSES ON DEVELOPMENT TECHNICAL KNOW-HOW WAS NOT CLAIMED BY T HE ASSESSEE AS REVENUE EXPENDITURE. HE POINTED OUT THAT THE HONB LE ITAT WHILE REMANDING THE ISSUE IN PARA 99 & 100 OF ITS ORDER O BSERVED THAT THE COST OF TECHNICAL KNOW-HOW IS ASCERTAINABLE AND THEREFORE IT WAS NOT POSSIBLE TO ARGUE THAT THERE IS NO COST OF ACQUISITION OF TECH NICAL KNOW-HOW. ITA NO.1281/BANG/2010 PAGE 19 OF 45 22. IN HIS REJOINDER THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE TRIBUNAL CANNOT REMAND THE MATTER NOW AND DOING SO WILL BE ALLOWING A 3 RD OPPORTUNITY TO THE REVENUE. HE RELIED ON THE DECI SION OF THE THIRD MEMBER DELHI IN THE CASE OF ZUARI LEASING & FINANCE LTD. VS. INCOME TAX OFFICER 112 ITD 205 TM (DELHI) WHEREIN IT WAS HELD PRIMARY POWER, RATHER OBLIGATION OF THE TRIBUNAL, I S TO DISPOSE OF THE APPEAL ON MERITS. THE INCIDENTAL POWER TO REMAND, IS ONLY AN EXCEPTION AND SHOULD BE SPARINGLY USED WHEN IT IS NOT POSSIBLE TO DISPOS E OF THE APPEAL FOR WANT OF RELEVANT EVIDENCE, LACK OF FINDING OR INVESTIGAT ION WARRANTED BY THE CIRCUMSTANCES OF THE CASE. REMAND IN A CASUAL MANNE R AND FOR THE SAKE OF REMAND ONLY OR AS A SHORT CUT, IS TOTALLY PROHIBITE D. IT HAS TO BE BORNE IN MIND THAT LITIGANTS HAVE TO WAIT FOR LONG TO HAVE F RUIT OF LEGAL ACTION AND EXPECT THE TRIBUNAL TO DECIDE ON MERIT. IT IS, THER EFORE, ALL THE MORE NECESSARY THAT MATTER SHOULD BE DECIDED ON MERIT WI THOUT ALLOWING ONE OF THE PARTIES BEFORE THE TRIBUNAL TO HAVE ANOTHER INN ING, PARTICULARLY WHEN SUCH PARTY HAD FULL OPPORTUNITY TO ESTABLISH ITS CA SE. UNNECESSARY REMAND, WHEN RELEVANT EVIDENCE IS ON RECORD, BELIES LITIGAN TS LEGITIMATE EXPECTATIONS AND IS TO BE DEPRECATED. 23. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSES SEE FIRSTLY HELD THAT THE SALE OF THE TRANSPORTATION BUSINESS/UNDERTAKING WAS NOT A SLUMP SALE AND IT WAS A SALE OF ITEMIZED ASSETS. THE TRIBUNAL THEREA FTER HELD THAT THERE WERE THREE DISTINCT CATEGORIES OF ASSETS WHICH HAVE BEEN TRANSFERRED AND TO ITA NO.1281/BANG/2010 PAGE 20 OF 45 WHICH VALUES HAVE BEEN ASSIGNED BY THE PURCHASER, N AMELY, (I) VALUE ASSIGNED TO THE INVENTORY SOLD; (II) VALUE ASSIGNED TO THE DEPRECIABLE ASSETS SOLD; AND (III) VALUE ASSIGNED TO THE OTHER ASSETS SOLD. THE TRIBUNAL DEALT WITH THE MODE OF COMPUTATION OF PROFITS/GAINS ARISI NG ON TRANSFER OF OTHER ASSETS. IN PARA-100 OF ITS ORDER THE TRIBUNAL CLEA RLY EXPRESSED ITS OPINION THAT THE PROFITS OR GAINS ARISING ON TRANSFER OF OT HER ASSETS (WHICH COMPRISES ONLY OF THE ASSET TECHNICAL KNOW-HOW) HAS TO BE C OMPUTED AND THAT THE TECHNICAL KNOW-HOW WAS DEVELOPED IN-HOUSE BY THE AS SESSEE AND THAT IT WAS NOT PURCHASED. THE TRIBUNAL WHILE DECIDING THE APPEAL NEVER EXPRESSED ANY DOUBT AS TO WHAT WAS TRANSFERRED WAS TECHNICAL KNOW- HOW. THE TRIBUNAL ONLY OBSERVED THAT IF THE COSTS INCURRED TO DEVELOP TECHNICAL KNOW-HOW WERE ALREADY CLAIMED AS REVENUE EXPENSES THAN THE GAINS ARISING AS A RESULT OF SALE THEREOF WILL HAVE TO BE NECESSARILY TREATED IN REVENUE FILED U/S.28 OF THE ACT AS BUSINESS INC OME OR SEC.56 OF THE ACT READ WITH SEC.10(3) OF THE ACT, AS OTHER INCOME OF A CASUAL OR NON-RECURRING NATURE. IF THE EXPENDITURE ON DEVELOPMENT OF TECHN ICAL KNOW-HOW HAD BEEN CAPITALIZED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT S, THAN THE GAIN ON THEIR TRANSFER WOULD BE TAXABLE AS CAPITAL GAIN U/S.45 OF THE ACT. THE ISSUE WITH REGARD TO TAXABILITY OF CONSIDERATION RECEIVED ON TRANSFER OF KNOW-HOW WAS REMANDED TO THE AO ONLY FOR THE LIMITED PURPOSE SET OUT ABOVE. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE AS SESSEE IT WAS NOT OPEN TO THE AO IN THE REMAND PROCEEDINGS TO HOLD THAT TH E CONSIDERATION RECEIVED FOR TRANSFER OF KNOW-HOW WAS IN FACT FOR T RANSFER OF GOODWILL. THE ITA NO.1281/BANG/2010 PAGE 21 OF 45 REVENUE IN COMING TO THE CONCLUSION THAT SALE OF TH E TRANSPORTATION BUSINESS/UNDERTAKING BY THE ASSESSEE WAS NOT A SLUM P SALE HAD PLACED STRONG RELIANCE ON THE CLASSIFICATION AND ALLOCATIO N OF CONSIDERATION AS RECORDED IN ITS BOOKS OF ACCOUNTS BY THE PURCHASER. HOWEVER WHEN IT COMES TO TAXING THE CONSIDERATION ALLOCATED BY THE PURCHASER TOWARDS TECHNICAL KNOW-HOW, THE REVENUE CLAIMS THAT IT WA S TOWARDS GOODWILL. AS ALREADY STATED AT NO POINT OF TIME IN THE ORIGINAL PROCEEDINGS DID THE AUTHORITIES TAKE A STAND THAT THE CONSIDERATION ALL OCATED TOWARDS TECHNICAL KNOW-HOW WAS IN FACT NOT FOR TRANSFER OF TECHNICA L KNOW-HOW BUT TOWARDS GOODWILL. THE CIT(A) IN THE PROCEEDINGS AFTER TH E ORDER OF THE TRIBUNAL SUSTAINED THE ORDER OF THE AO ON THE BASIS THAT THE ASSESSEE FAILED TO PRODUCE ANY DETAILS/INFORMATION CALLED FOR TO SUBST ANTIATE THE EXPENSES INCURRED TOWARDS ACQUISITION/IMPROVEMENT/DEVELOPMEN T OF TECHNICAL KNOW- HOW OR THE FACT OF ITS EXISTENCE. THIS CANNOT BE THE BASIS TO CONCLUDE THAT WHAT THE PARTIES AGREED TO AS TRANSFER OF TECHNICA L KNOW-HOW WAS IN FACT TRANSFER OF GOODWILL. THE AGREEMENT DATED 28.6.1 996 IN CLAUSE 1 (A)(VI) GIVES AN INDICATION OF WHAT WAS TRANSFERRED AS TEC HNICAL KNOW-HOW AND IT READS THUS:- 1. IN THIS AGREEMENT, THE FOLLOWING EXPRESSIONS SHALL, UNLESS THE CONTEXT OTHERWISE REQUIRES, HAVE THE FOLLOWING MEANINGS. (A) UNDERTAKING MEANS THE OPERATIONS AND ACTIVITI ES OF THE TRANSPORTATION BUSINESS OF THE VENDOR AS A GOING CONCERN ON AS IS WHERE IS BASIS AND SHALL INCLUDE, INTER ALIA: (I).TO (V). ITA NO.1281/BANG/2010 PAGE 22 OF 45 (VI) TECHNOLOGY FOR DESIGN, MANUFACTURE, TEST, QUAL ITY ASSURANCE AND SERVICING FOR ALL RAILWAY EQUIPMENTS AND PARTS/COMPONENTS THEREOF AS EXISTING WITH THE VENDO R AS ON THE DATE OF THE TRANSFER WHETHER PURCHASED OR SELF DEVELOPED INCLUDING ALL BOOKS, DOCUMENTS, DRAWINGS, DESIGNS, MANUALS, ETC. 24. AS ALREADY STATED AT NO POINT OF TIME DID THE R EVENUE OR THE TRIBUNAL IN ITS ORDER DOUBT THE FACT THAT THE ASSESSEE IN FA CT TRANSFERRED TECHNICAL KNOW-HOW AND THAT THE CONSIDERATION FOR SUCH TRANS FER WAS A SUM OF RS.43,17,62,000/- AS RECORDED BY THE PURCHASER IN T HEIR BOOKS OF ACCOUNTS AS ALLOCABLE TO TRANSFER OF TECHNICAL KNOW-HOW. THE REASON WHY THE REVENUE WANTS TO TREAT THE PAYMENT OF RS.43,17,62,0 00/- AS CONSIDERATION TOWARDS GOODWILL IS BECAUSE EVEN THOUGH GOODWILL IS A SELF-GENERATED ASSET AND THEREFORE ITS COSTS OF ACQUISITION CANNOT BE DETERMINED, BY REASON OF AMENDMENT TO THE PROVISIONS OF SEC.55(2)( A) OF THE ACT BY THE FINANCE ACT, 1987 W.E.F. 1.4.1989, THE COST OF ACQU ISITION OF GOODWILL IS NIL AND THEREFORE IT IS POSSIBLE TO COMPUTE OF CAPITAL GAIN ON TRANSFER OF GOODWILL. SUCH AN APPROACH CANNOT BE ADOPTED IF TH E CAPITAL ASSET TRANSFERRED IS TECHNICAL KNOW-HOW. AS WE HAVE AL READY NOTICED THE HON'BLE SUPREME COURT IN THE CASE OF IN CIT V. B. C. SRINIVASA SEETTY [1981] 128 ITR 294(SC) DEALT WITH THE QUESTION WHETHER CAPITAL GAIN ACCRUE OR ARISE WHEN 'GOODWILL' OF A BUSINESS IS TR ANSFERRED. THE HON'BLE SUPREME COURT HELD THAT SECTION 45 OF THE ACT OPERA TES IF THERE IS A TRANSFER OF A (ASSESSMENT YEAR 2000-01) CAPITAL ASSET GIVING RISE TO A PROFIT OR GAIN. THE HON'BLE COURT HELD THAT THE EXPRESSION 'CAPITAL ASSET' IS DEFINED IN ITA NO.1281/BANG/2010 PAGE 23 OF 45 SECTION 2(14) TO MEAN 'PROPERTY OF ANY KIND HELD BY AN ASSESSEE' AND THEREFORE WAS OF THE WIDEST AMPLITUDE, AND APPARENT LY COVERS ALL KINDS OF PROPERTY AND GOODWILL IS NOT EXPRESSLY EXCLUDED BY THE DEFINITION. THE HON'BLE COURT HOWEVER HELD THAT THE DEFINITIONS IN SECTION 2 OF THE ACT ARE SUBJECT TO AN OVERALL RESTRICTIVE CLAUSE VIZ., 'UNL ESS THE CONTEXT OTHERWISE REQUIRES'. THE HON'BLE COURT THEREFORE WENT INTO TH E QUESTION WHETHER CONTEXTUALLY SECTION 45, IN WHICH THE EXPRESSION 'C APITAL ASSET' IS USED, EXCLUDES GOODWILL. THE HON'BLE COURT AFTER REFERRIN G TO SEC.48 WHICH PROVIDES THE MODE OF COMPUTATION OF CAPITAL GAIN VI Z., DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET 'THE COST OF ACQUISIT ION OF THE CAPITAL ASSET ', HELD THAT THE ASSET CONTEMPLATED IN SEC.45 OF THE A CT IS AN ASSET WHICH POSSESSES THE INHERENT QUALITY OF BEING AVAILABLE O N THE EXPENDITURE OF MONEY TO A PERSON SEEKING TO ACQUIRE IT. THE HON'BL E COURT HELD THAT GOODWILL IS SOMETHING BUILT UP BY THE CARRYING ON O F A BUSINESS OR PROFESSION AND CANNOT BE ACQUIRED BY JUST PAYING MO NEY. THEREFORE THERE CAN BE NO COST OF ACQUISITION FOR GOODWILL WHICH IS A SELF - GENERATED. THE COURT HELD THAT SEC.45 WHICH IS THE CHARGING SECTIO N AND SEC.48 WHICH IS THE COMPUTATION PROVISION TOGETHER CONSTITUTES AN I NTEGRATED CODE. WHEN THERE IS A CASE TO WHICH THE COMPUTATION PROVISIONS CANNOT APPLY AT ALL, SUCH A CASE WAS NOT INTENDED TO FALL WITHIN THE CHA RGING SECTION. IN SUCH A CASE, WHEN THE ASSET IS SOLD AND THE CONSIDERATION IS BROUGHT TO TAX, WHAT IS CHARGED IS THE CAPITAL VALUE OF THE ASSET AND NOT A NY PROFIT OR GAIN. ITA NO.1281/BANG/2010 PAGE 24 OF 45 25. TO OVERCOME THE DECISION IN THE CASE OF B.C.SRINIVASA SHETTY (SUPRA) AND WITH A VIEW TO ENSURE THAT COMPUTATION PROVISI ONS DO NOT FAIL WHEN THERE IS A TRANSFER OF GOODWILL, THE PROVISION S OF SEC.55(2)(A) WERE INTRODUCED BY THE FINANCE ACT, 1988 W.E.F 1-4-1989. THESE PROVISIONS READ AS FOLLOWS: 55. MEANING OF 'ADJUSTED', 'COST OF IMPROVEMENT' A ND 'COST OF ACQUISITION'.-- (1) ............. (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, 'COST O F ACQUISITION',-- (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS,-- (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE ; AND (II) IN ANY OTHER CASE, SHALL BE TAKEN TO BE NIL ; 26. BY THE FINANCE ACT, 1997 W.E.F 1-4-1998, PROVIS IONS OF SEC.55(2)(A) WERE AGAIN AMENDED AS FOLLOWS:- (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, 'COST OF ACQUISITION',-- (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS, OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICL E OR THING, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOUR S, -- (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY TH E ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE ; AND (II) IN ANY OTHER CASE NOT BEING A CASE FALLING UN DER SUB-CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 49, SHALL BE TAKEN TO BE NIL ; ITA NO.1281/BANG/2010 PAGE 25 OF 45 27. CIRCULAR NO. 763, DATED 18TH FEBRUARY, 1998 EXP LAINING THE ABOVE PROVISIONS OF FINANCE ACT, 1997 IS AS FOLLOWS:- '30.1 COST OF ACQUISITION AND COST OF IMPROVEMENT O F CERTAIN CAPITAL ASSETS 30.1 UP TO THE ASSESSMENT YEAR 1988- 89, THE GAINS ARISING ON THE TRANSFER OF GOODWILL WERE NOT LIABLE TO TAX. THIS WAS ON ACCOUNT OF THE JUDICIAL VIEW APPROVED BY THE SUP REME COURT IN CIT V. B. C. SRINIVASA SHETTY [1981] 128 ITR 294. T HE RATIONALE OF THE DECISION WAS THAT GOODWILL BEING A SELF-GENE RATED ASSET AND NOT COSTING ANYTHING IN TERMS OF MONEY, THE GAINS C OULD NOT BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT. BY THE FINANCE ACT, 1987, THE METHOD OF COMPUTING THE COST OF ACQUISITION AS WELL AS THE COST OF IMPROVEMENT OF G OODWILL WAS PROVIDED FOR. WHERE GOODWILL IS PURCHASED BY THE TR ANSFEROR, THE COST OF ACQUISITION IS TAKEN TO BE THE PURCHASE PRI CE AND IN ALL OTHER CASES IT IS TAKEN TO BE NIL. THE COST OF IMPR OVEMENT IN EITHER CASE IS TAKEN TO BE NIL. 30.2 INSTANCES HAVE COME TO LIGHT WHERE RIGHTS TO M ANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING HAVE BEEN E XTINGUISHED FOR A CONSIDERATION AND CLAIMED TO BE NOT TAXABLE. 30.3 THE ACT HAS, THEREFORE, AMENDED SECTIONS 55(1) AND 55(2) OF THE INCOME-TAX ACT IN ORDER TO BRING EXTINGUISHMENT OF SUCH A RIGHT TO MANUFACTURE, ETC., WITHIN THE AMBIT OF CAP ITAL GAINS TAX. CAPITAL GAINS TAX WOULD BE LEVIABLE ONLY WHERE SUCH AN EXTINGUISHMENT OF RIGHT TO MANUFACTURE, ETC., IS FO R ANY CONSIDERATION. SUCH RECEIPTS WILL BE SUBJECTED TO C APITAL GAINS TAX ON THE SAME BASIS AS ALREADY ADOPTED FOR TAXING TRA NSFER OF GOODWILL AND TENANCY RIGHTS. THE COST OF ACQUISITIO N AND COST OF IMPROVEMENT WILL BE DETERMINED IN THE SAME MANNER A S FOR GOODWILL.' 28. CBDT CIRCULAR NO.14 OF 2001 DATED 12.12.2001 25 2 ITR (ST.) 65 WHICH ALSO CLARIFIES THAT GOODWILL OF A BUSINESS I S AN ASSET SEPARATE AND DISTINCT FROM A TRADE MARK THAT IS USED IN THE BUSI NESS. ITA NO.1281/BANG/2010 PAGE 26 OF 45 29. BY THE FINANCE ACT, 2002, W.E.F. 1-4-2003, THE PROVISIONS OF SEC.55(2)(A) WAS AMENDED AS FOLLOWS:- (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, 'COST OF ACQUISITION',-- (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS, OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THIN G OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIA GE PERMITS OR LOOM HOURS, -- (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY TH E ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE ; AND(ASSESSMENT YEAR 2000-01) (II) IN ANY OTHER CASE NOT BEING A CASE FALLING UN DER SUB-CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 49, SHALL BE TAKEN TO BE NIL ; 30. IN CIRCULAR NO.8 OF 2002 DT. 27.8.2002 THE CBDT HAS EXPLAINED THE ABOVE PROVISIONS OF FINANCE ACT, 2002, AS BELOW: '39. AMENDMENT OF SECTION 55 OF THE INCOME-TAX ACT, 1961 39.1 UNDER SECTION 45, ANY CAPITAL RECEIPTS ARISING OUT OF TRANSFER OF ANY BUSINESS OR COMMERCIAL RIGHTS ARE TAXABLE UNDER THE HEAD 'CAPITAL GAINS'. THE AMOUNT OF 'CAPITAL GAINS' IS C OMPUTED ACCORDING TO SECTION 48 OF THE INCOME-TAX ACT, 1961 . FOR THIS PURPOSE, 'COST OF ACQUISITION' AND 'COST OF IMPROVE MENT' ARE DEFINED UNDER SECTION 55. AT PRESENT, IN CASE OF RE CEIPTS FOR TRANSFER OF RIGHT TO MANUFACTURE, PRODUCE OR PROCES S ANY ARTICLE OR THING THE 'COST OF ACQUISITION' AND 'COST OF IMPROV EMENT' ARE TAKEN AS 'NIL' UNDER SECTION 55.' 31. THUS THE ONLY WAY TO BRING TO TAX SALE CONSIDER ATION RECEIVED ON TRANSFER OF TECHNICAL KNOW-HOW IS TO CALL IT GOO DWILL AND THAT IS PROBABLY ITA NO.1281/BANG/2010 PAGE 27 OF 45 THE REASON WHY THE AO PREFERRED TO CALL TRANSFER OF TECHNICAL KNOW-HOW AS TRANSFER OF GOODWILL. WE ARE OF THE VIEW THAT TEC HNICAL KNOW-HOW AND GOODWILL CANNOT BE EQUATED. IN FACT THE STATUTOR Y AMENDMENTS TO SEC.55(2)(A) CLEARLY SHOWS THAT THE LEGISLATURE HAS NOT EQUATED GOODWILL WITH TRADE MARK OR BRAND NAME ASSOCIATED WITH A BU SINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THIN G OR RIGHT TO CARRY ON ANY BUSINESS. THE ATTEMPT MADE BY THE AO TO EQUATE TRA NSFER OF TECHNICAL KNOW-HOW WITH TRADE MARK, TRADE NAME, GOODWILL ETC ., IN OUR VIEW CANNOT BE SUSTAINED. THE AO IN HIS ORDER HAS ATTEMPTED TO GIVE AN IMPRESSION THAT THE ASSESSEE HAS AGREED TO TREAT THE RECEIPT O N TRANSFER OF TECHNICAL KNOW-HOW AS GOODWILL. IN THIS REGARD IT IS SEEN TH AT IN THE ASSESSEES LETTER DATED 7.12.2009 TO THE AO, THE CONTENTIONS WERE MAD E WITHOUT PREJUDICE AND THEREFORE THE OBSERVATIONS OF THE AO IN THIS RE GARD ARE NOT CORRECT. THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANGALORE GANESH BEEDI WORKS (SUPRA) HAS SINCE BEEN SET ASIDE AND REMANDED TO THE HONBLE HIGH COURT BY THE HONBLE S UPREME COURT. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE AS SESSEE, TECHNICAL KNOWHOW HAS TO BE REGARDED AS AN ASSET SEPARATE AND DISTINCT FROM GOODWILL. IN THE ABSENCE OF ANY COST OF ACQUISITIO N BEING INCURRED FOR ACQUIRING SUCH TECHNICAL KNOWHOW, WHICH FACT IS NOT DISPUTED BY THE AO/CIT(A), THE ENTIRE CONSIDERATION COULD NOT BE BR OUGHT TO TAX HAVING REGARD TO THE PRINCIPLE ENUNCIATED BY THE HONBLE S UPREME COURT IN CIT VS. B.C.SRINIVASA SETTY 128 ITR 294 (SC) . TECHNICAL KNOW HOW IS A ITA NO.1281/BANG/2010 PAGE 28 OF 45 SELF-GENERATED ASSET AND THE ASSESSEE INCURRED NO C OST BUT DEVELOPED IN THE COURSE OF CONDUCTING ITS BUSINESS. EVEN IF TE CHNICAL KNOW-HOW IS TO BE REGARDED AS RIGHT TO MANUFACTURE AN ARTICLE OR THING OR A RIGHT TO CARRY ON BUSINESS, THE AMENDMENT TO SEC.55(2)(A) OF THE ACT DEEMING COST OF ACQUISITION OF THESE ASSETS AS NIL WAS EFFECTIVE ONLY FROM 1.4.2003 AND PRIOR TO THAT THE CAPITAL GAIN ON TRANSFER OF THESE ASSETS WAS INCAPABLE OF BEING DETERMINED AND THEREFORE THE CHARGING PROVISI ONS OF SEC.45 READ WITH SEC.48 OF THE ACT WERE NOT CAPABLE OF BEING APPLIED AND THE CHARGE TO TAX WOULD FAIL ON THE PRINCIPLE LAID DOWN BY THE HONBL E SUPREME COURT IN THE CASE OF B.C.SRINIVASA SETTY (SUPRA) . WE THEREFORE HOLD THAT PROFIT ON SALE OF TECHNICAL KNOW-HOW CANNOT BE BROUGHT TO TAX AS CAPITAL GAIN U/S.45 OF THE ACT. 32. WITH REGARD TO THE ARGUMENT OF THE LEARNED DR PRAYING FOR A REMAND OF THE ISSUE TO THE AO FOR A FRESH CONSIDERATION, W E ARE OF THE VIEW THAT THE AO IN THE REMAND PROCEEDINGS HAS CONSCIOUSLY TAKEN A DECISION THAT THE GAIN ON SALE OF TECHNICAL KNOW-HOW WAS CAPITAL RECE IPT CHARGEABLE TO TAX U/S.45 OF THE ACT. BY IMPLICATION HE WAS SATISFIED THAT IT WAS NOT A REVENUE RECEIPT CHARGEABLE TO TAX EITHER U/S.28 OR U/S.56 O R SEC.10(3) OF THE ACT. IF THE REVENUE DEEMS SUCH CONCLUSION ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE THAN IT COULD HAVE EXPLORED THE OTHER OPTIONS AVAILABLE UNDER THE ACT TO RECTIFY THE ERROR. PRAY ER FOR A REMAND TO THE AO, IN OUR VIEW, WOULD NOT BE SUSTAINABLE. ITA NO.1281/BANG/2010 PAGE 29 OF 45 33. THUS THE RELEVANT GROUNDS OF APPEAL OF THE ASS ESSEE ARE ALLOWED TO THE EXTENT INDICATED ABOVE. TAXABILITY OF NON-COMPETE FEE 34. WE HAVE ALREADY SEEN THAT UNDER AN AGREEMENT DA TED 24.6.1996, THE ASSESSEE AGREED WITH ABB BAHNBETEILIGUNGEN GMBH , HEREINAFTER REFERRED TO AS DEBAB, WHICH EFFECTIVELY HELD ALL THE SHARES OF ABB DAIMLER BENZ TRANSPORTATION (INDIA) LTD., TO WHOM T HE TRANSPORTATION BUSINESS UNDERTAKING OF THE ASSESSEE WAS SOLD, THAT NEITHER THE ASSESSEE OR ITS AFFILIATES SHALL ENGAGE IN ANY WAY DIRECTLY OR INDIRECTLY, IN ANY INDUSTRIAL ACTIVITY WHICH COMPETES IN INDIA WITH THE ACTIVITIE S OF THE BUSINESS THAT IS TRANSFERRED. IN RESPECT OF THIS COVENANT NOT TO CO MPETE, THE ASSESSEE WAS PAID A SUM OF RS.30,00,00,00 BY DEBAB. THE TRIBUNAL FIRST HELD THAT THE ASSESSEE FAILED TO DEMONSTRATE THAT IT POSSESSED A PROBABLE AND VIABLE MEANS OF COMPETITION AND THAT THE NCA WAS ECONOMICA LLY REAL AND MEANINGFUL. THEREAFTER THE TRIBUNAL HELD THAT THE AO HAD TAXED THE NON- COMPETE FEE EITHER U/S.28 OR U/S.10 (3) OR AS ATTRI BUTABLE TO TRANSFER OF GOODWILL. THE CIT(A) HOWEVER HELD THAT NON-COMPETE FEE WAS NOTHING BUT RECEIPT ON ACCOUNT OF TRANSFER OF GOODWILL OF THE A SSESSEE TO THE PURCHASER.. ACCORDING TO THE TRIBUNAL THE ORDER OF CIT(A) WAS C RYPTIC AND HAD NOT ANALYSED AS TO WHETHER THE RECEIPT IN QUESTION COUL D BE TAXED U/S.28 OR U/S.10(3)/56 OF THE ACT OR AS LONG TERM CAPITAL GAI N ON TRANSFER OF GOODWILL. THE TRIBUNAL HELD THAT THE PAYMENT CANNOT BE ON ACC OUNT OF TRANSFER OF GOODWILL. THE ISSUE WAS THEREFORE SET ASIDE TO THE AO FOR A FRESH ITA NO.1281/BANG/2010 PAGE 30 OF 45 CONSIDERATION TO DECIDE WHETHER THE RECEIPT WOULD B E CHARGEABLE TO TAX EITHER U/S.28 OR U/S.10(3) READ WITH SEC.56 OF THE ACT. 35. IN THE PROCEEDINGS AFTER THE ORDER REMAND BY T HE TRIBUNAL, THE AO HELD THAT THE RECEIPT WAS BUSINESS PROFITS. NO REA SONS HAVE BEEN ASSIGNED BY THE AO FOR COMING TO THIS CONCLUSION. 36. BEFORE CIT(A) THE ASSESSEE CONTENDED THAT THE QUESTION WHETHER THE RECEIPT OF RS.30 CRORES CONSTITUTED BUSINESS RE CEIPTS U./S.28 OF THE ACT OR INCOME OF A CASUAL AND NON-RECURRING NATURE U/S. 10(3) OF THE ACT READ WITH SEC.56 OF THE ACT WAS NOT CONCLUDED BY THE ITA T IN ITS ORDER AND THE SAME WAS LEFT OPEN FOR DETERMINATION BY THE AO. IT WAS POINTED OUT HAD THE DECISION OF THE TRIBUNAL BEEN TO HOLD THAT THE RECE IPT IN QUESTION WAS BUSINESS RECEIPT, THERE WAS NO NECESSITY TO HAVE RE MANDED THE ISSUE TO THE AO FOR FRESH DETERMINATION. IT WAS ARGUED BY THE A SSESSEE THAT IN THE SET ASIDE PROCEEDINGS, THE AO BROUGHT NO MATERIAL ON RE CORD TO JUSTIFY BRINGING TO TAX RECEIPT OF RS.30 CRORES EITHER UNDER THE HEA D INCOME FROM BUSINESS U/S.28 OF THE ACT OR INCOME OF THE NATURE DESCRIBED IN SEC.10(3) READ WITH SEC.56 OF THE ACT. IT WAS ARGUED THAT ALL RECEIPTS ARE NOT INCOME AND THE BURDEN IS ON THE REVENUE TO SHOW THAT A RECEIPT WHI CH IS OTHERWISE NOT IN THE NATURE OF INCOME, IS INCOME AND IN THIS REGARD PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PARIMISETTI SEETHARAMAMMA VS. CIT 57 ITR 532 (SC) . IT WAS ARGUED THAT MERE REJECTION OF THE ASSESSEES ARGUMENT WILL NOT RESUL T IN THE RECEIPT BEING OF ITA NO.1281/BANG/2010 PAGE 31 OF 45 THE CHARACTER OF INCOME OR IN THE NATURE OF INCOME FROM BUSINESS OR OTHER SOURCES. IT WAS ARGUED THAT THERE IS NO BASIS OR M ATERIAL ON THE BASIS OF WHICH IT COULD BE CONCLUDED THAT THE RECEIPT IN QUE STION WAS IN THE REVENUE FIELD. IT WAS SUBMITTED THAT THAT THE RECEIPT WAS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. 37. THE CIT(A) FIRSTLY RELIED ON THE TRIBUNALS OR DER TO COME TO THE CONCLUSION THAT THE PAYMENT IN QUESTION WAS NOT FOR ANY NON-COMPETE COVENANT AND WAS A COLOURABLE DEVICE TO PASS OFF RE CEIPTS AS NON-TAXABLE. THEREAFTER THE CIT(A) REFERRED TO DECISIONS OF ITAT CHENNAI BENCH IN THE CASE OF ACIT VS. HELIOS & MATHERSON 2008-TIOL-200 ITAT-MAD WHEREIN IT WAS HELD THAT NON- COMPETE FEE WAS IN FA CT A PAYMENT MADE TO THE ASSESSEE SHARING CUSTOMER DATABASE AND SHARING OF TRAINED EMPLOYEES AND WAS CHARGEABLE TO TAX. THE CIT(A) ALSO REFERRE D TO ANOTHER DECISION OF ITAT CHENNAI IN THE CASE OF MADRAS CARBONS PVT. LTD., VS. ACIT 2007- TIOL-255-MAD WHEREIN THE TRIBUNAL HELD THE PAYMENT OF NON-COMPE TE FEE WAS IN FACT A PAYMENT MADE ON ACCOUNT OF GOODWI LL AND TO AVOID TAX THE SAME WAS CAMOUFLAGED AS NON-COMPETE FEE. AFTER REF ERRING TO THE AFORESAID TWO DECISIONS THE CIT(A) CONCLUDED THE RE CEIPT OF RS.30 CRORES WAS IN THE NATURE OF BUSINESS INCOME TAXABLE U/S.28 OF THE ACT. 38. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LEARNE D COUNSEL FOR THE ASSESSEE REITERATED STAND OF THE ASSESSEE AS WAS PU T FORTH BEFORE THE ITA NO.1281/BANG/2010 PAGE 32 OF 45 CIT(A). HE POINTED OUT THAT THE TWO DECISIONS RELI ED UPON BY THE LEARNED CIT(A) DOES NOT HELP THE CASE OF THE REVENUE. IN T HE CASE OF M/S.HELIOS & MATHERSON INFORMATION TECHNOLOGY LTD. (SUPRA) , THE FINDING OF THE TRIBUNAL WAS THAT THE NON-COMPETE FEE WAS IN FACT A PAYMENT FOR SHARING CUSTOMER DATABASE AND SHARING OF TRAINED EMPLOYEES AND THEREFORE CHARGEABLE TO TAX. HE POINTED OUT THAT THE RECEIPT IN THE CASE OF THE ASSESSEE IS NOT ATTRIBUTABLE TO TRANSFER OF ANY ASS ET OR RIGHT AND THE MERE FACT THAT THE RECEIPT IS NOT ATTRIBUTABLE TO NON-CO MPETE COVENANT IT CANNOT BE AUTOMATICALLY CONCLUDED THAT THE RECEIPT WAS EITHER FROM BUSINESS OR INCOME OF A CASUAL OR RECURRING NATURE. IN THE DEC ISION RENDERED IN THE CASE OF MADRAS CARBON BRUSHES PVT.LTD., (SUPRA) , THE FINDING OF THE TRIBUNAL WAS NON-COMPETE FEE WAS IN FACT CONSIDERAT ION FOR TRANSFER OF GOODWILL. HE POINTED OUT THAT IN THE PRESENT CASE THE TRIBUNAL HAS ALREADY HELD THAT THE PAYMENT OF RS.30 CRORES IS NOT TOWARD S GOODWILL. THEREFORE RELIANCE PLACED BY THE LEARNED CIT(A) ON THE AFORES AID DECISION CANNOT IN ANY WAY IMPROVE THE CASE OF THE REVENUE. HE REITER ATED THAT THE REVENUE HAS FAILED TO ESTABLISH THAT THE RECEIPT IN QUESTIO N IS ON REVENUE ACCOUNT AND CHARGEABLE TO TAX EITHER AS BUSINESS RECEIPTS O R INCOME OF A CASUAL OR NON-RECURRING NATURE. HE DREW OUR ATTENTION TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PARTIMISETTI SEETHARAMAMMA (SUPRA) AND EXPLAINED THE RATIO LAID DOWN THEREIN. FURTHER REL IANCE WAS PLACED BY HIM ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MEHBOOB PRODUCTIONS PRIVATE LTD. VS. COMMISSIONER O F ITA NO.1281/BANG/2010 PAGE 33 OF 45 INCOME TAX 106 ITR 758 (BOM) FOR THE PROPOSITION TH AT ALL RECEIPTS BY AN ASSESSEE DOES NOT CONSTITUTE ITS INCOME. IN THE AF ORESAID DECISION, THE ASSESSEE WAS DOING BUSINESS IN PRODUCTION OF FILMS. THE ASSESSEE COMPLETED THE PRODUCTION OF A FILM TITLED MOTHER I NDIA AND WAS GIVEN EXEMPTION FROM PAYMENT OF ENTERTAINMENT DUTY. THE ASSESSEE CONTENDED THAT THE RECEIPT IN THE FORM OF EXEMPTION FROM PAYM ENT OF ENTERTAINMENT DUTY WAS NOT A TRADING RECEIPT AND THEREFORE NOT CH ARGEABLE TO TAX AS INCOME AND IN THE ALTERNATIVE CLAIMED THAT IF IT IS REGARDED AS INCOME IT MUST BE HELD TO BE EXEMPT BEING INCOME OF A CASUAL OR NO N-RECURRING NATURE. THE HONBLE BOMBAY HIGH COURT HELD THAT THE RECEIPT WAS NO IN THE NATURE OF INCOME AND WAS NOT A TRADING RECEIPT. THE LEARN ED COUNSEL HIGHLIGHTED THE FOLLOWING OBSERVATIONS OF THE HONBLE BOMBAY HI GH COURT:- ON THE MATERIAL BEFORE US THERE IS NOTHING TO SHOW THAT THE ASSESSEE-COMPANY HAD PRODUCED THE SAID PICTURE MOTH ER INDIA WITH THE SLIGHTEST EXPECTATION THAT THE SAME WOULD BE EXEMPT FROM ENTERTAINMENT DUTY AND THAT THE AMOUNTS COLLEC TED BY THE EXHIBITORS AS AND BY WAY OF SUCH DUTY WOULD BE DIRE CTED TO BE PAID OVER TO IT AS PRODUCERS BY THE GOVERNMENT OF B OMBAY. IT IS TRUE THAT WE MAY CONSIDER THE TWO NOTIFICATIONS OF THE GOVERNMENT (ANNEXURES 'A' AND 'A-1' TO THE STATEMEN T OF CASE) AND THE VARIOUS LETTERS OR ORDERS MADE PURSUANT TO THE LATER NOTIFICATION DATED 25TH OCTOBER, 1957, AS THE DEFIN ITE SOURCE TO WHICH THE RECEIPTS ARE ATTRIBUTABLE. THE FACT THAT THE PAYMENTS APPEAR TO BE ENTIRELY AT THE DISCRETION OF THE GOVE RNMENT AND THAT THE EXEMPTION CAN BE WITHDRAWN BY THE GOVERNMENT EV EN WITHOUT ANY DEFAULT ON THE PART OF THE ASSESSEE (SE E CL. 4 OF ANNEXURE A-1) WOULD NOT BE SUFFICIENT TO DISENTITLE THE RECEIPTS FROM BEING CONSIDERED AS INCOME. IT IS TRUE THAT TH E OBJECT OF THE SUBSIDY WAS TO ASSIST THE PRODUCERS (AS ANNEXURE 'A ' SHOWS) AND TO ENCOURAGE FUTURE PRODUCTION OF FILMS OF SUFFICIE NTLY HIGH ITA NO.1281/BANG/2010 PAGE 34 OF 45 QUALITY AND WHICH SERVED A HIGH SOCIAL PURPOSE. BEA RING THE FACTUAL POSITION IN MIND, WHICH HAS BEEN INDICATED EARLIER, IN THIS JUDGMENT, I WOULD HOLD THAT THESE RECEIPTS DO NOT P ARTAKE OF THE ELEMENT OF A RETURN WHICH IS NECESSARY FOR IT TO CO NSTITUTE INCOME, AND FURTHER THAT IT WAS OF THE NATURE OF A WINDFALL A WINDFALL AS TO THE FACTUM AND NOT A WINDFALL AS TO MERE QUANTUM . ON BOTH THE COUNTS, THEREFORE, THE ANSWER TO THE QUESTION WHETH ER THESE RECEIPTS CONSTITUTE INCOME OF THE ASSESSEE MUST BE IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE, VIZ., THAT THEY DID NOT CONSTITUTE INCOME. 39. ACCORDING TO HIM IF THE RECEIPT IS NOT TOWARDS NON-COMPETE FEE THAN IT CANNOT BE REGARDED AS TRADING RECEIPT AS THE ASSESS EE NEVER HAD THE EXPECTATION THAT HE WOULD RECEIVE RS.30 CRORES AT T HE TIME OF TRANSFER OF TRANSPORTATION BUSINESS/UNDERTAKING. IT MUST THE REFORE BE HELD THAT IT WAS NOT IN THE NATURE OF INCOME AT ALL. 40. FURTHER RELIANCE WAS PLACED BY HIM ON THE DECI SION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CADELL WEAVING MIL L CO. (P) LTD. VS. COMMISSIONER OF INCOME TAX 249 ITR 265 (BOM) WH EREIN IT WAS HELD THAT A CAPITAL RECEIPT WHICH IS NOT CHARGEABLE TO TAX U/S.45 OF THE ACT CANNOT BE REGARDED AS INCOME OF A CASUAL OR NON-REC URRING NATURE AND BROUGHT TO TAX. FURTHER REFERENCE WAS ALSO MADE TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER O F INCOME TAX VS. D.P. SANDU BROS. CHEMBUR (P) LTD. 273 ITR 1 (SC ) WHEREIN THE HONBLE SUPREME COURT CONFIRMED THE VIEW TAKEN BY T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CADELL WEAVING MILL CO.PVT.LTD. (SUPRA) . ITA NO.1281/BANG/2010 PAGE 35 OF 45 41. THE LEARNED DR SUBMITTED THAT IN THE ORIGINAL ORDER OF THE AO HE HAS DISCUSSED AS TO HOW THE RECEIPT ON ACCOUNT OF N ON-COMPETE FEE IS TAXABLE AND THOSE FINDINGS WILL SUPPORT THE CONCLUS IONS OF THE AO IN THE ORDER PASSED AFTER REMAND BY THE TRIBUNAL. ALTERNA TIVELY THE LEARNED DR PLEADED THAT THE ISSUE BE REMANDED TO THE AO TO EXP LAIN AS TO HOW THE RECEIPT IN QUESTION IS TAXABLE AS INCOME. ACCORDIN G TO HIM THE RECEIPT IS RELATABLE TO THE SALE OF THE TRANSPORTATION BUSINE SS/UNDERTAKING AND THEREFORE SHOULD BE CONSIDERED AS HAVING NEXUS WITH THE TRANSPORTATION BUSINESS AND HENCE TAXABLE U/S.28 OF THE ACT. ALTE RNATIVELY IT WAS ARGUED BY HIM THAT THE RECEIPT IN QUESTION CAN BE BROUGHT TO CHARGE OF TAX U/S.28(IV) OF THE ACT AS VALUE OF ANY BENEFIT OR PE RQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINES S OR THE EXERCISE OF A PROFESSION. 42. IN HIS REJOINDER THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT SEC.28(IV) OF THE ACT WILL NOT APPLY TO THE FACTS O F THE PRESENT CASE AS WHAT THE ASSESSEE RECEIVED WAS MONETARY CONSIDERATION. IN THIS REGARD HE RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. VS. CIT 261 ITR 501 (BOM) WHEREIN THE QUESTION WAS AS TO WHETHER WAIVER OF LOAN TO ACQUIR E A CAPITAL ASSET CAN BE REGARDED AS RECEIPT CHARGEABLE TO TAX U/S.28(IV) OF THE ACT. THE HONBLE BOMBAY HIGH COURT HELD THAT THE INCOME WHICH CAN BE TAXED UNDER S. 28(IV) MUST NOT ONLY BE REFERABLE TO A BENEFIT OR P ERQUISITE, BUT IT MUST BE ARISING FROM BUSINESS. SECONDLY, S. 28(IV) DOES NOT APPLY TO BENEFITS IN CASH ITA NO.1281/BANG/2010 PAGE 36 OF 45 OR MONEY. ACCORDING TO HIM THE ASSESSEE RECEIVED RS .30 CRORES IN THE PRESENT CASE AND THEREFORE SEC.28(IV) OF THE ACT WI LL NOT APPLY. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF UNIVERSAL RADIATOR VS. CIT 201 ITR 800 (SC) . IN THE AFORESAID CASE THE ASSESSEE WAS CARRYING ON THE BUSINESS OF MANUFA CTURING RADIATORS. IT IMPORTED COPPER INGOTS FROM USA WHICH WERE TO BE CO NVERTED INTO STRIPS AT BOMBAY AND THEN SENT TO ASSESSEE FOR BEING USED AS RAW MATERIAL. THE SHIP CARRYING ASSESSEE'S COPPER INGOTS WERE SEIZED BY PAKISTAN DURING WAR. THE ASSESSEE RECEIVED CLAIM FROM INSURANCE CO MPANY. DUE TO DEVALUATION OF RUPEE, ASSESSEE GOT RS. 3,43,556 AS AGAINST PAYMENT OF RS. 2,00,164. THE DIFFERENCE WAS NOT A REVENUE RECEIPT AS SO FAR AS THE INGOTS DID NOT REACH BOMBAY AND GOT CONVERTED INTO STRIPS, THE CONNECTION IT BORE WITH ASSESSEE'S BUSINESS WAS REMOTE. INGOTS WERE NO T STOCK-IN-TRADE OF ASSESSEE AND EVEN IF ASSUMED TO BE SO, THEY GOT BLO CKED AND STERLISED AND CEASED TO BE SO. IT WAS HELD THAT ANY SURPLUS RECE IVED DUE TO FLUCTUATION IN EXCHANGE RATE WAS CAPITAL RECEIPT ONLY AND NOT CHAR GEABLE TO TAX. AND THAT THE EXCESS AROSE DUE TO FORTUITOUS CIRCUMSTANCES OF DEVALUATION OF CURRENCY BUT NOT DUE TO BUSINESS ACTIVITY, THEREFORE, NOT TA XABLE 43. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE FACTS GO TO SHOW THAT THE ASSESSEE CLAIMED TO H AVE RECEIVED RS.30 CRORES UNDER AN AGREEMENT THAT IT WILL NOT CARRY ON ANY BUSINESS COMPETING WITH THE BUSINESS THAT IT SOLD VIZ., TRANSPORTATIO N BUSINESS/UNDERTAKING. THE TRIBUNAL HAS ALREADY HELD THAT THERE WAS NO THR EAT OF ANY COMPETITION BY ITA NO.1281/BANG/2010 PAGE 37 OF 45 THE ASSESSEE AND THEREFORE THE RECEIPT OF RS.30 CRO RES CANNOT BE SAID TO BE FOR AGREEING TO A COVENANT NOT TO CARRY ON A COM PETING BUSINESS. ACCORDING TO THE TRIBUNAL THE ORDER OF CIT(A) WAS C RYPTIC AND HAD NOT ANALYSED AS TO WHETHER THE RECEIPT IN QUESTION COUL D BE TAXED U/S.28 OR U/S.10(3)/56 OF THE ACT OR AS LONG TERM CAPITAL GAI N ON TRANSFER OF GOODWILL. THE TRIBUNAL HELD THAT THE PAYMENT CANNOT BE ON ACC OUNT OF TRANSFER OF GOODWILL. THE ISSUE WAS THEREFORE SET ASIDE TO THE AO FOR A FRESH CONSIDERATION TO DECIDE WHETHER THE RECEIPT WOULD B E CHARGEABLE TO TAX EITHER U/S.28 OR U/S.10(3) READ WITH SEC.56 OF THE ACT. IN THE SET ASIDE PROCEEDINGS NEITHER THE AO NOR THE CIT(A) HAVE GIVE N A FINDING AS TO WHETHER THE RECEIPT IN QUESTION IS CHARGEABLE TO TA X EITHER U/S.28 OR U/S.10(3) READ WITH SEC.56 OF THE ACT. 44. IN THE CASE OF PARIMISETTI SEETHARAMAMMA (SUPRA) , THE FACTS WERE THAT THE ASSESSEE CARRIED ON BUSINESS AT NUZVI D AS A MONEYLENDER AND CONDUCTED A CINEMATOGRAPH THEATRE. IN RESPECT O F INCOME FROM PROPERTY AND BUSINESS SHE SUBMITTED A RETURN OF HER INCOME FOR THE ASST. YR. 1947-48, AND DISCLOSED A STATEMENT DT. 26TH AUG., 1 949, THAT SITA DEVI, MAHARANI OF BARODA, HAD BETWEEN 10TH NOV., 1945, AN D 11TH FEB., 1948, 'OUT OF NATURAL LOVE AND AFFECTION' GIVEN TO HER SO ME JEWELLERY AND FOUR AMOUNTS OF MONEY WHICH AGGREGATED TO RS. 5,20,000. THE ITO, SPECIAL CIRCLE, VIJAYAWADA, ACCEPTED THE APPELLANT'S STATEM ENT AND DID NOT TREAT THE MONEY AND JEWELLERY RECEIVED BY HER AS TAXABLE INCO ME. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR 1951-52, THE IT O WAS INCLINED TO TREAT ITA NO.1281/BANG/2010 PAGE 38 OF 45 THE MONEY AND JEWELLERY GIVEN TO THE APPELLANT AS R EMUNERATION FOR SERVICES RENDERED TO SITA DEVI AS A MAIDSERVANT. HE ACCORDINGLY ISSUED A NOTICE UNDER S. 34 OF IT ACT AND CALLED UPON THE AP PELLANT TO SUBMIT AN EXPLANATION ADDUCING ALL DOCUMENTARY AND OTHER EVID ENCE IN HER POSSESSION RELATING TO THE RECEIPT OF ASSETS ADMITT ED BY HER IN HER STATEMENT' DT. 26TH AUG., 1949, AND RELATING TO OTH ER CASH AMOUNTS AND CHEQUES RECEIVED BY HER BETWEEN 25TH AUG., 1948, AN D 23RD OCT., 1952, AND TO OTHER ASSETS POSSESSED BY THE APPELLANT AND DISCLOSED BY HER IN HER 'WEALTH STATEMENT'. BY HER STATEMENTS DT. 27TH NOV. , 1953, THE APPELLANT SUBMITTED A DETAILED EXPLANATION ABOUT THE ITEMS RE FERRED TO IN THE LETTER OF THE ITO AND CLAIMED THAT INCOME RECEIVED BY HER WAS EARNED WITH THE AID OF PROPERTY WHICH SITA DEVI AND THE YUVARANI OF PIT HAPURAM HAD GIVEN TO HER OUT OF LOVE AND AFFECTION FROM TIME TO TIME. THE HONBLE HIGH COURT ENDORSED THE VIEW OF THE TRIBUNAL THAT THE ASSESSEE DID NOT SUBSTANTIATE THAT THE RECEIPTS FROM THE MAHARANI WERE OUT OF NAT URE LOVE AND AFFECTION AND NOT FOR SERVICES RENDERED BY THE ASSESSEE. ON FURTHER APPEAL THE HONBLE SUPREME COURT HELD:- IN SO OBSERVING, THE HIGH COURT IN OUR JUDGMENT HA S COMMITTED AN ERROR OF LAW. BY SS. 3 AND 4 THE ACT IMPOSES A GENERAL LIABILITY TO TAX UPON ALL INCOME. BUT THE A CT DOES NOT PROVIDE THAT WHATEVER IS RECEIVED BY A PERSON M UST BE REGARDED AS INCOME LIABLE TO TAX. IN ALL CASES IN W HICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES UPON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION. WHERE HOWEVER A RECEIPT IS OF THE NATURE OF THE INCOME, THE BURDEN OF PROVIDING THAT IT IS NOT TAXA BLE BECAUSE IT FALLS WITHIN AN EXEMPTION PROVIDED BY TH E ACT LIES UPON THE ASSESSEE. THE APPELLANT ADMITTED THAT SHE HAD ITA NO.1281/BANG/2010 PAGE 39 OF 45 RECEIVED JEWELLERY AND DIVERSE SUMS OF MONEY FROM S ITA DEVI AND SHE CLAIMED THAT THESE WERE GIFTS MADE OUT OF L OVE AND AFFECTION. THE CASE OF THE APPELLANT WAS THAT THE R ECEIPTS DID NOT FALL WITHIN THE TAXING PROVISION : IT WAS NOT H ER CASE THAT BEING INCOME THE RECEIPTS WERE EXEMPT FROM TAXATION BECAUSE OF A STATUTORY PROVISION. IT WAS THEREFORE FOR THE DEPARTMENT TO ESTABLISH THAT THESE RECEIPTS WERE CHARGEABLE TO TA X. (EMPHASIS SUPPLIED) 45. IN OUR VIEW, THE PRINCIPLE LAID DOWN IN THE AFO RESAID DECISION WOULD SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE. I N THE PRESENT CASE THE CLAIM OF THE ASSESSEE THAT THE RECEIPT OF RS.30 CRO RES IS IN RESPECT OF NON- COMPETE COVENANT WAS NOT BELIEVED BY THE REVENUE. AS TO HOW IT COULD BE REGARDED AS REVENUE IN NATURE OR RECEIPTS FROM BUSI NESS HAS NOT BEEN SUBSTANTIATED BY THE REVENUE. THE RECEIPT OF RS.30 CRORES BY THE ASSESSEE CANNOT THEREFORE BE REGARDED AS INCOME. IT SHOULD R EGARDED AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. THE PRAYER FOR A RE MAND OF THE ISSUE TO THE AO FOR FRESH CONSIDERATION AS MADE BY THE LEARNED D R BEFORE US CANNOT BE ACCEPTED FOR THE REASONS WHICH WE HAVE GIVEN WHILE DEALING WITH THE FIRST ISSUE OF TAXABILITY OF CONSIDERATION RECEIVED ON TR ANSFER OF TECHNICAL KNOW- HOW. THE ARGUMENT OF THE LEARNED DR THAT THE REAS ONS GIVEN BY THE AO IN THE ORIGINAL ORDER OF ASSESSMENT SHOULD BE REGARDED AS REASONS GIVEN IN THE ORDER PASSED BY HIM AFTER REMAND BY THE TRIBUNA L, IS NOT ACCEPTABLE. THE ORIGINAL ORDER OF THE AO HAS BEEN SET ASIDE BY THE TRIBUNAL AND THEREFORE THE REASONS GIVEN THEREIN CAN NO LONGER B E LOOKED INTO. IT IS NOT THE CASE OF THE AO IN THE ORDER PASSED AFTER REMAND BY THE TRIBUNAL THAT THE REASONS GIVEN IN THE ORIGINAL ORDER WILL CONTIN UE TO HOLD GOOD. THE ITA NO.1281/BANG/2010 PAGE 40 OF 45 RECEIPT IN QUESTION CANNOT ALSO BE REGARDED AS FALL ING WITHIN THE AMBIT OF SEC.28(IV) OF THE ACT AS THE CONSIDERATION WAS RECE IVED IN CASH AND THEREFORE CANNOT BE REGARDED AS VALUE OF ANY BENEFI T OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINES S OR THE EXERCISE OF A PROFESSION. THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA) , RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY SUPPORTS THE PLEA OF THE A SSESSEE IN THIS REGARD. THE TWO DECISIONS RELIED UPON BY THE LEARNED CIT(A) DOES NOT HELP THE CASE OF THE REVENUE. IN THE CASE OF M/S.HELIOS & MATHERSON INFORMATION TECHNOLOGY LTD. (SUPRA) , THE FINDING OF THE TRIBUNAL WAS THAT THE NON- COMPETE FEE WAS IN FACT A PAYMENT FOR SHARING CUSTO MER DATABASE AND SHARING OF TRAINED EMPLOYEES AND THEREFORE CHARGEAB LE TO TAX. THE RECEIPT IN THE CASE OF THE ASSESSEE IS NOT ATTRIBUTABLE TO TRANSFER OF ANY ASSET OR RIGHT AND THE MERE FACT THAT THE RECEIPT IS NOT ATT RIBUTABLE TO NON-COMPETE COVENANT IT CANNOT BE AUTOMATICALLY CONCLUDED THAT THE RECEIPT WAS EITHER FROM BUSINESS OR INCOME OF A CASUAL OR RECURRING NA TURE. IN THE DECISION RENDERED IN THE CASE OF MADRAS CARBON BRUSHES PVT.L TD., (SUPRA), THE FINDING OF THE TRIBUNAL WAS NON-COMPETE FEE WAS IN FACT CONSIDERATION FOR TRANSFER OF GOODWILL. IN THE PRESENT CASE THE TRIB UNAL HAS ALREADY HELD THAT THE PAYMENT OF RS.30 CRORES IS NOT TOWARDS GOODWILL . THEREFORE RELIANCE PLACED BY THE LEARNED CIT(A) ON THE AFORESAID DECIS ION CANNOT IN ANY WAY IMPROVE THE CASE OF THE REVENUE. ITA NO.1281/BANG/2010 PAGE 41 OF 45 46. WE THEREFORE HOLD THAT THE SUM OF RS.30 CRORES CANNOT BE BROUGHT TO TAX AND DELETE THE ADDITION MADE IN THIS REGARD AND ALLOW THE RELEVANT GROUNDS OF APPEAL OF THE ASSESSEE AS INDICATED ABOV E. 47. THE ASSESSEE HAS ALSO RAISED AN ISSUE WITH REG ARD TO THE MANNER IN WHICH THE AO HAS COMPUTED INTEREST U/S.220(2) OF TH E ACT WHILE GIVING EFFECT TO THE ORDER OF THE ITAT. THE AO PASSED THE ORDER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL ON 10.12.2009. IN THE S AID ORDER AFTER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL, THE TAX P AYABLE WAS ARRIVED AT BY HIM AT RS.1,70,94,171. TO THE AFORESAID SUM THE AO ADDED A SUM OF RS.34,49,92,215 TO ARRIVE AT THE TAX PAYABLE ON WHI CH INTEREST U/S.220(2) OF THE ACT WAS TO BE CALCULATED. THE ASSESSEE WAS ENT ITLED TO A REFUND IN AY 96-97 WHICH WAS A SUM OF RS.34,49,92,215 AND WHICH WAS ADJUSTED ON 22.10.1999. THE ABOVE REFUND INCLUDED REFUND OF TA X OF RS.26,33,52,847 AND INTEREST ON TAX REFUND U/S.244A OF THE ACT OF A SUM OF RS.8,16,39,368. THE ASSESSEE HAD ALREADY OFFERED TO TAX AS INCOME T HE SUM OF RS.8,16,39,368 IN AY 2000-01. THE PLEA OF THE ASSE SSEE WAS THAT ONLY A SUM OF RS.26,33,52,847 OUGHT TO BE ADDED TO THE SUM OF RS.1,70,94,171 AND NOT THE SUM OF RS.34,49,92,215. ACCORDING TO T HE ASSESSEE INTEREST U/S.244A OF THE ACT GRANT UNDER ONE ORDER SHOULD NO T BE CONSIDERED AS THE PRINCIPAL AMOUNT WHILE PASSING A SUBSEQUENT ORDER F OR CHARGING INTEREST U/S.220(2) OF THE ACT OR GRANTING INTEREST U/S.244A OF THE ACT. OTHERWISE IT WOULD AMOUNT TO TAX ON AN AMOUNT WHICH WAS EARLIER TREATED AS INTEREST SUBSEQUENTLY BEING TREAT AS TAX BY REVENUE. THE AS SESSEE ALSO POINTED ITA NO.1281/BANG/2010 PAGE 42 OF 45 OUT THAT THE INTEREST U/S.244A OF THE ACT HAS ALREA DY BEEN OFFERED TO TAX BY THE ASSESSEE IN AY 2000-01 AND THEREFORE THE CALCUL ATION OF INTEREST U/S.220(2) OF THE ACT AS DONE BY THE AO IS INCORREC T AND THAT DONE BY THE ASSESSEE WHICH IS AT PAGE- 18 OF THE ASSESSEES PAP ER BOOK SHOULD BE ACCEPTED AS CORRECT. THE CIT(A) WITHOUT UNDERSTAND ING THE ABOVE CLAIM OF THE ASSESSEE MERELY OBSERVED THAT CHARGING OF INTER EST U/S.220(2) OF THE ACT WAS MANDATORY. 48. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT IDENTICAL ISSUE WAS CONSIDERED AS DECIDED BY THE IT AT IN ASSESSEES OWN CASE FOR AY 96-97 & 2003-04 IN ITA NO.437 & 439/BAN G/2012 AND THIS TRIBUNAL HAS UPHELD SIMILAR PLEA OF THE ASSESSEE. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 49. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN C ASE ON A SIMILAR ADJUSTMENT IN THE CASE CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THIS TRIBUNAL HELD AS FOLLOWS ON THE ISSUE:- 4.1 WE HAVE HEARD THE LEARNED SENIOR COUNSEL OF T HE ASSESSEE IN SUPPORT OF THE GROUNDS RAISED. IT IS CONTENDED B Y THE LEARNED AUTHORISED REPRESENTATIVE THAT THE COMPUTATION OF I NTEREST ADOPTED BY THE ASSESSING OFFICER IS FLAWED AND ERRO NEOUS. IT WAS SUBMITTED THAT INTEREST UNDER SECTION 244A OF THE A CT GRANTED UNDER ONE ORDER SHOULD NOT BE CONSIDERED AS THE PRI NCIPAL AMOUNT WHILE PASSING A SUBSEQUENT ORDER FOR CHARGING INTER EST UNDER SECTION 220(2) OF THE ACT OR GRANTING INTEREST UNDE R SECTION 244A OF THE ACT. OTHERWISE, IT WOULD AMOUNT TO TAX ON AN AMOUNT WHICH WAS EARLIER TREATED AS INTEREST SUBSEQUENTLY BEING TREATED AS ITA NO.1281/BANG/2010 PAGE 43 OF 45 TAX BY REVENUE. IT IS SUBMITTED THAT THE INTEREST A MOUNT GRANTED UNDER SECTION 244A OF THE ACT HAS BEEN OFFERED TO T AX BY THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES I N THE YEAR OF RECEIPT AND TREATING IT AS TAX NOW WOULD AMOUNT TO DOUBLE TAXATION. IN VIEW OF THIS, THE LEARNED AUTHORISED R EPRESENTATIVE ASSAILED THE PRINCIPLE UPHELD BY THE LEARNED CIT (A PPEALS) THAT JUST AS INTEREST ON INTEREST UNDER SECTION 244A OF THE ACT CAN BE CHARGED, ON PARITY, OF REASONING OR REVERSE ANALOGY INTEREST ON INTEREST CAN BE CHARGED UNDER SECTION 220(2) OF THE ACT. IN SUPPORT OF THE ASSESSEES STAND AND THE ARGUMENTS P UT FORTH, THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE O N THE FOLLOWING JUDICIAL DECISIONS: I) GIRNAR INVESTMENTS LTD. V CIT (2012) 340 ITR 529 (DEL) II) CIT V. FLUORO CHEMICALS SLP (C) NO.11406 OF 200 8 DT.18.9.2013. ITA NOS.437 & 439/BANG/12 4.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND S UBMITTED THAT THEY OUGHT TO BE UPHELD AND CONSEQUENTLY THE ASSESS EES APPEALS FOR BOTH YEARS BE DISMISSED. 4.3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE ON LY ISSUE FOR ADJUDICATION, BEFORE US, IS THE MANNER OF TREATING THE INTEREST UNDER SECTION 244A OF THE ACT GRANTED EARLIER, WHIL E COMPUTING THE INTEREST UNDER SECTION 220(2) OF THE ACT. THE A SSESSEES CONTENTION IS THAT THE ENTIRE AMOUNT OF REFUND GRAN TED, WHICH ALSO INCLUDES INTEREST UNDER SECTION 244A OF THE ACT, SH OULD NOT BE CONSIDERED: BUT WHAT SHOULD BE CONSIDERED IS ONLY T HE PRINCIPAL AMOUNT OF TAX. IF THE ENTIRE AMOUNT OF REFUND GRANT ED EARLIER IS CONSIDERED, THEN THAT WOULD AMOUNT TO DOUBLE TAXATI ON OF THE INTEREST COMPONENT AS IT HAS BEEN OFFERED AS INCOME FOR TAX SEPARATELY IN THE YEAR OF RECEIPT. PER CONTRA, THE VIEW OF REVENUE, AS EMERGES FROM THE ORDER OF THE CIT(APPEALS), IS T HAT CHARGING OF INTEREST ON INTEREST IS CORRECT AND IS ALLOWED B Y THE PROVISIONS OF LAW AS UPHELD BY THE HONBLE APEX COURT IN ITS D ECISION IN SANDVIK ASIA (SUPRA). 4.3.2 THE DECISION OF THE HONBLE APEX COURT IN SA NDVIK ASIA (SUPRA) HAS BEEN EXPLAINED BY THE HONBLE APEX COUR T IN THE ITA NO.1281/BANG/2010 PAGE 44 OF 45 DECISION RENDERED IN THE CASE OF CIT V GUJARAT FLUO RO CHEMICALS, SLP (C) NO.11406 OF 2008. THE HONBLE APEX COURT, I N THE IMPUGNED CASE, HAS CLARIFIED THAT IT IS ONLY INTERE ST PROVIDED FOR UNDER THE STATUTE WHICH CAN BE CLAIMED BY THE ASSES SEE AND NO OTHER INTEREST ON SUCH STATUTORY INTEREST. THE HON BLE COURT HAD CLARIFIED THAT IN THE CASE OF SANDVIK ASIA (SUPRA), THE HONBLE APEX COURT HAD DIRECTED REVENUE TO PAY COMPENSATION FOR THE UNDER DELAY IN ISSUING OF REFUND AND NOT INTEREST O N INTEREST. THEREFORE, THE SETTLED LEGAL POSITION IS THAT INTER EST HAS TO BE GRANTED ONLY AS PER THE PROVISIONS OF THE ACT AND T HAT WHAT HAS BEEN GRANTED IN THE CASE OF SANDVIK ASIA (SUPRA) IS ONLY A COMPENSATION FOR THE UNDUE DELAY IN GRANT OF REFUND . THE DECISION CANNOT BE READ TO MEAN THAT INTEREST HAS T O BE GRANTED ON INTEREST UNDER SECTION 244A OF THE ACT, AS THE INCO ME TAX ACT, 1961 DOES NOT PROVIDE FOR THE CHARGING OF INTEREST ON THE INTEREST GRANTED UNDER SECTION 244A OF THE ACT AND THEREFORE CHARGING THE SAME IS NOT TENABLE. 4.3.3 FURTHER, AS IN THE CASE ON HAND, THE QUESTIO N OF UNDUE DELAY IN THE CASE OF REVENUE DOES NOT ARISE. THE IN TEREST UNDER SECTION 244A OF THE ACT IS GRANTED BY THE DEPARTMEN T TO THE ASSESSEE FOR THE DELAY IN GIVING REFUND DUE TO THE ASSESSEE. ON A SUBSEQUENT DATE, IF DUE TO ORDERS OF ASSESSMENT OR APPELLATE ORDERS PASSED, THE INTEREST GRANTED TO THE ASSESSEE UNDER SECTION 244A OF THE ACT IS TO BE WITHDRAWN, THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR ANY UNDUE DELAY, THEREBY REQUIRING ANY COMPENSATION. HENCE, THE PRINCIPLE OF COMPENSATORY INTEREST FOR UNDUE DELAY IN GRANT OF REFUND CAN BE APPLICABLE TO THE ASSESSEE BUT NOT TO THE DEPARTMENT. 4.3.4 IN VIEW OF THE ABOVE DISCUSSION AT PARA 4.3.1 TO 4.3.3 (SUPRA), WE DIRECT THE ASSESSING OFFICER TO RECOMPU TE THE INTEREST CHARGEABLE UNDER SECTION 220(2) OF THE ACT ACCORDIN GLY, BY REDUCING ONLY THE PRINCIPAL AMOUNT OF TAX FROM THE REFUND GRANTED EARLIER AND NOT TO CHARGE INTEREST ON THE INTEREST GRANTED EARLIER UNDER SECTION 244A OF THE ACT. IT IS ORDERED ACCORD INGLY. CONSEQUENTLY, THE ASSESSEES APPEALS FOR ASSESSMENT YEARS 199697 AND 2003-04 ON THIS ISSUE ARE ALLOWED. ITA NO.1281/BANG/2010 PAGE 45 OF 45 50. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L, WE DIRECT THE AO TO COMPUTE INTEREST U/S.220(2) OF THE ACT AS HAS BEEN CLAIMED BY THE ASSESSEE. THE RELEVANT GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED. 51. THE GROUND OF APPEAL REGARDING GRANT OF U/S.24 4A OF THE ACT IS PURELY CONSEQUENTIAL. THE AO IS DIRECTED TO GIVE C ONSEQUENTIAL EFFECT. 52. IN THE RESULT APPEAL BY THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF MAY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 14 TH MAY , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.