DAI-ICHI KARKARIA LTD, MUMBAI V. ACIT RG 1(1), MUMBAI

ITA 1843/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0272 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: PRASAD BAPAT; RAKESH MOHAN
• Keywords: Capital asset; Business income; Business expenditure; Opportunity of being heard; Earning of tax free income; Wholly owned subsidiary; Bad and doubtful debts; Capital receipt
• Section: 143(3); 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1843 / MUM/20 14 ASSESSMENT YEAR: 2009 - 10 M/S. DAI ICHI KARKARIA LTD., VS. A CIT RG 1 (1) LIBERTY BUILDING, SIR VITH AL DAS MUMBAI THAKARSEY MARG, MUMBAI 400 028 PAN NO. AAACD0548F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAKESH MOHAN & SHRI PRASAD BAPAT , AR REVENUE BY: SH RI O.P. MEENA , DR DATE OF HEARING : 12/05 /2017 DATE OF PRONOUNCEMENT: 09/08/2017 ORDER PER N.K. PRADHAN, AM . THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF INTEREST AND OTHER EXPENDITURE AGGREGATING TO RS. 4,44,001/ - U/S 14A READ WITH RULE 8D. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNE D CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF WRITE OFF OF INTER CORPORATE DEPOSIT OF RS. 10,00,000/ - U/S 36(1)(VII) AS BAD DEBT OR IN THE ALTERNATE AS ITA NO. 1843 /MUM/201 4 2 BUSINESS LOSS U/S 28 WITHOUT APPRECIATING THAT THE DEPOSIT WAS GIVEN IN THE ORDINARY COURSE OF BUSINESS. 3. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE TREATMENT OF AMOUNT RECEIVED FROM A JOINT VENTURE PARTNER OF RS. 7,32,53,534/ - AS BUSINESS INCOME WITHOUT APPRECIATING THAT THE AMOUNT WAS RECEIVED TOWAR DS BREACH OF CONTRACTUAL OBLIGATIONS RESULTING IN EXTINGUISHMENT OF SOURCE OF INCOME AND THEREFORE A CAPITAL RECEIPT. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THAT THE SAID AMOUNT IS CAPITAL RECEIPT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING THE ALTERNATE GROUND OF THE APPELLANT TO TREAT THE SAME AS LONG TERM CAPITAL GAIN BEING EXTINGUISHMENT OF RIGHT TO USE TECHNICAL KNOW - HOW, BRAND NAME OF THE JV PARTNER. 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. THE ASSESSING OFFICER (AO) HAS OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE M/S DAI - ICHI KARKARIA LTD. (DKL) HAD CLAIMED EXEMPTION U/S 10(33) ON DIVIDEND INCOME AMOUNTING TO RS.34,29,529/ - . THE ASSESSEE SUBMITTE D BEFORE THE AO THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR THE PURPOSE OF EARNING THE AFORESAID EXEMPT INCOME OTHER THAN RS.1,02,886/ - WHICH WAS ATTRIBUTABLE TO THE EARNING OF THE SAID EXEMPT INCOME. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE SUBMI SSION OF THE ASSESSEE AND WORKED OUT THE DISALLOWANCE U/S 14A R.W. RULE 8D AND IT COMES TO RS.4,44,001/ - . 3.1 AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS AGREED WITH THE DISALLOWANC E OF RS.4,44,001/ - MADE BY THE AO U/S 14A. 3.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT OUT OF THE AGGREGATE VALUE OF OPENING INVESTMENT, THE TOTAL OWN FUNDS AT THE END OF THE YEAR WERE RS. 59.67 CRORES AS AGAINST TOTAL INVESTMENT OF RS.9.2 3 CRORES. THEREFORE, IT IS SUBMITTED BY HIM THAT THE ENTIRE INVESTMENTS ARE ACQUIRED OUT OF OWN FUNDS. RELIANCE WAS PLACED BY ITA NO. 1843 /MUM/201 4 3 HIM ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITIES LTD. 313 ITR 340 FOR THE PROPOSITION THAT IF THE INTERE ST - FREE FUNDS AVAILABLE TO AN ASSESSEE ARE SUFFICIENT TO MEET INVESTMENTS, IT IS PRESUMED THAT INVESTMENTS ARE MADE OUT OF INTEREST - FREE FUNDS. 3.3 ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.4,44,0 01/ - MADE BY THE AO. 3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND FROM THE BALANCE SHEET OF DKL AS AT 31.03.2009 THAT THE TOTAL OWN FUNDS AT THE END OF THE YEAR WERE RS.59.67 CRORES AS AGAINST TOTAL INVESTMENT OF RS.9.23. CRORES. WE FOLLOW THE RATIO LAID DOWN IN RELIANCE UTILITIES LTD. (SUPRA) AND DELETE THE DISA LLOWANCE OF INTEREST EXPENSES OF RS.1,23,251/ - MADE BY THE AO UNDER RULE 8D (2) (II) . 3.4.1 HOWEVER, I N GODREJ AND BOYCE M FG CO. LTD. VS. DCIT (2010) 194 TAXMAN 203 (BOM), THE HONBLE HIGH COURT EXPLAINED RULE 8D AS UNDER: AS REGARDS RULE 8D(2)(III), IT HAD BEEN SUBMITTED THAT SOME MECHANISM OR FORMULA HAD TO BE ADOPTED FOR ATTRIBUTING PART OF THE ADMINISTRATIVE / MANAGERIAL TO TAX - EXEMPT INVESTMENT INCOME. THE ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO TAX - FREE INVESTMENT INCOME HAVE A FIXED COMPONENT AND A VARIABLE COMPONENT. A VIEW WAS TAKEN THAT THE DISALLOWANCE SHOULD ALSO BE LINKED TO THE VALUE OF THE INVESTMENT RATHER THAN THE A MOUNT OF EXEMPT INCOME. UNDER P O R TFOLIO MANAGEMENT SCHEMES (PMS), THE FEE CHARGED RANGES BETWEEN 2 AND 2.5 PER CENT OF THE PO RTFOLIO VALUE WHICH WOULD BE INCLUSIVE OF A PROFIT ELEMENT FOR THE PORTFOLIO MANAGER. WHILE THE FIXED ADMINISTRATIVE EXPENSES WERE EXCLUDED ON THE GROUND THAT IN THE CASE OF LARGE CORPORATE TAXPAYER THEY WOULD BE SPREAD OVER A LARGE ITA NO. 1843 /MUM/201 4 4 NUMBER OF VO LUMINOUS A CTIVITIES, THE VARIABLE EXPENSES WERE COMPUTED AT ONE - HALF PER CENT OF THE VALUE OF THE INVESTMENT. IN VIEW OF THE ABOVE POSITION OF LAW , WE CONFIRM THE DISALLOWANCE OF RS.3,20,750/ - MADE BY THE AO UNDER RULE 8D(2)(III). 3.5 THUS THE 1 ST GROUND OF APPEAL IS PARTLY ALLOWED. 4. NOW WE TURN TO 2 ND GROUND OF APPEAL. THE AO OBSERVED THAT THE ASSESSEE HAD WRITTEN OFF RS.10,00,000/ - AS BAD DEBT IN THE P&L ACCOUNT. THE AO REFERRED TO SECTION 36(2) WHEREIN IT IS STATED THAT NO DEDUCTION FOR A BAD DEBT OR PART THEREOF WILL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINES S OF BANKING OR MONEY LE NDING WHICH IS CARRIED ON BY THE ASSESSEE. THE AO OBSERVED THAT THE DEBT WAS IN THE NATURE OF INTER CORPORATE DEPOSIT FOR GENERAL CO - OPERATION TO WORK TOGETHER TOWARDS A COMM ON CAUSE DISPUTING SEVERAL CLAUSES IN ONGC CONTRACT TERMS. THE AO THUS CAME TO A FINDING THAT THIS WAS NEITHER A TRADE ADVANCE NOR A CREDIT SALE. IT WAS AN INTER CORPORATE DEPOSIT NECESSARILY IN THE NATURE OF CAPITAL DEPOSIT AND NOT IN THE ORDINARY COURSE OF BUSINESS. THEREFORE, HE DISALLOWED THE CLAIM OF RS.10,00,000/ - . 4.1 IN APPEAL THE LD. CIT(A) HAS OBSERVED FROM THE SUBMISSION MADE BY THE ASSESSEE THAT CONSIDERING THE REMOTE CHANCES OF RECOVERY AND THAT DISPUTE OF RECOVERABILITY OF THE SAID ICD WAS STILL BEFORE THE COURT AS ON 31.03.2009, IT IS AN ADMITTED POSITION BY THE ASSESSEE THAT THE AMOUNT HAS NOT BECOME A BAD DEBT AND IS VERY MUCH ALIVE. THEREFORE, THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE ADDITION OF RS.10,00 ,000/ - . ITA NO. 1843 /MUM/201 4 5 4.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE DISPUTE OF RECOVERABILITY OF THE SAID ICD WAS STILL PENDING BEFORE THE COURT AS ON 31.03.2009. HOWEVER, CONSIDERING THE REMOTE CHANCES OF RECOVERY THE COMPANY WROTE OFF THE SAID AMO UNT FROM BOOKS OF ACCOUNT AND CLAIMED IT AS BUSINESS EXPENDITURE. THE ICD WAS GIVEN DURING THE COURSE OF BUSINESS ACTIVITY FOR THE FURTHERANCE OF BUSINESS. THE IMPUGNED AMOUNT WAS DEBITED UNDER THE HEAD OF BAD DEBTS AND ADVANCES WRITTEN OFF. SINCE THE ADVA NCE WAS GIVEN FOR THE PURPOSE OF BUSINESS AND THAT TOO ON REVENUE ACCOUNT, IT IS ALLOWANCE AS BUSINESS LOSS U/S 28. RELIANCE WAS PLACED BY HIM ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUDUMJEE PULP AND PAPER MILLS LTD. (ITA NO. 1590 OF 2013). 4.3 ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.10,00,000/ - MADE BY THE AO. 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, THE AO HAS MADE THE DISALLOWANCE U/S 36(2). IN THE CASE OF PUDUMJEE PULP AND PAPER MILLS LTD. (SUPRA) , THE HONBLE BOMBAY HIGH COURT HAS HELD THAT; 10. SO FAR AS SECTION 36(1)(VII) OF THE ACT IS CONCERNED, IT IS A SETTLED POSITION IN LA W THAT AFTER 1 ST APRIL, 1989, IT IS NECESSARY THAT THE DEBT ITSELF MUST BE PROVED TO BE IRRECOVERABLE. THE ONLY REQUIREMENT IS THAT THE AMOUNTS CLAIMED AS BAD DEBTS SHOULD BE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE (SEE T R F LTD. VS. CIT - 323 ITR 397). THE SATISFACTION OF THE ABOVE PROVISION IS NOT DISPUTED BY THE REVENUE. THE HUB OF THE CONTROVERSY IS WHETHER THE REQUIREMENT OF SECTION 36(2)(I) OF THE ACT IS SATISFIED. ITA NO. 1843 /MUM/201 4 6 11. IT IS NOTICED THAT SECTION 36(2)(I) OF THE ACT ALLOWS DEDUCTION ON ACCOUNT OF SATISFACTION OF ANY OF THE TWO CONDITIONS AS UNDER: (A) BAD DEBTS OR PART THEREOF TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR AN EARLIER ASSESSMENT YEAR BEFORE SUCH DEBT OR PART THEREOF IS WRITTEN OFF; OR (B) THE DEBTS R EPRESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY - LENDING WHICH IS CARRIED ON BY THE ASSESSEE. THEREFORE, EVEN IF ONE OF THE TWO CONDITIONS OF SECTION 36(2)(I) OF THE ACT IS SATISFIED, THEN BAD DEBTS CLAIMED UNDER SECTION 36(1)(VII) OF THE ACT HAS TO BE ALLOWED. : 4.5 RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DELETE THE DISAL LOWANCE OF RS.10,00,000/ - MADE BY THE AO ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 5. FINALLY WE COME TO THE 3 RD GROUND OF APPEAL. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DKL HAD RECEIVED DAMAGE COMPENSATION FROM BAKER PRODUCTION SERVICES (UK) [IN SHORT BAKER ] OF RS.7,32,53,534/ - . THE ASSESSEE CLAIMED IT AS A CAPITAL RECEIPT IN THE RETURN OF INCOME. THE BAC KGROUND IS THAT DKL AND BAKER HAD EN TERED INTO A JOINT VENTURE AGREEMENT (JVA) ON 5 TH OCTOBER, 1989. IN TERMS OF THE JVA, BAKER OIL TREATING (INDIA) LTD. (IN SHORT BOTIL) WAS INCORPORATED AS A JV BETWEEN DKL WITH A SHARE OF 60% AND BAKER WITH A SHARE OF 40%. BOTIL WAS ENGAGED IN MANUFACTURE OF SPECIALITY CHEMICALS FOR OI L AND GAS PRODUCTION, TRANSPORTATION AND REFINERY INDUSTRY. AS PER THE JVA, THE TECHNICAL KNOW - HOW POSSESSED OR DEVELOPED BY BAKER WAS TO BE MADE AVAILABLE TO THE JV COMPANY (IN SHORT J V CO.) FOR WHICH A TECHNICAL KNOW - HOW AGREEMENT WAS SEPARATELY ENTERED. THE JVA PROHIBITED BOTH THE PARTIES FROM ENGAGING OR ITA NO. 1843 /MUM/201 4 7 PARTICIPATING IN INDIA IN THE MANUFACTURING, SALE OR DISTRIBUTION OF THE PRODUCTS OR INTERMEDIARIES OF THE PRODUCTS PRODUCED BY TH E JV CO. THEY WERE ALSO PROHIBITED FROM DISCLOSING KNOW - HOW, TECHNICAL INFORMATION, USE OF TRADE NAME OR TRADEMARKS. THE JV CO. WOULD BE THE SOLE VEHICLE FOR THE MANUFACTURE AND SALE OF AGREED PRODUCTS IN INDIA. THE JVA WAS TO REMAIN IN FORCE TILL IT WAS T ERMINATED IN ACCORDANCE WITH THE PROVISIONS THEREOF. HOWEVER, IN 2007 BAKER UNILATERALLY FORMED A WHOLLY OWNED SUBSIDIARY IN INDIA FOR MANUFACTURE OF PRODUCTS WHICH WERE BEING PRODUCED BY THE JV CO. BAKER REFUSED TO OFFER TECHNICAL SUPPORT AS WELL AS PRO DUCTS TO THE JV CO. THUS BAKER VIOLATED THE TERMS OF THE JVA WHICH HAD SERIOUS REPERCUSSIONS OF THE JV CO. DUE TO NON - COMPLIANCE OF THE TERMS OF THE JVA AND THE WRONGFUL CONDUCT OF THE BAKER, DKL HAD TO FILE A SUIT IN THE BOMBAY HIGH COURT AGAINST BAKER REQUESTING MANDATORY INJUNCTION DIRECTING BAKER TO SUPPLY PRODUCTS, TECHNICAL SUPPORT AND KNOW - HOW TO THE JV CO. IT ALSO CLAIMED DAMAGES TO THE TUNE OF RS.10,00,00,000/ - FROM BAKER FOR BREACH OF JVA. THE DISPUTE WAS FINALLY SETTLED OUT OF THE COURT THROU GH THE CONSENT TERMS DATED 18 TH FEB. 2009 AS AGREED BETWEEN THE PARTIES. AS PER THE CONSENT TERMS IT WAS AGREED THAT BAKER WILL PAY USD 1.5 MILLION (RS.7,32,53,534/ - ) AS DAMAGE AND TRANSFER OF 4,50,000 SHARES IN BOTIL TO DKL . THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE AMOUNT HAD NOT ARISEN IN THE ORDINARY COURSE OF CARRYING ON ITS BUSINESS AND THEREFORE, IS NOT ON REVENUE ACCOUNT. THE CONDUCT OF THE OTHER PARTY WAS TANTAMOUNT TO INFLICTING INJURY TO THE PROFIT MAKING APPARATUS O F ITA NO. 1843 /MUM/201 4 8 DKL. SINCE THE AMOUNT H AS BEEN PAID AS DAMAGES FOR LOSS RELATING TO CAPITAL ASSET CAUSED BY WRONGFUL CONDUCT OF BAKER, THE AMOUNT OF DAMAGES ARE IN THE NATURE OF CAPITAL RECEIPT. FURTHER, AFTER THE CONSENT TERMS THE ASSESSEE - COMPANY TO ENSURE THE VIABILITY OF THE JV CO. HAD ENTERED INTO AN AGREEMENT WITH A NEW PARTNER TO CARRY ON THE SA ME BUSINESS. THE NAME OF THE JV CO. AFTER INTRODUCTION OF THE NEW JV PARTNER HAS BEEN CHANGED TO CHAMPION DAI - ICHI TECHNOLOGIES INDIA LTD. THUS THE ASSESSEE SUBMITTED BEFORE THE AO THAT (I) THE AMOUNT RECEIVED WAS TOWARDS EXTINGUISHMENT OF SOURCE OF INCOME AND HENCE IT WAS A CAPITAL RECEIPT (II) THE SAID CAPITAL RECEIPT WAS NOT CHARGEABLE TO TAX AND ACCORDINGLY THE ASSESSEE CLAIMED IT AS DEDUCTION IN COMPUTING TOTAL INCOME. 5.1 HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE AN D HE MADE SPECIFIC REFERENCE TO CLAUSE 4.10; 9.6 ; 9.8 & 9.9 OF THE JVA DATED 5 TH OCTOBER, 1989. THE AO HELD THAT DKL WAS NOT DEPRIVED OF ANY CAPITAL ASSET OR PROFIT MAKING APPARATUS AS IT CONTINUED TO MANUFACTURE AND SALE THE SAME PRODUCTS AND RENAMED THE JV CO. AS CHAMPION DAI - ICHI TECHNOLOGIES (P.) LTD. AFTER INTRODUCTION OF A NEW JV PARTNER. THEREFORE, THE AO HELD THE AMOUNT RECEIVED ON BREACH OF JVA AS INCOME ON REVENUE ACCOUNT U/S 28 OF THE ACT AND MADE AN ADDITION OF RS.7,32,53,534/ - TO THE TOTAL INCO ME. 5.2 IN APPEAL THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND DISMISSED THE APPEAL ON THE ABOVE GROUND FILED BY THE ASSESSEE. 5.3 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING (I) COMPUTATION OF INCOME, (II ) ANNUAL FINANCIAL STATEMENTS AUDITORS REPORT, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, NOTES TO ACCOUNTS, (III) SUBMISSION BEFORE CIT(A) DATED 4 TH ITA NO. 1843 /MUM/201 4 9 OCTOBER 2012, (IV) EXTRACTS OF MEMORANDUM AND ARTICLES OF ASSOCIATION, (V) SUBMISSION BEFORE THE CIT(A) DATED 26 TH NOVEMBER 2012, (VI) CONSENT TERMS, (VII) COPY OF SUIT FILED BEFORE BOMBAY HIGH COURT AGAINST BAKER, (VIII) MEMORANDUM OF UNDERSTANDING, ( IX ) JOINT VENTURE AGREEMENT, (X) TECHNICAL KNOW - HOW AGREEMENT, ITS APPROVAL LETTER AND AMENDMENTS, (XI) AMEN DMENT TO JV AGREEMENT, (XII) CORRESPONDENCE BETWEEN DAI - ICHI AND BAKER, (XIII) BAKERS LETTERS TO REGISTRAR OF COMPANIES, (XIV) CORRESPONDENCE BETWEEN DAI - ICHI AND BAKER AND (XV) COPY OF ORDER PASSED BY INCOME TAX APPELLATE TRIBUNAL IN CASE OF APPELLATE COM PANY FOR AY 2008 - 09 . 5.3.1 THE LD. COUNSEL RELIE S ON THE DECISION IN THE CASE OF (I) SPACO CARBURETORS I PVT. LTD. VS. ADDL. CIT (2009) 315 ITR 86 (MUM), (II) OBEROI HOTEL PVT. LTD. VS. CIT (1999) 236 ITR 903 (SC), (III) VAN DEN BERGHS LTD. VS. H.M. INSPECTOR OF TAXES (3 ITR 17), (IV) CIT VS. SAURASHTRA CEMENT LIMITED (2010) 325 ITR 422 (SC), (V) CIT VS. BOMBAY BURMAH TRADING CORPORATION (1986) 161 ITR 386 (SC), (VI) CIT VS. VAZIR SULTAN & SONS (1959) 36 ITR 175 (SC), (VII) CIT VS. RAI BAHADUR JAIRAM VALJI AND OTHERS (1959) 35 ITR 148 (SC) AND (VIII) PAYAL KAPUR VS. ACIT (2006) 104 TTJ 690 (DELHI) . 5.3.2 THE LD. COUNSEL SUBMITS THAT THE JVA HAD STRUCTURED THE BUSINESS AND HAD DESIGNED THE APPARATUS THROUGH WHICH THE ENVISAGED BUSINESS WAS TO BE CARRIE D ON. IT WAS PREMATURELY TERMINATED. THE EXCLUSIVE MANUFACTURING RIGHTS HAD TO BE GIVEN UP AND BAKER WAS GIVEN THE RIGHT OF MANUFACTURING IN INDIA AND CONSEQUENTLY AN ENTRY INTO INDIA. THE COMPENSATION RECEIVED WAS FOR THIS RIGHT THAT BAKER OBTAINED AT THE COST OF THE ENTIRE BUSINESS STRUCTURE AND APPARATUS OF DKL (IN THE FORM OF JVA) GETTING DESTROYED. THEREFORE, IT IS A CAPITAL RECEIPT. ITA NO. 1843 /MUM/201 4 10 5.4 PER CONTRA THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE ACTION OF THE AO IN BRIN G ING TO TA X THE AMOUNT OF RS.7,32,53,534/ - AS A REVENUE RECEIPT. HE RELIES ON THE ORDER PASSED BY THE ITAT F BENCH, MUMBAI IN THE CASE OF ION EXCHANGE (I) LTD. VS. ITO (ITA NO. 4190/MUM/2015). 5.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATER IALS ON RECORD. AS MENTIONED AT PARA 5.1 HERE - IN - ABOVE, THE AO HAS REFERRED TO CLAUSE 4.10; 9.6; 9.8 & 9.9 OF THE JVA DATED 5 TH OCTOBER, 1989 WHILE ARRIVING AT HIS FINDING THAT THE AMOUNT OF RS.7,32,53,534/ - IS A REVENUE RECEIPT. WE FIND THAT THE DOCUMEN TS LIKE (I) CONSENT TERMS, (II) S UIT FILED BEFORE THE BOMBAY HIGH COURT AGAINST BAKER , (III) TECHNICAL KNOW - HOW AGREEMENT, ITS APPROVAL LETTER AN D AMENDMENTS, (IV) AMENDMENT TO JVA AGREEMENT, (V) BAKERS LETTERS TO REGISTRAR OF COMPANIES ETC. HAVE A DIRECT BEARING IN DECIDING WHE THER THE COMPENSATION RECEIVED BY DKL IS A CAPITAL RECEIPT OR A REVENUE ONE. WE FIND THAT NEITHER THE AO NOR THE LD. CIT(A) HAS EXAMINED THE ABOVE DOCUMENTS WHILE ARRIVING AT A FINDING. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER EXAMINING THE RELEVANT DOCUMENTS AND GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. THE ASSESSEE IS ALSO DIRECTED TO FILE THE CONCERNED DETAILS BEFORE THE AO. THUS THE 3 RD GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1843 /MUM/201 4 11 AS WE HAVE RESTORED THE MATTE R TO THE FILE OF THE AO, WE ARE NOT ADVERTING TO THE CASE - LAWS RELIED ON BY THE LD. COUNSEL OF BOTH THE SIDE . 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 09/08/2017. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 09/08/2017 RAHUL SHARMA , SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI