STERLING RE-ROLLING MILLS P. LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 2793/MUM/2010

• Counselvise Citation: 279319914 RSA 2010
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 08-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS KU SUM INGALE
• Assessee Lawyers: K SHIVARAM ARVIND DALAL
• Keywords: Capital asset; Business income; Opportunity of being heard; Cost of acquisition; Corroborative evidences; Capital receipt; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER ITA NO.2793/MUM/2010 (ASSESSMENT YEAR: 2006-07) STERLING RE-ROLLING MILLS PVT. LTD., STATE BANK BUILDING ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AABCS 1149 N VS ASST. COMMISSIONER OF INCOME-TAX-2(3), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITA NO.3388/MUM/2010 (ASSESSMENT YEAR: 2006-07) ASST. COMMISSIONER OF INCOME-TAX-2(3), AAYAKAR BHAVAN, MUMBAI ...... APPELLANT VS M/S. STERLING RE-ROLLING MILLS PVT. LTD., STATE BANK BUILDING ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT ITA NO.2588/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITA NO.2792/MUM/2010 (ASSESSMENT YEAR: 2006-07) RUIA STUD FARMS PVT. LTD., RUIA INDUSTRIES PVT. LTD., STATE BANK BUILDING ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AAACR 7200 C PAN: AAACR 1950 R VS ASST. COMMISSIONER OF INCOME-TAX-2(3)/ ADDL. COMMISSIONER OF INCOME-TAX -7(2) AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 2 ITA NO.3392/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITA NO.3396/MUM/2010 (ASSESSMENT YEAR: 2006-07) ASST. COMMISSIONER OF INCOME-TAX-2(3)/ ASST./ADDL. COMMISSIONER OF INCOME-TAX -7(2) AAYAKAR BHAVAN MUMBAI -400 020 ...... APPELLANT VS RUIA STUD FARMS PVT. LTD., RUIA INDUSTRIES PVT. LTD., STATE BANK BUILDING ANNEXE BANK STREET, FORT MUMBAI -400 023 ..... RESPONDENT ITA NO.2791/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITA NO.2389/MUM/2010 (ASSESSMENT YEAR: 2006-07) VINAYKUMAR FAMILY INVESTMENTS LTD., M/S. VINAYA TRADING CO. PVT. LTD. STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AAACV 3115 A PAN: AAACV 1601 M VS ASST. COMMISSIONER OF INCOME-TAX-2(1), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITA NO.3389/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITA NO.2688/MUM/2010 (ASSESSMENT YEAR: 2006-07) ASST. /ADDL. COMMISSIONER OF INCOME-TAX-2(3),/ DY. COMMISSIONER OF INCOME-TAX -2(3), ROOM NO.555, AAYAKAR BHAVAN, MUMBAI ...... APPELLANT VS VINAYKUMAR FAMILY INVESTMENTS LTD., M/S. VINAYA TRADING CO. PVT. LTD. STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ..... RESPONDENT PAN: AAACV 1601 M ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 3 ITA NO.2388/MUM/2010 (ASSESSMENT YEAR: 2006-07) EVERGREEN STUD AND AGRICULTURAL FARMS PVT. LTD., STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AAACE 0848 F VS ASST. COMMISSIONER OF INCOME-TAX-2(1), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITA NO.2479/MUM/2010 (ASSESSMENT YEAR: 2006-07) ASST. COMMISSIONER OF INCOME-TAX-2(1), AAYAKAR BHAVAN, MUMBAI .. .... APPELLANT VS M/S. EVERGREEN STUD & AGRICULTURAL FARMS PVT. LTD., STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ..... RESPONDENT ITA NO.5189/MUM/2010 (ASSESSMENT YEAR: 2006-07) FAIR LAWNS STUD FARMS PVT. LTD., STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AAACF 8459 M VS ASST. COMMISSION OF INCOME-TAX-2(1), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITA NO.6067/MUM/2010 (ASSESSMENT YEAR: 2006-07) ASST./ DY. COMMISSIONER OF INCOME-TAX-2(1), R.NO.575, 5TH FLOOR, M.K. ROAD, AAYAKAR BHAVAN, MUMBAI .. .... APPELLANT VS M/S. FAIR LAWNS STUD FARMS PVT. LTD., STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ..... RESPONDENT ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 4 ITA NO.2790/MUM/2010 (ASSESSMENT YEAR: 2006-07) SJS INVESTMENTS PVT. LTD., STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AAACS 6381 H VS ADDL. COMMISSION OF INCOME-TAX-2(3), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITA NO.3390/MUM/2010 (ASSESSMENT YEAR: 2006-07) ASST. / ADDL. COMMISSIONER OF INCOME-TAX-2(3), AAYAKAR BHAVAN, MUMBAI .. .... APPELLANT VS SJS INVESTMENTS PVT. LTD., STATE BANK BUILDING, ANNEXE BANK STREET, FORT MUMBAI -400 023 ..... RESPONDENT ITA NO.6147/MUM/2010 (ASSESSMENT YEAR: 2006-07) RUIA APPARELS PVT. LTD., STATE BANK BUILDING ANNEXE BANK STREET, FORT MUMBAI -400 023 ...... APPELLANT PAN: AABCR 6465 L VS ASSTT. COMMISSIONER INCOME-TAX -7(2), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT APPELLANT ASSESSEES BY: S/SHRI K. SHIVARAM, ARVIND DALAL & AJAY SINGH RESPONDENT REVENUE BY: MRS. KUSUM INGALE DATE OF HEARING: 08.06.2012 DATE OF PRONOUNCEMENT: 20.06.2012 ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 5 O R D E R PER BENCH: OUT OF THESE 17 APPEALS, 16 APPEALS ARE CROSS APPEA LS FILED IN THE CASES OF EIGHT ASSESSES FOR A.Y. 2006-07 WHILE THE REMAINING SEVENTEENTH APPEAL IS THE APPEAL FILED BY THE ASSES SEE NAMELY M/S. RUIA APPARELS P. LTD. FOR A.Y. 2006-07. SINCE COMM ON ISSUES ARE INVOLVED IN THESE APPEALS, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OFF BY A SINGLE COMPOSITE ORDER. 2. THE MAIN COMMON ISSUE INVOLVED IN THESE APPEALS AS RAISED IN THE SOLITARY GROUND OF ALL THE EIGHT APPEALS OF THE REVENUE AS WELL AS GROUND NO. 1 OF ALL THE NINE APPEALS OF THE ASSESSE E RELATES TO THE TAXABILITY OF NON-COMPETE FEES RECEIVE BY ALL THE N INE ASSESSEES IN THE PRESENT CASE. 3. THE ASSESSEE COMPANIES IN THE PRESENT CASES ALON G WITH SOME OTHER ENTITIES WERE PROMOTERS OF A COMPANY NAMELY M /S. DAWN MILLS CO. LTD. AND WERE HOLDING 52.60 PERCENT SHARES OF T HE SAID COMPANY. THEY AGREED TO TRANSFER THEIR SHARES AND CONTROLLIN G INTEREST IN M/S. DAWN MILLS CO. LTD. AS PER THE SHARES PURCHASE AGRE EMENT DATED 24.11.2005. AS PER THE SAID AGREEMENT, THE SHARES WERE AGREED TO BE SOLD AT A PRICE OF RS.4,642/- PER SHARE. IN ADDITI ON, A SUM OF RS.1,161/- PER SHARE WAS RECEIVED BY THE TRANSFEROR OF SHARES INCLUDING THE ASSESSEES COMPANIES TOWARDS NON-COMP ETE FEES. THE SAID AMOUNT RECEIVED ON ACCOUNT OF NON-COMPETE FEE S WAS CONSIDERED BY THE ASSESSEES AS PART OF THE SALE CONSIDERATION FOR TRANSFER OF SHARES WHILE COMPUTING THE CAPITAL GAINS ARISING ON TRANSFER OF SHARES AND THE SAME WAS OFFERED TO TAX @ 10% WITHOUT INDEX ATION. THIS CLAIM OF THE ASSESSEES WAS EXAMINED BY THE A.O. AND THE SAME WAS FOUND TO BE NOT ACCEPTABLE BY HIM FOR THE ELABORATE REASONS GIVEN IN THE ASSESSMENT ORDERS. HE HELD THAT THE NON-COMPE TE FEES OF RS.1,162/- PER SHARE RECEIVED BY THE ASSESSEES COMP ANIES WAS NOT PART OF THE CONSIDERATION FOR SALE OF SHARES OF M/S . DAWN MILLS CO. LTD. ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 6 BUT THE SAME CONSTITUTED BUSINESS INCOME CHARGEAB LE U/S.28(VA) OF THE ACT. ON APPEAL, THE LD. CIT (A) AGREED WITH TH E A.O. THAT THE CONSIDERATION OF RS.1,161/- PER SHARE RECEIVED BY T HE ASSESSEES COMPANIES ON ACCOUNT OF NON-COMPETE FEES DID NOT REPRESENT PART OF THE SALE PROCEEDS OF SHARES OF M/S. DAWN MILLS CO. LTD. HE, HOWEVER, HELD RELYING ON SOME TRIBUNALS DECISION THAT THE NON-COMPETE FEES RECEIVED BY THEM WERE CHARGEABLE TO TAX AS CAPITAL GAINS AND NOT BUSINESS INCOME. IN THE CASE OF RUIA APPARELS PV T. LTD. (ITA NO. 6147/M/2010), THE LD. CIT(A), HOWEVER, TOOK A DIFFE RENT VIEW HOLDING THAT THE AMOUNT OF NON-COMPETE FEES WAS CHARGEABLE TO TAX AS BUSINESS INCOME. AGGRIEVED BY THE ORDERS OF THE LD. CIT (A) ON THIS ISSUE, THE ASSESSEES AND THE REVENUE BOTH HAVE RAIS ED THEIR RESPECTIVE GRIEVANCES IN THE PRESENT APPEALS FILED BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS NOT PRESSED THE RELEVANT GROUND I.E. G ROUND NO.1 OF THE ASSESSEES APPEALS ON THIS ISSUE CHALLENGING THE DE CISION OF LD. CIT (A) TREATING THE NON-COMPETE FEES RECEIVED BY THEM AS C APITAL GAIN CHARGEABLE TO TAX EXCEPT IN THE APPEAL FILED IN THE CASE OF RUIA APPARELS PVT. LTD. WHERE THE LD. CIT (A) HAS HIMSEL F TREATED THE NON- COMPETE FEES AS BUSINESS INCOME. GROUND NO. 1 RAISE D IN THE EIGHT APPEALS OF THE ASSESSEES (BARRING ITA NO. 6147/M/20 10) IS ACCORDINGLY DISMISSED AS NOT PRESSED. 5. AS REGARDS THIS ISSUE RAISED IN ALL THE EIGHT AP PEALS OF THE REVENUE AND THE APPEAL OF THE ASSESSEE FILED IN THE CASE OF RUIA APPARELS PVT. LTD. (ITA NO. 6147/M/2010) TO THE EXT ENT WHETHER THE NON-COMPETE FEES RECEIVED BY THE ASSESSEES IN THE YEAR UNDER CONSIDERATION IS CHARGEABLE TO TAX AS CAPITAL GAINS OR BUSINESS INCOME, WE HAVE HEARD THE ARGUMENTS OF THE LD. REPRESENTATI VES OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON REC ORD. IT IS NO DOUBT TRUE THAT IN SOME OF THE CASES INCLUDING THE CASES OF ASSOCIATED CONCERNS OF THE ASSESSEE COMPANIES WHEREIN SIMILAR AMOUNT OF NON- COMPETE FEES WAS RECEIVED, THE CO-ORDINATE BENCHES OF THIS TRIBUNAL HAVE TAKEN A VIEW IN FAVOUR OF THE ASSESSEE HOLDING THAT THE NON- ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 7 COMPETE FEES WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEES AS CAPITAL GAINS. HOWEVER, A SIMILAR ISSUE THEREAFT ER WAS REFERRED TO A SPECIAL BENCH OF THE TRIBUNAL OF HYDERABAD IN THE C ASE OF ACIT VS. DR. B.V. RAJU AND THE SAME HAS BEEN DECIDED BY THE SPEC IAL BENCH ON FEBRUARY 13, 2012 VIDE ITS ORDER REPORTED IN 135 IT D 1 (HYDERABAD) (SB). THE SAID DECISION OF THE SPECIAL BENCH, THER EFORE, WAS BROUGHT TO THE NOTICE OF THE LEARNED REPRESENTATIVES OF BOT H THE SIDES AND THEY WERE INVITED TO MAKE SUBMISSIONS ON THIS ISSUE INVO LVED IN THE PRESENT APPEALS IN THE LIGHT OF THE SAID DECISION OF SPECIA L BENCH. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS PREPAR ED AND FURNISHED A COMPARATIVE STATEMENT TO SHOW THAT THE FACTS INVOLV ED IN THE PRESENT CASES ARE DIFFERENT FROM THE FACTS INVOLVED IN THE CASE OF DR. B.V. RAJU (SUPRA) DECIDED BY THE SPECIAL BENCH. ON GOING THR OUGH THE SAID STATEMENT, IT IS, HOWEVER, OBSERVED THAT THE DIFFER ENCE IN FACTS AS SOUGHT TO BE POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE IS NOT MATERIAL ENOUGH TO SAY THAT THE DECISION OF SPECIAL BENCH OF THE ITAT IN THE CASE OF DR. B.V. RAJU (SUPRA) HAS NO APPLICA TION IN THE PRESENT CASES. 6. AS ALREADY NOTED, HYDERABAD SPECIAL BENCH OF TH IS TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF DR. B.V. RAJU (SUPR A) HAS CONSIDERED A SIMILAR ISSUE RELATING TO TAXABILITY OF NON-COMPET E FEES IN THE LIGHT OF RELEVANT PROVISIONS OF THE LAW AS AMENDED FROM TIME TO TIME AND AFTER TAKING INTO CONSIDERATION THE SAID PROVISIONS AS WE LL AS OTHER RELEVANT ASPECTS OF THE MATTER IN DETAIL, THE SPECIAL BENCH OF THE TRIBUNAL SUMMARISED ITS CONCLUSION IN PARAGRAPH NO.37 OF ITS ORDER AS UNDER: 37. THE CONCLUSION THAT EMERGES FROM THE AFORESAID DISCUSSION IS THAT WHEN A BUSINESS IS SOLD AND THE PURCHASER E NTERS INTO AGREEMENTS TO ENSURE THAT THERE IS NO COMPETITION, HE MAY ENTER INTO AGREEMENTS NOT ONLY WITH THE TRANSFEROR OF THE BUSINESS BUT ALSO WITH PERSONS CONNECTED WITH THE TRANSFEROR. H E MAY ALSO PAY CONSIDERATION TO THE TRANSFEROR FOR TRANSFER OF BUSINESS, FOR NOT ENGAGING IN COMPETITION. HE MAY ALSO PAY CONSI DERATION TO ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 8 PERSONS ASSOCIATED WITH THE TRANSFEROR NOT TO INDUL GE IN COMPETITION. THE RECEIPTS BY THE TRANSFEROR OR OTH ER PERSONS CONNECTED WITH THE TRANSFEROR CAN BE DIVIDED INTO T HE FOLLOWING CATEGORIES; A) THE CONSIDERATION PAID BY THE TRANSFEREE FOR TRA NSFER OF THE BUSINESS TO THE TRANSFEROR; B) CONSIDERATION PAID TO THE TRANSFEROR NOT TO CARR Y ON SAME BUSINESS DIRECTLY OR INDIRECTLY NOT TO INDULGE IN MANUFACTURING SAME OR SIMILAR PRODUCTS, NOT TO USE THE TRADE NAMES ETC. ; C) CONSIDERATION PAID TO PERSONS ASSOCIATED WITH TH E TRANSFEROR TO ENSURE THAT THEY ALSO DO NOT INDULGE IN COMPETING BUSINESS; IT HAS TO BE CLARIFIED THAT THE CASE LAWS IN WHICH THE TRANSFEREE CLAIMS THE CONSIDERATION PAID AS ABOVE AS REVENUE E XPENDITURE HAVE NO BEARING WHATSOEVER WHEN WE DEAL WITH THE CA SE OF THE TAX TREATMENT IN THE HANDS OF THE TRANSFEREE. THER E ARE DIFFERENT CONSIDERATIONS FOR DETERMINING WHETHER THE COST PAI D BY THE TRANSFEROR IS TO BE REGARDED AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. 38. AS FAR AS CATEGORY (A) IS CONCERNED THE RECE IPT WOULD FALL FOR CONSIDERATION UNDER THE HEAD CAPITAL GAINS AS THERE IS A TRANSFER OF CAPITAL ASSET IN RESPECT OF WHICH THE MACHINERY PROVISIONS OF COMPUTATION OF CAPITAL GAIN CAN BE APPLIED. AS FA R AS CATEGORY (B) IS CONCERNED THE CONSIDERATION RECEIVED WOULD F ALL FOR CONSIDERATION UNDER THE HEAD CAPITAL GAIN BUT DEPEN DING UPON THE LAW THAT PREVAILED AT THE TIME OF TRANSFER. SE LF GENERATED ASSETS LIKE, GOODWILL OF A BUSINESS OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS, A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON A NY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOUR S BY THEIR VERY NATURE COULD NOT HAVE COST OF ACQUISITION AND THERE FORE MACHINERY PROVISIONS WERE AMENDED TO PROVIDE COST OF ACQUISIT ION BEING TREATED AS NIL. THESE AMENDMENTS ARE SET OUT IN TH E LATER PART OF ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 9 THIS ORDER. AS FAR AS CATEGORY (C) IS CONCERNED, THE SAME WOULD FALL FOR CONSIDERATION TO SEE IF IT IS CAPITAL RECE IPT CHARGEABLE TO TAX AS ON THE DATE OF TRANSFER BECAUSE AFTER 1-4-2003 S UCH CONSIDERATION EVEN IF REGARDED AS CAPITAL RECEIPT W OULD BE CHARGEABLE TO TAX U/S.28(VA)(A) OF THE ACT. THEREF ORE THE LAW AS IT PREVAILS ON THE DATE ON WHICH A PERSON AGREES TO DE SIST FROM DOING CERTAIN ACTS IN RELATION TO ANY BUSINESS WOUL D BE RELEVANT. 39. IF A PAYMENT IS IN THE NATURE OF NON-COMPETE FEE RECEIVED BY THE TRANSFEROR WHEN HE SELLS HIS BUSINESS AND AGREE S NOT TO CARRY ON THE BUSINESS WHICH HE TRANSFERS THEN THAT WOULD FALL FOR CONSIDERATION UNDER (CATEGORY (B) REFERRED TO EARLI ER) SECTION 55(2)(A) RIGHT TO CARRY ON BUSINESS. IF THE NON- COMPETE FEE IS PAID TO PERSONS ASSOCIATED WITH THE TRANSFEROR THEN THE SAME WOULD FALL FOR CONSIDERATION ONLY UNDER SEC.28(VA)( A) OF THE ACT INTRODUCED BY THE FINANCE ACT, 2002, W.E.F 1-4-2003 . IT IS SIGNIFICANT TO NOTE THAT THE WORDS USED IN SEC.28(V A)(A) OF THE ACT ARE NOT CARRYING OUT ANY ACTIVITY IN RELATION TO A NY BUSINESS. THE PROVISO (I) TO SECTION 28(VA)(A) PROVIDES FOR E XCEPTION TO CASES WHERE SUCH RECEIPTS ARE TAXABLE AS CAPITAL GAIN VIZ ., WHERE ANY SUM IS RECEIVED FOR TRANSFER OF A RIGHT TO CARRY ON ANY BUSINESS WHICH IS CHARGEABLE TO TAX AS CAPITAL GAIN. WHEN T HE TRANSFEROR IS ALREADY CARRYING ON BUSINESS AND AGREES NOT TO CARR Y ON BUSINESS TRANSFERRED, THEN THE SAME WOULD FALL FOR CONSIDERA TION ONLY UNDER SEC.55(2)(A) OF THE ACT. 40. WITH THE CHANGE IN THE LAW RECEIPTS ON ACCOU NT OF GIVING UP RIGHT TO CARRY ON BUSINESS EVEN IF IT IS CAPITAL RE CEIPT WOULD NOW BE CHARGEABLE TO TAX AS INCOME FROM BUSINESS. THE DIFFERENCE WOULD BE THAT IF IT IS PAID TO THE TRANSFEROR FOR G IVING UP RIGHT TO CARRY ON BUSINESS, IT WOULD BE REGARDED AS CAPITAL GAIN, THE COST OF ACQUISITION OF RIGHT TO CARRY ON BUSINESS BEING DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SEC.55(2)(A) OF T HE ACT. IF IT IS COMPENSATION PAID FOR NOT CARRYING OUT ANY ACTIVIT Y IN RELATION TO ANY BUSINESS, WHICH THE TRANSFEROR IS NOT CARRYING ON, THE SAME ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 10 WOULD BE CHARGEABLE U/S.28(VA)(A) OF THE ACT. IF A RECEIPT IS CONSIDERED AS PAYMENT FOR NOT CARRYING ON BUSINESS WHICH THE TRANSFEROR IS ALREADY CARRYING ON THEN IT WOULD BE REGARDED AS CAPITAL GAIN, BEING TRANSFER OF A CAPITAL ASSET VIZ ., RIGHT TO CARRY ON BUSINESS. THUS FOR THE PROVISIONS OF SEC.55(2)(A) OF THE ACT TO APPLY THE TRANSFEROR MUST BE CARRYING ON A BUSINESS WHICH HE AGREES NOT TO CARRY ON. IF THE TRANSFEROR IS NOT AL READY CARRYING ON BUSINESS THEN HE RECEIVES CONSIDERATION ONLY FOR N OT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS. IN THAT CASE THE PROVISIONS OF SEC.28(VA)(A) OF THE ACT WOULD APPLY AND NOT THE PROVISO THERETO. 7. KEEPING IN VIEW THE DECISION OF THE SPECIAL BENC H OF THE ITAT IN THE CASE OF DR. B.V. RAJU (SUPRA) AS SUMMARISED ABO VE AND DIFFERENT CATEGORISATION OF NON-COMPETE FEES MADE THEREIN , THE LEARNED REPRESENTATIVE OF BOTH THE SIDES WERE ASKED TO MAKE SUBMISSIONS AS TO UNDER WHICH CATEGORY THE AMOUNTS IN QUESTION R ECEIVED BY THE ASSESSEES IN THE PRESENT CASE AS NON-COMPETE FEES WOULD FALL? THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD HAS SUB MITTED THAT THE AMOUNTS RECEIVED BY THE ASSESSEES IN THE PRESENT CA SES WOULD FALL UNDER CATEGORY AS MENTIONED IN PARA 37(B) OF THE SP ECIAL BENCH ORDER BEING CONSIDERATION PAID TO THE TRANSFEROR NOT TO C ARRY ON SAME BUSINESS DIRECTLY OR INDIRECTLY BY NOT INDULGING IN MANUFACTURING SAME OR SIMILAR PRODUCT. HE HAS SUBMITTED THAT THE ASSE SSEE COMPANIES IN THE PRESENT CASES WERE HAVING CONTROLLING INTEREST IN M/S. DAWN MILLS CO. LTD. AND THEY BEING THE TRANSFERORS OF THE SA ID CONTROLLING INTEREST, THEIR CASES ARE COVERED BY PARA 37(B) AN D NOT BY PARA 37(C) WHICH COVERS THE PERSONS ASSOCIATED WITH THE TRANS FEROR. HE HAS SUBMITTED THAT THE ASSESSEE COMPANIES IN THE PRESEN T CASES ARE NOT THE PERSONS ASSOCIATED WITH THE TRANSFEROR BUT THEY THEMSELVES ARE THE TRANSFEROR DIRECTLY WHICH ARE COVERED IN CATEGOR Y GIVEN IN PARA 37(B). 8. THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED T HAT WHAT IS MEANT BY TRANSFEROR AS MENTIONED IN PARA 37(B) AN D 37(C) OF THE ORDER OF SPECIAL BENCH IS THE TRANSFEROR OF THE BUS INESS AND NOT THE ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 11 TRANSFEROR OF SHARES OR CONTROLLING INTEREST. SHE HAS SUBMITTED THAT SUCH TRANSFEROR OF BUSINESS IN THE PRESENT CASE W AS M/S. DAWN MILLS CO. LTD., WHICH WAS ACTUALLY IN THE BUSINESS AND TH E ASSESSEE COMPANIES WERE ONLY ASSOCIATED WITH THE SAID TRANS FEROR I.E. M/S. DAWN MILLS CO. LTD. BEING PROMOTER/SHAREHOLDER. SH E HAS SUBMITTED THAT THE CASE OF THE ASSESSEE THUS IS SQUARELY COVE RED BY PARA 37(C) OF THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF DR. B.V. RAJU (SUPRA) AND THE CONSIDERATION PAID TO THE ASSE SSEES WHICH WERE ASSOCIATED WITH TRANSFEROR OF THE BUSINESS I.E. M /S. DAWN MILLS CO. LTD. NOT TO INDULGE IN COMPETING BUSINESS IS CHARGE ABLE TO TAX AS BUSINESS INCOME AS PER THE PROVISIONS OF SEC.28(V A)(A) OF THE ACT INSERTED BY THE FINANCE ACT, 2002 W.E.F. 1.4.2003. SHE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT CASES THUS I S SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DR . B.V. RAJU WHICH IS BINDING ON THIS DIVISION BENCH. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE ARE INCLINED TO AGR EE WITH THE CONTENTION OF THE LD. D.R. ON THIS ISSUE. IT IS OB SERVED THAT THE FACTS WHICH ARE MATERIAL IN THE PRESENT CONTEXT AS INVOLV ED IN THE PRESENT CASES ARE SIMILAR TO THE CASE OF THE DR. B.V. RAJU (SUPRA) DECIDED BY SPECIAL BENCH OF THE ITAT. IN THE SAID CASE, DR. B .V. RAJU WAS A PROMOTER AND SHAREHOLDER OF TWO CEMENT COMPANIE S VIZ. RCL AND SVCL WHILE THE ASSESSEES COMPANIES IN THE PRESENT C ASES WERE THE PROMOTERS AND SHAREHOLDERS OF M/S. DAWN MILLS C O. LTD. ALTHOUGH DR. B.V. RAJU WAS NOT HAVING CONTROLLING INTEREST I N RCL& SVCL, THIS ASPECT OF THE MATTER, IN OUR OPINION, IS NOT VERY R ELEVANT IN THE PRESENT CONTEXT. IN ANY CASE, ALL THE ASSESSEE COMPANIES I N THE PRESENT CASES COLLECTIVELY WITH SOME OTHER COMPANIES WERE HAVING CONTROLLING INTEREST IN DAWN MILLS CO. LTD. AND NOT INDIVIDUALL Y. IN THE CASE OF DR. B.V. RAJU, RCL AND SVCL WERE TAKEN OVER BY SOME OTH ER COMPANY SIMILAR TO THE TAKING OVER OF M/S. DAWN MILLS CO. L TD. IN THE PRESENT CASE BY SOME THIRD PARTY. THE COMPANY WHO TOOK OVE R RCL & SVCL PAID NON-COMPETE FEES TO DR. B.V. RAJU SIMILAR TO PAYMENT OF NON- ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 12 COMPETE FEES MADE IN THE PRESENT CASES TO THE ASSES SEE COMPANIES BY PARTY TAKING OVER THE M/S. DAWN MILLS CO. LTD. THE ISSUE INVOLVED IN THE CASES OF DR. B.V. RAJU (SUPRA) FOR THE CONSIDER ATION OF SPECIAL BENCH WAS RELATING TO THE TAXABILITY OF SAID NON-CO MPETE FEES IN THE LIGHT OF THE PROVISIONS OF SEC.55(2)(A) OF THE ACT AS AMENDED FROM TIME TO TIME DEALING WITH CAPITAL GAINS AS WELL AS THE P ROVISIONS OF SEC.28(VA)) AS INSERTED BY THE FINANCE ACT, 2002 W. E.F. 01.04.2003. 10. IN THIS CONTEXT, THE SPECIAL BENCH NOTED THAT T HE EXPRESSION USED IN THE PROVISIONS OF SEC.55(2A) WAS A RIGHT T O MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING WHILE THE EXPRESSION USED IN SEC.28(V)(A) WAS A A RIGHT TO CARRY ON A BUSINESS . THE SPECIAL BENCH HELD THAT THESES TWO EXPRESSIONS HAVE DEFINITE AND DIFFERENT CONNOTATION. EXPLAINING FURTHER, IT WAS OBSERVED BY THE SPECIAL BENCH THAT THE EXPRESSION USED IN SEC.55(2)(A) CONT EMPLATES EXISTENCE OF RIGHT TO MANUFACTURE, PRODUCE OR PROCESS AN ARTI CLE OR THING OTHERWISE THE QUESTION OF EXTINGUISHMENT OR CURTAIL MENT OF SUCH A RIGHT WOULD NOT HAVE BEEN CONTEMPLATED BY THE LEGIS LATURE. IT WAS HELD BY THE SPECIAL BENCH THAT IT WOULD BE REASONAB LE TO PRESUME THAT WHAT HAS SOUGHT TO BE COVERED BY THE EXPRESSION A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THIN G USED ANY ARTICLE U/S.55(2)(A) IS INTANGIBLE ASSET IN THE FORM OF PAT ENT OR A SIMILAR RIGHT. IT WAS HELD BY THE TRIBUNAL THAT WHEN THE TRANSFERO R IS ALREADY CARRYING ON THE BUSINESS AND AGREES NOT TO CARRY ON THE BUSINESS TRANSFERRED THEN THE SAME WOULD FALL FOR CONSIDERAT ION ONLY UNDER SEC.55(2)(A) OF THE ACT. 11. AS REGARD THE PROVISIONS OF SEC.28(VA), THE TRI BUNAL HELD THAT WITH THE INSERTION OF THE SAID PROVISIONS W.E.F. 0 1.40.2003, RECEIPTS ON ACCOUNT OF GIVING UP RIGHT TO CARRY ON BUSINESS EVE N IF IT IS CAPITAL RECEIPT WOULD NOW BE CHARGED TO TAX AS INCOME FROM BUSINESS. IT WAS HELD THAT IF THE COMPENSATION IS PAID FOR NOT CARR YING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS WHICH THE TRANSFEROR IS NOT CARRYING ON, THE SAME WOULD BE CHARGEABLE U/S.28(VA) OF THE ACT. IT WAS HELD THAT IF THE TRANSFEROR IS NOT ALREADY CARRYING ON BUSINE SS THEN WHAT HE ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 13 RECEIVES AS NON-COMPETE FEES IS THE CONSIDERATION O NLY FOR NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINE SS, WHICH WOULD BE COVERED BY THE PROVISIONS OF SEC.28(VA) OF THE ACT W.E.F. 01.04.2003. THE CONSIDERATION PAID TO DR. B.V. RAJU, WHICH IS S IMILAR TO THE ONE INVOLVED IN THE PRESENT CASES, THEREFORE WAS HELD B Y THE SPECIAL BENCH AS FALLING UNDER THE CATEGORY OF PAYMENT FOR NOT C ARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS AS COVERED BY THE PROVISIONS OF SEC.28(VA)(A) AND SINCE THE SAID PROVISIONS WERE AP PLICABLE W.E.F. 01.04.2003, THE AMOUNT RECEIVED BY SHRI B.V. RAJU A S NON-COMPETE FEES IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2000-01 WAS HELD TO BE NOT CHARGEABLE TO TAX. IN OUR OPINION, THE RATIO OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF DR. B.V. RAJU IS SQUAR ELY APPLICABLE TO THE FACTS OF THE PRESENT CASES AND SINCE THE SAME I S BINDING ON US, WE RESPECTFULLY FOLLOW THE SAME TO HOLD THAT THE NON- COMPETE FEES RECEIVED BY THE ASSESSEES IN THE PRESENT CASES IS C HARGEABLE TO TAX AS BUSINESS INCOME AS HELD BY THE AO AND NOT AS CAP ITAL GAINS AS HELD BY THE LD. CIT (A). THE IMPUGNED ORDERS OF THE LD. CIT (A) ON THIS ISSUE PASSED IN THE CASES OF ALL ASSESSES (EXCEPT I N THE CASE OF RUIA APPARELS PVT. LTD.) ARE, THEREFORE, SET ASIDE RESTO RING BACK THAT OF THE A.O. AND THE APPEALS FILED BY THE REVENUE IN THESE EIGHT CASES ARE ALLOWED. AS ALREADY NOTED, THE LD. CIT(A) IN THE CA SE OF RUIA APPARELS PVT. LTD. HOWEVER TOOK A VIEW THAT THE NON-COMPETE FEES WAS CHARGEABLE TAX AS BUSINESS INCOME. THE IMPUGNED ORD ER OF THE LD. CIT(A) PASSED IN THE SAID CASE ON THIS ISSUE IS THE REFORE UPHELD DISMISSING THE RELEVANT APPEAL OF THE ASSESSEE. 12. THE NEXT COMMON ISSUE AS RAISED IN GROUND NO.2 OF THE APPEALS OF THE ASSESSEES FILED IN THE CASES OF RUIA INDUSTR IES PVT. LTD. (ITA NO. 2792/M/2010), STERLING RE-ROLLING MILLS PVT. LTD. ( ITA NO. 2793/M/2010), VINAYA TRADING CO. LTD. (ITA NO. 2389 /M/2010) AND SJS INVESTMENTS PVT. LTD. (ITA NO. 2790/M/2010) REL ATES TO THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) ON ACCOUNT OF ASSESSEES CLAIM FOR LONG-TERM CAPITAL L OSS ON SALE OF SHARES OF M/S. SPECIAL PAINTS LTD. AND OTHER COMPANIES. ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 14 13. THE CONCERNED ASSESSEES HAD DEBITED SUBSTANTIAL AMOUNT IN THEIR PROFIT AND LOSS ACCOUNT OF LOSS ON ACCOUNT OF SALE OF SHARES OF M/S. SPECIAL PAINTS LTD. AND OTHER COMPANIES. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. REQUIRED THE ASSES SEES TO FURNISH THE COMPLETE DETAILS OF THE SAID LOSS AS WELL AS TO PRODUCE THE SUPPORTING EVIDENCE IN THE FORM OF BROKERS NOTE, D EMAT ACCOUNT ETC. ALTHOUGH THE ASSESSEE FURNISHED RELEVANT DETAILS SH OWING THAT THE SHARES OF M/S. SPECIAL PAINTS LTD. WERE SOLD AT THE FACE VALUE, THE DOCUMENTARY EVIDENCE REQUIRED BY THE A.O. WAS NOT F URNISHED BY THE ASSESSES. THE ASSESSEES ALSO COULD NOT SATISFACTOR ILY EXPLAIN THE REASON FOR SELLING THE SHARES OF M/S. SPECIAL PAINT S LTD. AT FACE VALUE. IT WAS ONLY EXPLAINED THAT THE SAID SHARES WERE TRA NSFERRED AS A PART OF THE FAMILY SETTLEMENT BETWEEN THE TWO GROUPS OF THE RUIA FAMILY WHO WERE HOLDING SHARES IN THE VARIOUS GROUP COMPANIES. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E BY THE A.O. AND IN THE ABSENCE OF RELEVANT DETAILS AND DOCUMENTS, H E HELD THAT TRANSFER OF SHARES AT FACE VALUE AS A PART OF THE F AMILY SETTLEMENT COULD NOT BE REGARDED AS TRANSFER AND INVOKING THE PROV ISIONS OF SECTION 47(IV), HE TREATED THE LOSS AS A NOTIONAL LOSS. AC CORDINGLY, THE LOSS ON SALE OF SHARES CLAIMED BY THE ASSESSEES WAS DISALLO WED BY HIM. 14. THE MATTER WAS CARRIED BEFORE THE LD. CIT (A) A ND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEES BEFORE HIM THA T A.O. HAD WRONGLY CONSIDERED THE FACTS INASMUCH AS THE SHARES OF M/S. SPECIAL PAINTS LTD. WERE SOLD AT MARKET PRICE AND THE VALUATION RE PORT OF THE C.A. INDICATED THAT THE SAID COMPANY HAD NO RESERVES AND WAS A LOSS MAKING BIFR COMPANY. IT WAS ALSO SUBMITTED THAT TH E VALUE OF THE SAID SHARES WAS NEGATIVE AT THE RELEVANT TIME. THI S STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LD. CIT (A ). ACCORDING TO HIM, THE REPORT OF DIRECTORS OF SPECIAL PAINTS LTD. AVAILABLE IN THE PAPER BOOK FILED BY THE ASSESSEE WAS SUFFICIENT TO SHOW THAT THE NET- WORTH OF THE SAID COMPANY WAS NOT NEGATIVE BUT THE SAME HAD TURNED POSITIVE AS ON 31 ST MARCH, 2005. HE ALSO NOTED THAT NEW SHARE CAPITAL WORTH RS 3.16 CRORES WAS ISSUED BY THE SAID COMPANY BY ISSUING RIGHT SHARES DURING THE FINANCIAL YEAR 2004-05 AT RS.25 P ER SHARE. KEEPING ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 15 IN VIEW ALL THESE FACTS, THE LD. CIT (A) CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF LOSS CLAIMED BY THE ASSESSES ON SALE OF SHARES OF M/S. SPECIAL PAINTS LTD. AND OTHER COMPAN IES. 15. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES ON TH IS ISSUE AND ALSO PERUSED RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSES HAS SUBMITTED THAT THE CLAIM OF THE ASSESS ES FOR LOSS ON SALE OF SHARES OF SPECIAL PAINTS LTD. HAS BEEN DISALLOWE D BY THE A.O. AS WELL AS BY THE LD. CIT (A) ON WRONG ASSUMPTIONS OF FACTS. HE HAS SUBMITTED THAT THE SAID SHARES WERE NOT TRANSFERRED BY THE ASSESSEES AT FACE VALUE AS WRONGLY PRESUMED BY THE A.O. HE H AS SUBMITTED THAT IT WAS ALSO NOT A CASE OF TRANSFER OF SHARES BY THE ASSESSEE TO ITS SUBSIDIARY COMPANY AND THE A.O., THEREFORE, WAS NOT JUSTIFIED TO INVOKE THE PROVISIONS OF SEC.47(IV) TO TREAT THE LO SS CLAIMED BY THE ASSESSEE AS A NOTIONAL LOSS. HE HAS SUBMITTED T HAT RIGHT SHARES WERE ISSUED BY M/S. SPECIAL PAINTS LTD. AT RS.25/- PER S HARE AS PER THE ORDER OF BIFR AND THE LD. CIT (A) WAS NOT JUSTIFIED IN ASSUMING THAT THE NET-WORTH OF THE SAID COMPANY WAS NOT NEGATIVE BY RELYING ON THE SHARE PRICE OF RIGHT ISSUE. THE LD. COUNSEL FOR TH E ASSESSEE THEREAFTER HAS TAKEN US THROUGH THE DOCUMENTARY EVIDENCE FILED IN HIS PAPER BOOK TO SHOW THAT THE NET WORTH OF M/S. SPECIAL PAI NTS LTD. WAS NEGATIVE AT RELEVANT TIME AND THE SAID COMPANY WAS REFERRED TO BIFR. HE HAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE FOR LOSS ON SALE OF SHARES OF SPECIAL PAINTS LTD. IS THUS REQUIRED TO B E DECIDED ON MERITS IN THE LIGHT OF THE DOCUMENTARY EVIDENCE AVAILABLE WITH THE ASSESSEE AND THE MATTER MAY THEREFORE BE SENT BACK TO THE A. O. FOR SUCH EXAMINATION. SINCE THE LD. D.R. HAS NOT RAISED ANY OBJECTION IN THIS REGARD KEEPING IN VIEW THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS DOCUMENTARY EVIDENCE PLACED ON RECORD, WE SET ASIDE THE IMPUGNED ORDERS OF THE LD. CIT (A) ON THI S ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR DECIDING THI S ISSUE AFRESH ON MERITS AFTER EXAMINING THE SAND OF THE ASSESSEE IN THE LIGHT OF RELEVANT DOCUMENTARY EVIDENCE. GROUND NO.2 RAISED BY THE AS SESSES IN THE RELEVANT APPEALS IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 16 16. THE NEXT COMMON ISSUE AS RAISED IN GROUND NO.3 OF THE APPEALS OF THE ASSESSEES FILED IN THE CASES OF STERLING RE- ROLLING MILLS PVT. LTD. (ITA NO. 2793/M/2010), VINAYA TRADING CO. LTD. (ITA NO. 2389/M/2010) AND RUIA APPARELS PVT. LTD. (ITA NO. 6 147/M/2010) RELATES TO THE DISALLOWANCE MADE BY THE A.O. AND CO NFIRMED BY THE LD. CIT (A) U/S.14A R.W. RULE 8D OF INCOME-TAX RULES, 1 962. 17. IN THEIR RETURNS OF INCOME FILED FOR THE YEAR U NDER CONSIDERATION I.E. A.Y. 2006-07, THE CONCERNED ASSESSEE COMPANIES HAD CLAIMED CERTAIN INCOME TO BE EXEMPT FROM TAX. NO DISALLOWA NCE ON ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EX EMPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEES AS REQUIRED BY T HE PROVISIONS OF SEC.14A. THE A.O. WORKED OUT SUCH EXPENSES BY APPL YING RULE 8D OF INCOME-TAX RULES, 1962 AND MADE A DISALLOWANCE TO T HAT EXTENT. ON APPEAL, THE LD. CIT (A) CONFIRMED THE SAID DISALLOW ANCE MADE BY THE A.O. U/S.14A R.W. RULE 8D RELYING ON THE DECISION O F THE SPECIAL BENCH OF THE ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM) (SB) WHEREIN IT WAS HELD THAT RULE 8D HAS A RETROSPECTIVE APPLICATION. 18. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE N OW STANDS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. 234 CTR 1 WHEREIN IT WAS HELD THAT RULE 8D OF INCOME-TAX RULES, 1962 IS APPLICABLE ONLY FRO M ASSESSMENT YEAR 2008-09. AS FURTHER HELD BY THE HONBLE BOMBAY HIG H COURT, THE DISALLOWANCE U/S.14A FOR THE YEARS PRIOR TO ASSESSM ENT YEAR 2008-09 HAS TO BE MADE BY ADOPTING SOME REASONABLE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTION AL HIGH COURT, WE SET ASIDE THE IMPUGNED ORDERS OF THE LD. CIT (A) ON THI S ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO RECOMPUTE THE DISALLOWANCE OF EXPENSES TO BE MADE U/S.14A BY APPL YING SOME REASONABLE METHOD AFTER GIVING THE ASSESSEES AN OPP ORTUNITY OF BEING ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 17 HEARD. GROUND NO.3 OF THE RELEVANT APPEALS OF THE A SSESSEES IS ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTIC AL PURPOSE. 19. IN ITS APPEAL BEING ITA NO. 2588/M/2010 (RUIA S TUD FARMS PVT. LTD.), THE ASSESSEE HAS RAISED THE ISSUE IN GROUND NO. 2 THAT THE ISSUE RELATING TO ALLOWABILITY OF PROFESSIONAL FEES OF RS .1,04,935/- PAID TO KANGA & CO., SOLICITORS AS DEDUCTION IN COMPUTATION OF CAPITAL GAINS HAS NOT BEEN CONSIDERED AND DECIDED BY THE LD. CIT( A). 20. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR T HE ASSESSEE FROM THE RELEVANT RECORD, THIS ISSUE SPECIFICALLY RAISED BY THE ASSESSEE IN ITS APPEAL FILED BEFORE THE LD. CIT (A) IN GROUND NO. I II(B) HAS NOT BEEN DECIDED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER. WE THEREFORE DIRECT THE LD. CIT (A) TO DECIDE THE SAME ON MERIT AFTER G IVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. THIS GROUND IS ACCORDIN GLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 21. IN THE RESULT, ALL THE EIGHT APPEALS OF THE REV ENUE ARE ALLOWED WHEREAS THREE APPEALS OF THE ASSESSEES BEING ITA NO S.2791/M/2010, 2388/M/2010 AND 5189/M/2010 ARE DISMISSED AND SIX A PPEALS OF THE ASSESSEES BEING ITA NOS.2792/M/2010, 2793/M/201 0, 2389/M/2010, 6147/M/2010, 2790/M/2010 AND 2588/M/20 10 ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 0TH JUNE, 2012. SD/- ( SATBEER SINGH GODARA ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATE: 20TH JUNE, 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-30/ CONCERNED____, MUMBAI. 4) THE DIT (EXEMPTION), CIT ..CONCERNED.., MUMBAI. 5) THE D.R. J BENCH, MUMBAI. ITAS 2793 & 3388/M/2010 -STERLING RE-ROLLING MILLS PVT. LTD. AND 15 OTHER GROUP APPEALS 18 BY ORDER / / TRUE COPY / / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN