TRINETRAM INVESTMENT P. LTD (FORMERLY KNOWN AS TOUR CLUB EXPRESS TRAVELS & TOUR P. LTD), MUMBAI V. DCIT (A) 8(3), MUMBAI

ITA 3062/MUM/2011

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1104 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2002-2003
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY
• Keywords: Capital asset; Business income; Cost of acquisition
• Section: 143(3); 2(14); 5(2); 28

Judgement Text

1IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3062/M/2011 ASSESSMENT YEAR: 2002-03 M/S. TRINETRAM INVESTMENT PVT. LTD., (FORMERLY KNOWN AS TOUR CLUB EXPRESS TRAVELS & TOURS PVT. LTD.) 601/602, VINAYAK ANGAN, OLD PRABHADEVI ROAD, MUMBAI 400 025 PAN: AAACT7220Q VS. DY. COMMISSIONER OF INCOME TAX 8(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) CO NO.29/M/2012 (ARISING OUT OF ITA NO.4455/M/2011) ASSESSMENT YEAR: 2004-05 M/S. TRINETRAM CONSULTANTS PVT. LTD., (FORMERLY KNOWN AS TRINETRAM INVESTMENTS PVT. LTD.) 601/602, VINAYAK ANGAN, OLD PRABHADEVI ROAD, MUMBAI 400 025 PAN: AAACT7220Q VS. DY. COMMISSIONER OF INCOME TAX 8(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) ITA NO.4455/M/2011 ASSESSMENT YEAR: 2004-05 ASST. COMMISSIONER OF INCOME TAX 8(3), ROOM NO.217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 VS. M/S. TRINETRAM CONSULTANTS PVT. LTD., (FORMERLY KNOWN AS TRINETRAM INVESTMENTS PVT. LTD.) 601/602, VINAYAK ANGAN, OLD PRABHADEVI ROAD, MUMBAI 400 025 PAN: AAACT7220Q (APPELLANT) (RE SPONDENT) ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 2 PRESENT FOR: ASSESSEE BY : SHRI ANUJ KISNADWALA, A.R. REVENUE BY : SHRI R. MANJUNATHASWAMY, D.R. DATE OF HEARING : 19.09.2018 DATE OF PRONOUNCEMENT : 30.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS ONE EACH BY THE AS SESSEE AND THE REVENUE AND CO BY THE ASSESSEE HAVE BEEN P REFERRED AGAINST THE ORDER DATED 21.03.2011 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2004-05. ITA NO.3062/M/2011 (ASSESSEES APPEAL) 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: GROUND NO. 1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. OF TREAT ING THE SUM OF LICENSE FEES OF RS.1,00,00,000/- AS BUSINESS INCOME OF A.Y.2002-03. THE APPELLANT PRAYS THAT THE ABOVE INCOME OF RS. 1,00,00,000/- RECEIVED SHOULD B E ALLOWED TO BE AMORTIZE OVER THE PERIOD OF 3 YEARS AS DONE BY THE ASSESSEE IN IT S RETURN OF INCOME. GROUND NO. 2: WITHOUT PREJUDICE TO THE GROUND NO. 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) - 18, MUMBAI E RRED IN CONFIRMING THE ACTION MADE BY A.O. AND ENHANCING BUSINESS INCOME OF THE A PPELLANT BY RS. 31,81,818/-, STATING THAT THE INCOME BY WAY OF LICENSE FEE WAS A CCRUED AND RECEIVED DURING THE CURRENT YEAR AND SHOULD NOT BE AMORTIZED OVER THREE YEAR PERIOD. THE APPELLANT PRAYS THAT THE ADDITION OF RS, 31,81,818/- MAY KIND LY BE DELETED. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE O RDER OF LD. CIT(A) CONFIRMING THE ACTION OF AO IN TREATING THE LICENSE FEE OF RS.1,00,00,000/- AS BUSINESS INCOME OF A.Y.2002-03 WHEREAS ACCORDING TO THE ASSESSEE THE INCOME SHOULD BE ALL OWED TO BE AMORTIZED OVER A PERIOD OF THREE YEARS. THE GROUND NO.2 IS WITHOUT PREJUDICE TO GROUND NO.1 AND IS AGAINST THE ORDER OF LD. ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 3 CIT(A) CONFIRMING THE ACTION OF THE AO IN ENHANCING THE BUSINESS INCOME OF THE ASSESSEE BY RS.31,81,818/- W HICH THE ASSESSEE PRAYED FOR THE DELETION. 4. THE ASSESSEE ALSO HAS RAISED ADDITIONAL GROUND V IDE APPLICATION DATED 08.02.2012 WHICH THE LD. COUNSEL FOR THE ASSESSEE STATED DURING THE HEARING AS NOT BEING PRE SSED AND THEREFORE THE SAME ARE DISMISSED ACCORDINGLY AS NOT BEING PRESSED. 5. THE FACTS IN BRIEF ARE THAT AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS S OLD ITS ENTIRE BUSINESS OF TOUR AND TRAVELS TO M/S. KUONI T RAVELS INDIA LTD. IN AY 2004-05 WHICH CONSTITUTED A PART OF ASSE SSEES TOTAL BUSINESS FOR A CONSIDERATION OF RS.14,34,14,546/- I NCLUDING BRAND NAME AND LOGO QUA TOUR AND TRAVEL AND RETURNE D THE INCOME AS CAPITAL GAIN UNDER SECTION 45 OF THE ACT AFTER CLAIMING DEDUCTION UNDER SECTION 54E OF THE ACT QU A THE CAPITAL GAIN. THE AO HAS GIVEN DETAILED FINDING IN A.Y. 20 04-05 AND TAXED THE SAID RECEIPT AS BUSINESS INCOME WHICH WAS DECIDED BY THE LD. CIT(A) IN FAVOUR OF THE ASSESSEE AND DIRECT ED THE AO TO ASSESS THE SAME AS CAPITAL GAIN AGAINST WHICH THE R EVENUE IS IN APPEAL BEFORE US. 6. THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.1,00,0 0,000/- AS NON REFUNDABLE LICENSE FEE FROM M/S. KUONI TRAV ELS INDIA LTD ON 30.06.2001 IN LIEU OF WHICH THE ASSESSEE ALLOWED THE PROPOSED TRANSFEREE TO USE ITS ENTIRE NETWORK FOR D OING BUSINESS WITH AN OPTION TO BUY THE BUSINESS OUT RIGHTLY WHIC H HAPPENED IN 2004-05. THE ASSESSEE HAS ENTERED INTO VARIOUS AGREEMENTS ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 4 WITH THE TRANSFEREE M/S. KUONI TRAVELS INDIA LTD. ACCORDINGLY TO THE AO THE SUM AND SUBSTANCE OF ALL THE AGREEMENTS TAKEN TOGETHER IS THAT THE ASSESSEE HAS ULTIMATELY SOLD T HE ENTIRE BUSINESS ALONG WITH THE CUSTOMERS BASE TO M/S. KUON I TRAVELS INDIA LTD. IN F.Y. 2001-02 CORRESPONDING TO A.Y. 20 02-03 THOUGH THE ASSESSEE HAS NOT RECEIVED THE ENTIRE CONSIDERAT ION IN A.Y. 2002-03 BUT DUE TO THE DATE OF AGREEMENT WHICH FALL S WITHIN THE PREVIOUS F.Y. 2001-02, THE WHOLE TRANSACTION WAS TA XABLE IN 2002-03. THE ASSESSEE RECEIVED RS.1,00,00,000/- IN THE FORM OF BRAND LICENSE FEE ON 30.06.2001 AND OFFERED TO TAX AS UNDER ON PRORATE BASIS: SR. NO. A.Y. AMOUNT (RS.) OFFERED FOR TAXATION UNDER THE HEAD 1. 2002-03 13,63,636 (I.E. RS.1,00,00,000 /5.5 (LICENSE PERIOD) X (9/12) BUSINESS INCOME 2. 2003-04 18,18,182 (I.E. RS.1,00,000 / 5.5 ( BUSINESS INCOME 3. 2004-05 13,63,636 (I.E. RS.1,00,00,000/5.5 (LICENSE PERIOD) X (9X12) BUSINESS INCOME 4. 2004-05 54,54,546 (I.E. RS.1,00,00,000 - 13,63,636 - 18,18,182 - 13,63,636) CAPITAL GAIN 7. ACCORDING TO THE ASSESSEE THE SAID INCOME SHOULD BE AMORTIZED OVER A PERIOD OF TIME TO WHICH IT RELATED AS THE LICENSE FEE WAS RECEIVED QUA THE USE OF BUSINESS SET UP O F THE ASSESSEE INCLUDING BRAND AND LOGO RELATING TO TOUR AND TRAVE L BUSINESS OVER A PERIOD OF TIME OR TILL THE TAKING OVER THE B USINESS WHICH ULTIMATELY PASSED ON TO THE TRANSFEREE IN A.Y. 2004 -05 AND THEREFORE ACCORDING TO THE ASSESSEE THE INCOME WAS RIGHTLY ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 5 OFFERED TO TAX AND HAS CORRECTLY BEEN ACCEPTED BY THE DEPARTMENT. HOWEVER, THE AO REJECTING THE CONTENTI ONS OF THE ASSESSEE TREATED THE ENTIRE SALE CONSIDERATION AS I NCOME FROM BUSINESS AND ADDED THE SAME TO THE INCOME OF THE AS SESSEE BY FRAMING ASSESSMENT VIDE ORDER DATED 17.12.2007 ON T HE GROUND THAT IT HAS TO BE TAXED UNDER SECTION 28 OF THE ACT . 8. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 4.4. AS MAY BE SEEN FROM THE APPELLANT CONTENTION THAT IT HAS EARNED REVENUE BY EXPLOITING THE CAPITAL ASSET AND THE AMOUNTS RECEIV ED BY THE APPELLANT AS A REVENUE RECEIPT. 4.4.1 THE APPELLANT'S SUBMISSION THAT IT HAS AMORTI ZED THE RECEIPTS IN VIEW OF THE WELL ACCEPTED ACCOUNTING NORMS IS FOUND TO BE NOT C ORRECT. AS PER THE RELEVANT PART OF ACCOUNTING IS STANDARD QUOTED IN APPELLANT SUBMI SSION ABOVE, IT SAYS THAT THE REVENUE ARE ACCRUED AND RECOGNIZED AS THEY ARE EARN ED. IN THE PRESENT CASE, THE REVENUE HAS ALREADY ACCRUED TO THE APPELLANT AS THE AMOUNT WAS NON-REFUNDABLE AS PER THE LICENSE AGREEMENT AND THE AMOUNT WAS RECEIV ED ALSO. 4.4.2. FURTHER, THERE IS NO CONCEPT TO AMORTIZE REC EIPT IN THE INCOME TAX ACT, AND CONCEPT OF AMORTIZATION OF EXPENSES IS LIMITED TO T HE PROVISIONS OF SEC.35D, WHICH IS APPLICABLE FOR PRE-OPERATIVE EXPENSES AND FOR EXPEN SES INCURRED FOR EXPANSION OF UNDERTAKING ETC. OF EXISTING BUSINESS. THE APPELLAN TS TREATMENT OF AMORTIZATION OF NON-REFUNDABLE RECEIPT OF RS.1 CRORES OVER A THREE YEAR PERIOD (THOUGH THE APPELLANT SAYS AS THAT AS PER AGREEMENT THE PERIOD OF FIVE AND HALF YEARS), IS FOUND TO BE WITHOUT ANY VALID BASIS EXCEPT TO REDUCE THE LIABILITY TO TAX. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE LD. CIT(A) HAS DIRECTED TH E AO TO TREAT RS.45,45,454/- AS INCOME FROM BUSINESS OF A.Y. 2002 -03 AND CONFIRMED THE ACTION OF THE AO IN TREATING RS.54,54 ,546/- SHOWN AS CAPITAL GAIN IN A.Y. 2004-05 (A PART OF NON-REFU NDABLE FEE OF RS.1 CRORE) AS BUSINESS INCOME. ACCORDING TO THE L D. CIT(A) THE STAND OF THE ASSESSEE ITSELF IS INCONSISTENT AS THE ASSESSEE HAS SHOWN IN THE THREE YEARS FROM AY 2002-03 RS. 13,63 ,636/-, AY 2003-04 RS. 18,18,182/- AND 2004-05 RS. 13,63,636/ - ON PRO- ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 6 RATA BASIS AGGREGATING TO RS.45,45,454/- AS BUSINE SS INCOME WHEREAS RS.54,54,546/- WAS SHOWN AS CAPITAL GAIN AND THEREFORE JUSTIFIED THE TREATMENT OF ENTIRE SUM AS BUSINESS INCOME AS HAS BEEN SUBMITTED HEREINABOVE. WE FIND MERIT IN THE ARGUMENTS OF THE LD. A.R. AS IS CLEAR FROM THE VARIOUS AGREEMENTS THAT THE ASSESSEE HAS ALLOWED M/S. KUONI TRAVELS INDIA LTD. TO USE ITS BUSINESS MODEL INCLUDING BRAN D AND LOGO WITH THE OPTION TO BUY ULTIMATELY IF THE SAID IT W AS FULLY SATISFIED WITH THE MODEL OF THE BUSINESS OF THE ASSESSEE. AS PER THE ASSESSEE RS.1,00,00,000/- WAS RECEIVED AS NON REFUN DABLE FEE IN LIEU OF ASSETS TO BE USED BY THE M/S. KUONI TRAVELS INDIA LTD. WE FIND REASON IN THE CONTENTIONS OF THE ASSESSEE T HAT SO LONG AS THERE WAS NO CONFIRMATION OF PURCHASE OF BUSINESS B Y THE SAID TRANSFEREE, THE SAME CAN NOT BE TREATED AS CAPITAL GAIN. THE ASSESSEE OFFERED THE INCOME ON PRO-RATA BASIS AS BU SINESS INCOME AND ONCE THE TRANSFEREE EXERCISES THE OPTION TO PURCHASE THE BUSINESS, INCOME FALLING THEREAFTER WAS OFFER ED AS CAPITAL GAIN. IN OUR VIEW, THE ASSESSEE HAS RIGHTLY OFFERE D THE INCOME IN A.Y. 2002-03, 2003-04 & 2004-05 TO THE TUNE OF RS.1 3,63,636/-, RS.18,18,132/- AND RS.13,63,636/- RESPECTIVELY AS B USINESS INCOME WHICH WERE DULY ASSESSED AND TO THIS EXTENT WE ARE NOT IN AGREEMENT WITH THE LD. CIT(A) THAT THE SAME SHOU LD BE ASSESSED IN ONE YEAR I.E. 2002-03. SO FAR AS THE L ICENSE FEE SHOWN AS CAPITAL GAIN A.Y. 2004-05 TO THE TUNE OF RS.54,54,546/- IS CONCERNED WE ARE IN AGREEMENT WIT H THE LD. CIT(A) THAT THE SAME SHOULD BE TREATED AS REVENUE R ECEIPT FOLLOWING THE SAME PRACTICE AS FOLLOWED IN THE EARL IER YEARS. ACCORDINGLY, WE MODIFY THE ORDER OF LD. CIT(A) TO T HIS EXTENT THAT ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 7 INCOME HAS TO BE AMORTIZED AND THEREFORE THIS APPEA L OF THE ASSESSEE IS ALLOWED ON THIS ISSUE. 10. SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E ON THE ISSUE OF AMORTIZATION OF INCOME ON PRO-RATA BASIS T HE GROUND NO.2 WHICH IS A WITHOUT PREJUDICE GROUND RAISED BY THE ASSESSEE IS RENDERED ACADEMIC AND NEEDS NO ADJUDICATION. 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.4455/M/2011 (REVENUES APPEAL) 12. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN TREATING THE AMOUNT OF RS. 12,79,60,000/- AS CAPITA L GAINS INSTEAD OF BUSINESS INCOME. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT TRA NSFERRED ANY CAPITAL ASSET / BUSINESS ASSETS / FIXED ASSET TO M/S KUONI TRAVELS INDIA LTD. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT TRA NSFERRED ITS TRADE NAME TO M/S KUONI TRAVELS INDIA LTD, AS EVIDENT FROM THE NON-US AGE OF THE ASSESEE'S TRADE NAME BY M/S KUONI TRAVELS INDIA LTD WHILE CONDUCTING SIM ILAR BUSINESS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT WITHOUT TRANSFER OF 'CAP ITAL ASSET' THERE CANNOT BE INCOME UNDER THE HEAD 'CAPITAL GAINS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE WAS PREVENT ED FROM ENGAGING ITSELF IN THE SAME LINE OF BUSINESS AND THEREFORE THE CONSIDERATI ON RECEIVED BY THE ASSESSEE FROM M/S KUONI TRAVELS INDIA LTD IS NOTHING BUT NON -COMPETE FEES AND HENCE THE ASSESSEE'S INCOME AS ENVISAGED IN SECTION 28(VA) OF THE I.T.ACT, 1961. THE APPELLANT PRAYS THAT THE ORDER OF THE C1T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ITO/ACIT/DCIT BE RESTORED. ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 8 13. THE ONLY EFFECTIVE ISSUE RAISED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A) TREATING THE AMOUNT OF RS.1 2,79,60,000/- AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME BY THE A O. 14. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS SO LD ITS ENTIRE BUSINESS COMPRISING INTANGIBLE ASSETS AND CUSTOMER BASE IN THE BUSINESS OF TOUR AND TRAVEL TO M/S. KUONI TRAVELS I NDIA LTD. FOR A CONSIDERATION OF RS.13,34,14,546/- AND OFFERED THE SURPLUS AS CAPITAL GAIN ON SALE OF ASSETS. ACCORDING TO THE A O THE ASSESSEE HAS NOT SOLD ANY TRADE MARK OR BRAND OR PATENT OR C APITAL ASSETS TO M/S. KUONI TRAVELS INDIA LTD. BUT SOLD THE RUNNI NG BUSINESS AND THEREFORE ACCORDING TO THE AO THIS DOES NOT COM E UNDER THE DEFINITION OF TRANSFER OF CAPITAL ASSETS UNDER SEC TION 45 OF THE ACT. ACCORDING TO THE AO THE SAID RECEIPT FROM SAL E OF RUNNING BUSINESS HAS TO BE TREATED UNDER SECTION 28 OF THE ACT AND NOT UNDER SECTION 45 AND ACCORDINGLY TREATED THE ENTIRE SALE CONSIDERATION AS INCOME FROM BUSINESS IN A.Y. 2004- 05 BY FRAMING ASSESSMENT UNDER SECTION 143(3) VIDE ORDER DATED 29.12.06. 15. THE LD. CIT(A) DIRECTED THE AO TO TREAT THE SUM OF RS.12,79,60,000/- AS INCOME FROM CAPITAL GAIN FOR A .Y. 2004-05 AND ALSO DIRECTED TO ALLOW DEDUCTION UNDER SECTION 54E OF RS.5,50,00,000/- TOWARDS INVESTMENT IN BONDS OF RUR AL ELECTRIFICATION CORPORATION LTD. BY OBSERVING AND H OLDING AS UNDER: 4.2. TREATMENT OF RS.12,79,60,000/- RECEIVED FOR T RANSFER OF PART OF THE BUSINESS:- THE ACTION OF THE AO TO TREAT THE SUM OF RS.12,79,6 0,000/- AS 'BUSINESS INCOME INSTEAD OF 'CAPITAL GAINS' IS FOUND TO BE NOT CORRE CT ON ACCOUNT OF FOLLOWING:- ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 9 (A) THE AO HELD THAT THE APPELLANT HAS SOLD ITS 'RU NNING BUSINESS' AT PARA 5.4, PARA 6.2, (SUB PARA 1), AND PARA 6.8 AND 'ENTIRE BU SINESS' AT PARA 6.7, YET THE AO ERRONEOUSLY CONCLUDED THAT THE CONSIDERATION RECEIV ED IS NOT 'CAPITAL GAIN' BUT 'BUSINESS INCOME'. SALE OF BUSINESS IS SALE OF 'CAP ITAL ASSET' AS DEFINED IN SECTION 2(14) OF THE INCOME TAX ACT FALLING WITHIN THE PHRA SE 'PROPERTY OF ANY KIND AS HELD IN LARGE NUMBER OF CASES WEST COAST ELECTRIC SUPPLY CORPORATION LTD VS CIT 107 ITR 483, SYNDICATE BANK LTD VS CIT 155 ITR 681, CIT VS PERIERA 184 ITR 461, KARVALAS VS CIT 197 ITR 95, PNB FINANCE VS CIT 252 ITR 491. (B) THOUGH THE AO'S FINDINGS ARE CORRECT THAT THE A PPELLANT HAS NOT-SOLD ANY TRADEMARK, BRAND , PATENT ETC., THE AO'S FINDING TH AT THE APPELLANT HAS NOT SOLD ITS ENTIRE BUSINESS IS NOT CORRECT AS APPELLANT HAS NOT SOLD ITS FIXED ASSETS, SOLD ITS WEBSITE SEPARATELY AND SOLD THE REST OF THE PART OF ITS TOUR AND TRAVEL BUSINESS SEPARATELY. THUS, THE APPELLATE IN FACT SOLD A 'PAR T OF THE BUSINESS' AND GAINS OF SUCH TRANSFER ARE TAXABLE AS CAPITAL GAINS. (C) THE AMOUNT OF RS 12,79,60,000/-WAS FOR THE TRANSFER OF 'A PART OF BUSINESS' (AS DISCUSSED ABOVE) AND THE GAINS WERE NOT OF 'BUS INESS', AS DEFINED IN SECTION 2(13) OF THE INCOME-TAX ACT TO INCLUDE ''ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMER CE OR MANUFACTURE'. THE GAINS DO NOT FALL WITHIN ANY OF THE CLAUSES OF SECTION 28 , INCLUDING CLAUSE (VA). INCIDENTALLY, THE NON-COMPETE FEES (TO BE TAXED AS BUSINESS INCOM E IF NOT TAXABLE AS CAPITAL GAIN) RECEIVED BY THE DIRECTORS OF THE COMPANY ARE TO BE TAXED IN THEIR INDIVIDUAL HANDS AND IT IS NOT A SUBJECT-MATTER OF PRESENT DISPUTE. THUS THE AMOUNT OF RS.12,79,60,000/ - IS NOT TAXABLE AS BUSINESS INCOM E BUT AS CAPITAL GAINS. (D) THE AO HAS REFERRED TO THE PROVISIONS OF SEC. 4 5 AT PARA 5.4.(I) PAGE 4 OF THE ASSESSMENT ORDER OF THE A.Y. 2004-05 WHILE DETERMIN ING EFFECTIVE DATE OF TRANSFER AS HAS REPEATEDLY OBSERVED THAT THE APPELLANT HAS S OLD ITS ENTIRE BUSINESS BUT AS CONTRADICTED HIMSELF IN TREADING THE TRANSFER OF BU SINESS AS INCOME FROM BUSINESS. IN FACT, JUST THE 'RIGHT TO CARRY ON ANY BUSINESS' IS A CAPITAL ASSET WHICH IS OBVIOUS FROM THE PROVISIONS DEALING WITH COMPUTATION OF INC OME FROM CAPITAL GAIN LIKE SECTION 55(1 )(B) WHICH REFERS TO COST OF IMPROVEME NT OF 'RIGHT TO CARRY ON ANY BUSINESS'. SECTION 55(2)(A)THAT STATES THAT ANY THE COST OF ACQUISITION' OF 'TIGHT TO CARRY ON ANY BUSINESS' WOULD BE TAKEN AS NIL. AS A MATTER OF FACT, SEC, 55(B)(L) AND 55(2) REFERS TO 'COST OF IMPROVEMENT' AND COST OF A CQUISITION' IN RELATION OF A CAPITAL ASSET BEING GOODWILL OF A BUSINESS OR A TRA DE MARK OR A BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTUR E, PRODUCE OR PROCESS ANY ARTICLE OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARNAGE PERMITS OR LOOM HOURS. AMENDMENT IN SECTION 55(L)(B) AND SECTION 5 5(2) FOR TREATING 'COST OF ACQUISITION' AND 'COST OF IMPROVEMENT' AT NIL, HAS BEEN BROUGHT TO SETTLE VARIOUS DECISIONS OF THE HIGH COURT AND SUPREME COURT WHERE IN IT WAS HELD THAT SINCE THE COST OF ACQUISITION OR COST OF IMPROVEMENT CANNOT BE DETERMINED THE CONSIDERATI ON RECEIVED FROM TRANSFER OF CAPITAL ASSET CANNOT BE TAXED. THE LEGAL POSITION HAS ALWAYS BEEN ABUNDANTLY CLEAR THAT 'BUSINESS UNDERTA KING' IS THE CAPITAL ASSET AND GAIN FROM TRANSFER OF BUSINESS UNDERTAKING IS TAXAB LE AS INCOME FROM CAPITAL GAIN. ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 10 THE GAINS OF THE APPELLANT FOR TRANSFER OF ITS 'PAR T OF THE BUSINESS' ARE, THEREFORE, CAPITAL GAIN AND NOT BUSINESS INCOME. (E) THE APPELLANT HAS BASICALLY SOLD ITS SOURCE OF INCOME FROM TRAVELS AND TOURS BUSINESS AS IS OBVIOUS FROM AO'S OBSERVATION QUOTED AT PARA 2.5 TO HIS ORDER WHICH IS AGAIN QUOTED AS UNDER: - 'THE ARGUMENT THAT ASSESSEE HAS SOLD BUSINESS TO M/S. KUONI CAN FURTHER BE AUGMENTED BY THE FACT THAT THE ASSESSEE HAS STOPPED SHOWING BUSINESS INCOME FROM THE TRAVEL AND TOUR ACTIVITY FROM A.Y. 20O2-O3 ONWARDS. IN THE A. Y. 2003-04 & 2004-05, THE ASSESSEE HAS SHOWN INCOME ONLY FROM INTEREST AND OTHER SOURCES. THIS ALSO SHOWS THE SAID INCOME OF TOURS AND TRAVELS IS THE INCOME OF KUONI AND NOT THE ASSESSEE.' GAINS FROM TRANSFER OF 'SOURCE OF INCOME' GIVE RISE TO CAPITAL GAINS AND NOT BUSINESS INCOME. IN THE PRESENT CASE THE APPELLANT HAS SOLD ITS BUSI NESS TO M/S KOUNI AND AS THE APPELLANT HAS SOLD THE SOURCE OF ITS INCOME ITSELF. M.3 YEAR OF CHARGEABILITY (A) CAPITAL GAINS DO NOT ACCRUE FROM DAY TO DAY OVER A PERIOD OF TIME BUT ARISES AT A FIXED POINT OF TIME, THE TAXABLE EVENT OCCURS ON THE DATE OF TRANSFER. TO DETERMINE THE YEAR OF CHARGEABILITY, THE RELEVANT D ATE IS NOT THE DATE OF AGREEMENT TO SALE BUT THE DATE OF SALE I.E. THE EFFECTIVE TRA NSFER AS CONTEMPLATED BY THE PARTIES, AS HAS BEEN HELD IN LARGE NUMBER OF CASES. (B) THE TRANSFER OF A 'PART OF THE BUSINESS' OF TOUR AN D TRAVELS IS IN FORM OF 'BRAND SALE AGREEMENT' IS DATED 30/06/2001. THE AO HAS MEN TIONED IN THE ASSESSMENT ORDER AT PARA 6.2 THAT THE 'AS PER THE CLAUSE 11.1 OF THE AGREEMENT THAT THE CONSIDERATION PAYABLE BY KUONI FOR THE ASSIGNMENT S HALL BE CALCULATED IN ACCORDANCE WITH SCHEDULE 6 OF THE AGREEMENT. IN THE SAID SCHEDULE THE TIME TABLE AND THE WORKING OF THE CONSIDERATION PAYABLE BY KUONI TO TH E ASSESSEE IS ENUMERATED. AS PER THE SAID PAYMENT SCHEDULE THE AMOUNTS ARE PAID ON THE BASIS OF ACTUAL PBT (PROFIT BEFORE TAXATION) OF THE TOUR CLUB, SBU (STR ATEGIC BUSINGSS UNIT).' THE PAYMENT OF CONSIDERATION, FOR SALE OF BRAND (AS PER ASSESSEE) OR PAYMENTS FOR RUNNING BUSINESS/ENTIRE BUSINESS (AS P ER AO) OR 'PART OF THE BUSINESS (AS PER THIS ORDER) DEPENDS ON FUTURE HAPPENINGS, I.E. PROFITS TO BE GENERATED IN FUTURE. HOW ON 30/06/2001, THE PAYMENTS OF FUTURE TO BE DETERMINED ON FUTURE UNCERTAIN EVENTS ON THE BASIS OF PROFIT BEFORE TAXATION OF TOUR AND TRAVEL BUSINESS OF THE PERIOD LEADING UP TO MAR CH 2004 MAY BE KNOWN? THUS, 30/06/2001 CANNOT BE THE DATE OF DATE OF TRANSFER W HEN THE AMOUNT OF CONSIDERATION FOR TRANSFER IS NOT KNOWN. ONLY RS 5 LAKHS WAS RECEIVED DURING AY 2002-03 AND THE FUTURE PAYMENTS TO BE RECEIVED BY A PPELLANT WAS NOT KNOWN DURING AY 2002-03. HENCE TO TAX THE SUM OF RS. 12,7 9,60,000/- IN AY 2002-03 THAT TOO AS 'BUSINESS INCOME' IS ABSOLUTELY INCORRECT. ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 11 (C) THE AO'S REFERENCE TO AMENDMENT IN SECTION 45 O F THE INCOME-TAX ACT REGARDING TRANSFER OF PROPERTY BEING GOVERNED THE SECTION 53A OF THE TRANSFER OF PROPERTY ACT AND ITS APPLICABILITY IN THE PRESENT CASE IS NOT CO RRECT AT ALL ON ACCOUNT OF FOLLOWING- (I) SECTION 53A OF THE TRANSFER OF PROPERTY ACT DEA LS WITH THE PART PERFORMANCE IN CASE 'IMMOVABLE PROPERTY' AND IN THE PRESENT CASE NO IMMOVABLE PROPERTY HAS BEEN TRANSFERRED (II) SECTION 53A OF THE TRANSFER OF PROPERTY ACT DE ALS WITH A CONTRACT TO TRANSFER 'IMMOVABLE PROPERTY' IN WRITING OF A CASE WHERE THE TERM NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTA INED WITH REASONABLE CERTAINTY. IN THE PRESENT CASE, THE AMOUNT OF CONSIDERATION ON 30 /06/2001 DEPENDS ON FUTURE UNCERTAIN EVENTS ON THE BASIS OF PROFIT BEFORE TAXATION OF TOUR AND TRAVEL BUSINESS OF THE PERIOD LEADING UP T O MARCH 2004? IN THE PRESENT CASE THE TERM NECESSARY TO CONSTITUTE THE T RANSFER (THE CONSIDERATION OF TRANSFER) CANNOT BE ASCERTAINED WITH REASONABLE CERTAINTY. (C) ON FULFILMENT OF CONDITIONS OF AGREEMENT. RS 5, 42,00,000/- WAS RECEIVED DURING AY 2003-04 AND RS 6,86,60,100 WAS PAID BY M/ S KUONI TO THE APPELLANT DURING 2004-05 TO COMPLETE THE TRANSACTIO N AND TRANSFER. THUS, THE TRANSFER HAS TAKEN PLACE IN AY 2004-05 AND THE CAPITAL GAINS OF RS 12,79,60,000/- IS TAXABLE IN AY 2004-05. (D) REGARDING CHARGEABILITY OF THE AMOUNT OF RS. 1, 27,96.000/-, THE AMOUNT IS TO BE CHARGED IN THE YEAR IN WHICH THE RIGHT TO RECEIVE ACCRUED TO THE ASSESSEE. THE AMOUNTS ACTUALLY RECEIVED ARE AS UNDER:- A.Y. RS. 2002-03 5,00,000/- 2003-04 5,42,00,000/- 2004-05 6,86,60, 100/- TOTAL- 12,79,60,000/- (E) THE TRANSFER HAS TAKEN PLACE ON FULFILLMENT OF VARIOUS CONDITIONS ONLY IN A.Y. 2004-05 THE SUM OF RS.12,79,60, OOO/- IS, THEREFORE , REQUIRED TO BE TAXED IN THE A.Y. 2004-05. 4.4 IN VIEW OF THE ABOVE DISCUSSION AT PARA 4.2. AND 4.3, PAGES 9 TO 12 OF THIS ORDER, THE AO'S ACTION TO TREAT THE SUM OF RS. 12.79,60,00 0/- AS BUSINESS INCOME FOR A.Y. 2004-05 ON PROTECTIVE BASIS IS FOUND TO BE NOT VALI D. THE AO IS DIRECTED TO TREAT THE SUM OF RS.12,79,60,000/- AS INCOME FROM CAPITAL GAI N FOR A.Y. 2004-05. 5. AS THE INCOME HAS BEEN HELD TO BE INCOME FROM CA PITAL GAIN CHARGEABILITY IN A.Y. 2004-05, THE AO IS DIRECTED TO ALLOW DEDUCTION U/S5 4E. AFTER EXAMINING THE FULFILLMENT OF THE CONDITION OF SEC. 54E ACCORDINGL Y. ITA NO.3062/M/2011 & ORS. M/S. TRINETRAM INVESTMENT P. LTD. 12 16. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT LD. CIT(A) HAS PASSED A VERY D ETAILED AND REASONED ORDER AND THUS CAME TO CONCLUSION THAT RS.12,79,60,000/- HAS TO BE ASSESSED AS CAPITAL GAI N IN A.Y. 2004-05 WHICH IN OUR OPINION IS CORRECT. WE ARE, T HEREFORE, FULLY SATISFIED WITH THE REASONING OF THE LD. CIT(A) ON THIS ISSUE AND IN VIEW OF THE SAME THE APPEAL OF THE REVENUE IS DI SMISSED. CO NO.29/M/2012 17. AT THE OUTSET THE LD AR SUBMITTED THAT THE CO IS NOT PRESSED AND THEREFORE BEING DISMISSED AS NOT PRESSE D. 18. IN THE RESULT, THE APPEAL IS ALLOWED AND CO BY THE ASSESSEE IS DISMISSED WHEREAS THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30.11.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.