DCIT, New Delhi V. M/s. Mediworld Publications Pvt. Ltd, New Delhi

ITA 4086/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3703 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 25-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 08-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Keywords: Capital asset; Business income; Capital Gains
• Section: 191; 28

Judgement Text

I.T.A. NO. 4086 /DEL/2009 1/14 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH E BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO. 4086/DEL/2009 (ASSESSMENT YEAR 2006-07) DCIT, CIRCLE 6(1), VS. M/S. MEDIWORLD PUBLICATIONS P. LTD., NEW DELHI D-73, 1 ST FLOOR, KALKAJI, NEW DELHI-110 019 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAACM8877C APPELLANT BY: SHRI M.K.GAUTAM, CIT DR RESPONDENT BY: SHRI SALIL AGGARWAL, ADV. ORDER PER A. K. GARODIA, AM: 1. THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD. CIT(A)-IX, NEW DELHI DATED 15.07.2009 FOR TH E ASSESSMENT YEAR 2006-07. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1) THE ORDER OF THE LD .CIT(A) IS ERRONEOUS & CONT RARY TO FACTS AND LAW. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING THE SUM OF RS.3,80 ,02,500/- RECEIVED BY THE ASSESSEE ON ACCOUNT OF BUSINESS AGR EEMENT AS CAPITAL GAIN AND NOT AS BUSINESS INCOME OF THE ASSE SSEE. 2. THE BRIEF FACTS AS NOTED BY THE LD. CIT(A) IN PARA 4.0 TO 4.2 ARE AS UNDER: 4.0 THE BRIEF FACTS OF THE CASE ARE THAT THE APPEL LANT COMPANY IS INCORPORATED IN THE YEAR 1995 VIDE CERTI FICATE OF I.T.A. NO. 4086 /DEL/2009 2/14 INCORPORATION ISSUED BY THE REGISTRAR OF COMPANIES, DELHI & HARYANA FOR CONDUCTING THE BUSINESS OF HEALTHCARE J OURNALS & COMMUNICATIONS INCLUDING ACTIVITIES SUCH AS PUBLICA TION OF MEDICAL JOURNALS FOR THE MEDICINE INDUSTRY AND PROF ESSIONALS AND PRODUCTION OF CUSTOMIZED PRINT, AUDIO AND VIDEO HEALTHCARE COMMUNICATIONS. ON 10 TH MARCH 2006, THE APPELLANT COMPANY ENTERED INTO A SPECIFIED ASSETS TRANSFER AGREEMENT WITH M/S. CMP MEDICA INDIA PRIVATE LIMITED, BANGALORE FOR THE SALE OF ALL ITS RIGHTS, TITLES AND INTERESTS IN THE SPECIFIED A SSETS OF ITS HEALTHCARE JOURNALS & COMMUNICATIONS BUSINESS. TH ESE ASSETS, AS NARRATED IN PARA 2 OF THE AFORESAID AGRE EMENT WERE (A) THE PERIODICALS (B) THE PRODUCTS (C) THE BUSINESS I NTELLECTUAL PROPERTY RIGHTS ALONG WITH THE GOODWILL AND ALL RIG HTS, INTERESTS AND BENEFITS APPURTENANT TO THE BUSINESS INTELLECTU AL PROPERTY RIGHTS (D) THE CUSTOMER DATABASE (E) THE RECORDS (F ) THE EDITORIAL MATERIALS AND (G) THE CONTRACTS. THROUGH TWO SEPAR ATE DEEDS OF THE SAME DATE, NAMELY THE DEED OF ASSIGNMENT OF CO PYRIGHTS AND THE DEED OF ASSIGNMENT OF TRADEMARKS, THE APP ELLANT COMPANY ALSO ASSIGNED THE COPYRIGHTS AND TRADEMARKS PERTAINING TO ITS HEALTHCARE JOURNALS & COMMUNICATI ONS BUSINESS. IN SHORT, THE APPELLANT BY THE SAID AGRE EMENTS TRANSFERRED ALL THE INTANGIBLE ASSETS BEING TRADE M ARKS, BRANDS, COPYRIGHTS AND THE ASSOCIATED GOODWILL OF ITS HEALT HCARE JOURNALS & COMMUNICATIONS BUSINESS, WHICH THE APPEL LATE HAD BUILT UP AND HAD BEEN RUNNING FOR THE PAST TEN YEAR S OR SO. 4.1 THE APPELLANT BY THE AFORESAID SPECIFIED ASSE T TRANSFER AGREEMENT ALSO RELINQUISHED FOR SIX YEARS THE RIGHT TO CARRY ON ANY BUSINESS INVOLVING OR RELATING TO OR C OMPETING WITH THE TRANSFERRED SPECIFIED ASSETS. THE APPELLANT AS SUCH GAVE UP ITS RIGHT TO CARRY ON THE HEALTHCARE JOURNALS & COM MUNICATIONS BUSINESS FOR THE SPECIFIED PERIOD. WHILE ALL THE A SSETS OF HEALTHCARE JOURNALS & COMMUNICATIONS BUSINESS WERE TRANSFERRED AS ABOVE, THE APPELLANT VIDE PARA 3.4.9 OF THE AGREEMENT RETAINED A LIMITED AND NON EXCLUSIVE RIGH T TO USE THE CUSTOMER DATABASE COMPRISED OF ADVERTISERS AND PHARMACEUTICAL COMPANIES SOLELY FOR THE PURPOSES OF ITS CLINICAL TRIALS BUSINESS AND FOR NO OTHER PURPOSE WHATSOEVER . IN CONSIDERATION OF THE AFORESAID TRANSFER, THE APPELL ANT RECEIVED A TOTAL SUM OF RS.3,80,02,500/- FROM THE SAID CMP MED ICAL INDIA (P) LTD. I.T.A. NO. 4086 /DEL/2009 3/14 4.2 FOR THE YEAR UNDER CONSIDERATION, THE APPELLAN T FILED ITS RETURN OF INCOME FOR THE ABOVE NOTED ASSESSMENT YEA R ON 19 TH NOVEMBER 2006 DECLARING A TOTAL INCOME OF RS.11,69, 453 COMPUTED AS UNDER: INCOME FROM BUSINESS 11,66,953 LONG TERM CAPITAL GAINS ON SALE OF INTANGIBLE ASSETS 3,80,02,500 LESS: AMT. INVESTED IN REC BONDS 3,80,00,000 2,500 TOTAL INCOME 11,69,453 3. LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE BY FOLLOWING THE TRIBUNAL ORDER RENDERED IN THE CASE O F ROHAN SOFTWARE PVT. LT. VS ITO AS REPORTED IN 304 ITR (AT ) 314. IT IS FURTHER NOTED BY THE LD. CIT(A) IN THAT CASE THE TR IBUNAL HAS FOLLOWED ANOTHER TRIBUNAL DECISION RENDERED IN THE CASE OF ITO VS GURINDER KAUR AS REPORTED IN 258 ITR (AT) 207. LD CIT(A) DIRECTED THE A.O. THAT THE ENTIRE RECEIPT OF RS.3,8 0,02,500/- BE ASSESSED AS LONG TERM CAPITAL GAIN AS AGAINST THE BUSINESS INCOME ASSESSED BY THE A.O. NOW, THE REVENUE IS I N APPEAL BEFORE US. 4. THE LD. D.R. FOR THE REVENUE SUPPORTED THE ASSESSME NT ORDER. IT IS FURTHER SUBMITTED BY HIM THAT A CLEAR FINDING HA S BEEN GIVEN BY THE A.O. ON PAGE 7 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT SOLD WHOLE OF ITS BUSINESS BUT ONLY SURREND ERED HIS RIGHTS REGARDING PUBLICATION OG JOURNAL AND HENCE PROVISIONS OF SECTION 28(VA) OF THE I. T. ACT ARE APPLICABLE AND HENCE THE A.O. WAS JUSTIFIED IN ASSESSING ITS RECEIPT OF RS.3 80.02 LACS AS BUSINESS INCOME, AS AGAINST THE LONG TERM CAPITA L GAIN TREATED BY THE ASSESSEE. OUR ATTENTION WAS DRAWN TO PARA 5 OF THE ORDER I.T.A. NO. 4086 /DEL/2009 4/14 OF LD. CIT(A) AND IN PARTICULAR TO PARA 5.1 OF HIS ORDER WHEREIN A FINDING IS GIVEN BY HIM THAT THERE IS NO CO-RELAT ION BETWEEN THE TWO BUSINESSES I.E. THE BUSINESS OF HEALTHCARE JOURNALS AND COMMUNICATION AND THE BUSINESS OF CLINICAL TRIAL. IT IS SUBMITTED BY HIM THAT THERE IS NO BASIS FOR THIS FINDING GIVE N BY THE LD. CIT(A). IT IS ALSO SUBMITTED BY HIM THAT THE ASSES SEE HAS ALSO GIVEN AN UNDERTAKING TO THE BUYER THAT IT WILL NOT COMPETE WITH THE BUYER I.E. CMP MEDICA INDIA PVT. LTD. FOR A PER IOD OF 6 YEARS AND HENCE SOME PORTION OF THE SALE CONSIDERAT ION SHOULD BE ALLOCATED TOWARDS NON COMPETE FEE AND THAT PORTI ON MUST BE ASSESSED AS BUSINESS INCOME. HE STRONGLY SUPPORTED THE ASSESSMENT ORDER AND IT IS URGED BY HIM THAT THE OR DER OF LD. CIT(A) SHOULD BE REVERSED AND THAT OF THE A.O. SHOU LD BE RESTORED. 5. AS AGAINST THIS, LD. COUNSEL FOR THE ASSESSEE HAS S TRONGLY SUPPORTED THE ORDER OF LD. CIT(A). IT IS ALSO SUBM ITTED BY HIM THAT THE RELEVANT AGREEMENT BETWEEN THE ASSESSEE CO MPANY AND THE BUYER, M/S. CMP MEDICA INDIA PVT. LTD. IS AVAIL ABLE ON PAGES 149-184 OF THE PAPER BOOK. OUR ATTENTION WAS DRAWN TO PAGE 155 OF THE PAPER BOOK CONTAINING PARA 2 OF THE TRANSFER AGREEMENT, AS PER WHICH, THE ASSESSEE COMPANY HAS T RANSFERRED VARIOUS ASSETS SUCH AS PERIODICALS, THE PRODUCTS, T HE BUSINESS INTELLECTUAL PROPERTY RIGHTS ALONG WITH GOODWILL, C USTOMER DATABASE AND RECORDS AND EDITORIAL MATERIALS AND TH E CONTRACTS. IT IS SUBMITTED THAT NO DOUBT, THE ASSESSEE HAS AGR EED FOR NO COMPETITION WITH THE BUYER FOR A PERIOD OF 6 YEARS BUT THIS IS NOT THE MAIN CONSIDERATION FOR THE CONTRACT. IT IS SUB MITTED THAT THE I.T.A. NO. 4086 /DEL/2009 5/14 CONTRACT IS MAINLY FOR TRANSFER OF THESE INTANGIBLE ASSETS AND NOT FOR GIVING UNDERTAKING FOR NON-COMPETITION. OUR AT TENTION WAS ALSO DRAWN TO PAGE 185 OF THE PAPER BOOK CONTAINING DEED OF ASSIGNING THE TRADEMARKS AND IT IS POINTED OUT THAT OUT OF TOTAL CONSIDERATION OF RS.380.02 LACS, THE AMOUNT OF RS.2 LACS WAS SPECIFIED ON ACCOUNT OF ASSIGNING OF TRADEMARKS. I T IS SUBMITTED THAT THE BALANCE AMOUNT OF RS.378.02 LACS WAS SPECI FIED ON ACCOUNT OF ASSIGNMENT OF COPYRIGHT AND OUR ATTENTIO N WAS DRAWN TO DEED OF ASSIGNING OF COPYRIGHT AS AVAILABLE ON P AGE 191 OF THE PAPER BOOK. IT IS SUBMITTED THAT THE COPYRIGHT ASSIGNED BY THE ASSESSEE INCLUDED PERIODICALS INCLUDING ITS TIT LE, PRODUCT DATABASE AND EDITORIAL MATERIAL ALONG WITH GOODWILL ATTACHED AND APPURTENANT THERETO AND FOR THESE INTANGIBLE AS SETS, THE BALANCE CONSIDERATION OF RS.3,78,02,500/- WAS RECEI VED BY THE ASSESSEE FROM THE BUYER AND HENCE NO PART OF CONSID ERATION CAN BE ASSESSED AS BUSINESS INCOME. REGARDING CLAUSE N O.8 OF THE MAIN AGREEMENT WITH REGARD TO NON COMPETE, IT IS SU BMITTED THAT THE SAME IS AVAILABLE ON PAGES 161 AND 162 OF THE P APER BOOK AND IT IS SUBMITTED THAT IT HAS BEEN SPECIFIED IN T HE AGREEMENT THAT IN CONSIDERATION OF CMP MEDICA PURCHASING AND ACQUIRING THE SPECIFIED ASSETS AND THE BUSINESS INTELLECTUAL PROPERTY RIGHTS FROM THE ASSESSEE, THE ASSESSEE UNDERTAKES TO THE B UYER THAT THE ASSESSEE SHALL NOT DO ANY BUSINESS FOR A PERIOD OF 6 YEARS IN CONNECTION WITH THE SIMILAR OF PERIODICALS AND PROD UCTS. IT IS SUBMITTED THAT THIS UNDERTAKING WAS GIVEN BY THE AS SESSEE IN ADDITION TO THE TRANSFER OF INTANGIBLE ASSETS AND H ENCE THE CONSIDERATION RECEIVED BY THE ASSESSEE HAS TO BE AP PROPRIATED I.T.A. NO. 4086 /DEL/2009 6/14 TOWARDS THESE INTANGIBLE ASSETS AND, THEREFORE, SHO ULD BE ASSESSED AS LONG TERM CAPITAL GAIN AND NOT AS BUSIN ESS INCOME. RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDER ED IN THE CASE OF ROHAN SOFTWARE PVT. LTD. VS ITO AS REPORTED IN 304 ITR (AT) 314. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, GONE THRO UGH THE MATERIAL ON RECORD, ORDERS OF AUTHORITIES BELOW AND THE TRIBUNAL DECISION FOLLOWED BY THE LD. CIT(A), WHICH IS ALSO CITED BEFORE US. WE FIND THAT IN THE PRESENT CASE, THE A.O. HAS INVOKED THE PROVISIONS OF SECTION 28(VA) OF THE ACT. FOR THE S AKE OF READY REFERENCE, THE PROVISIONS OF SECTION 28(VA) ARE REP RODUCED HEREIN BELOW: S.28(VA) ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN CASH OR KIND, UNDER AN AGREEMENT FOR- (A) NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BU SINESS; OR (B) NOT SHARING ANY KNOW-HOW, PATENT, COPYRIGHT, TRADE- MARK, LICENCE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERC IAL RIGHT OF SIMILAR NATURE OR INFORMATION OR TECHNIQUE LIKEL Y TO ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR PROVIS IONS FOR SERVICES; PROVIDED THAT SUB-CLAUSE (A) SHALL NOT APPLY TO- (I) ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN CASH OR KIND, ON ACCOUNT OF TRANSFER OF THE RIGHT TO MANUFACTURE, PR ODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON A NY BUSINESS, WHICH IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS; (II) ANY SUM RECEIVED AS COMPENSATION, FROM THE MUL TILATERAL FUND OF THE MONTREAL PROTOCOL ON SUBSTANCES THAT DE PLETE THE I.T.A. NO. 4086 /DEL/2009 7/14 OZONE LAYER UNDER THE UNITED NATIONS ENVIRONMENT PROGRAMME, IN ACCORDANCE WITH THE TERMS OF AGREEMEN T ENTERED INTO WITH THE GOVERNMENT O INDIA. EXPLANATION - FOR THE PURPOSES OF THIS CLAUSE,- (I) AGREEMENT INCLUDES ANY ARRANGEMENT OR UNDERSTANDI NG OR ACTION IN CONCERT,- (A) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS FORMAL OR IN WRITING; OR (B) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDINGS; (II) SERVICE MEANS SERVICE OF ANY DESCRIPTION WHI CH IS MADE AVAILABLE TO POTENTIAL USERS AND INCLUDES THE PROVI SION OF SERVICES IN CONNECTION WITH BUSINESS OF ANY INDUSTR IAL OR COMMERCIAL NATURE SUCH AS ACCOUNTING, BANKING, COMMUNICATION, CONVEYING OF NEWS OR INFORMATION, ADVERTISING, ENTERTAINMENT, AMUSEMENT, EDUCATION, FINANCING, INSURANCE, CHIT FUNDS, REAL ESTATE, CONS TRUCTION, TRANSPORT, STORAGE, PROCESSING, SUPPLY OF ELECTRICA L OR OTHER ENERGY, BOARDING AND LODGING; 7. AS PER THE PROVISIONS OF SECTION 28(VA) AS REPRODUC ED ABOVE, SUB-CLAUSE (A) OF SUB-SECTION (VA) OF SECTION 28 WI LL NOT BE APPLICABLE IF THE AMOUNT IN QUESTION IS RECEIVED ON ACCOUNT OF TRANSFER OF RIGHT TO MANUFACTURE, PRODUCE OR PROCES S ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS, WHICH I S CHARGEABLE UNDER THE HEAD CAPITAL GAIN. IN THE PRESENT CASE , THE ASSESSEE HAS TRANSFERRED / ASSIGNED ALL ITS TRADEMARKS AND A LSO PERIODICALS I.T.A. NO. 4086 /DEL/2009 8/14 INCLUDING THE TITLE, PRODUCT DATABASE AND EDITORIAL MATERIAL ALONG WITH GOODWILL AS ATTACHED AND APPURTENANT THERETO A ND IN ADDITION TO THIS, THE ASSESSEE HAS AGREED THAT IN C ONSIDERATION OF CMP MEDICA (P) LTD., PURCHASING AND ACQUIRING THE S PECIFIED ASSETS AND THE BUSINESS INTELLECTUAL PROPERTY RIGHT FROM THE SELLER I.E. ASSESSEE, THE ASSESSEE UNDERTAKES THAT IT WILL NOT PROCURE OR CAUSE TO PROCURE FOR A PERIOD OF 6 YEARS, PERIODICA LS AND PRODUCTS IN ANY OTHER LANGUAGE INCLUDING IN ENGLISH ETC. THIS GOES TO SHOW THAT IN FACT THE ASSESSEE HAS RECEIVED THIS AMOUNT OF RS.380.02 LACS ON ACCOUNT OF TRANSFER OF RIGHT T O CARRY ON BUSINESS OF HEALTHCARE JOURNALS AND COMMUNICATION A ND HENCE THIS PROVISO IS APPLICABLE IN THE PRESENT CASE AND THE IMPUGNED RECEIPTS OF THE ASSESSEE ARE NOT HIT BY SECTION 28( VA) (A) OF THE ACT. AT THIS JUNCTURE, WE FEEL THAT THE FINDINGS O F LD. CIT(A) ON THESE ASPECTS AS CONTAINED IN PARAS 5.0, 5.1 AND 5. 2 ARE RELEVANT AND FOR THE SAKE OF READY REFERENCE, THE SAME ARE R EPRODUCED HEREIN BELOW: 5.0 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED AUTHORISED REPRESENTATIVE OF THE APPELLANT COMPANY . I HAVE ALSO GONE THROUGH THE VARIOUS AGREEMENTS PRODUCED B Y THE APPELLANT DURING THE COURSE OF THE PRESENT PROCEE DINGS. IT IS FOUND THAT THE APPELLANT COMPANY WAS INCORPORATED I N THE YEAR 1995 TO CONDUCT THE BUSINESS OF HEALTHCARE JOURNAL S AND COMMUNICATIONS SUCH AS PUBLICATIONS OF THE MEDICAL JOURNALS ACTIVITIES FOR THE PHARMACEUTICALS INDUSTRY AND P ROFESSIONALS AND PRODUCTION OF CUSTOMIZED, PRINT AUDIO AND VID EO HEALTHCARE COMMUNICATIONS. IT IS ALSO A MATTER OF FACT THAT AL L THE JOURNALS I.T.A. NO. 4086 /DEL/2009 9/14 PUBLISHED BY THE APPELLANT COMPANY WAS OBTAINED FRO M THE OFFICE OF THE REGISTRAR OF NEWSPAPER OF INDIA (MINI STRY OF INFORMATION AND BROADCASTING) GOVT. OF INDIA. DECLA RATION IN FORM B FOR ALL PUBLICATIONS HAVE BEEN FILED WITH TH E DEPUTY COMMISSIONER OF POLICE (LICENSING), NEW DELHI AND THE PUBLICATIONS WERE INDEXED BY INDIA NATIONAL SCIENT IFIC DOCUMENTATION CENTRE (INDOC) GOVT. OF INDIA. THE AP PELLANT SEEMS TO BE EXCLUSIVE OWNER OF TRADEMARK AND COPYR IGHT OF THESE PUBLICATIONS. THE DETAILS AND DOCUMENTS SUBMI TTED BY THE LD. A.R. ALSO SUPPORT THE CONTENTION THAT THE PUBLI CATIONS I.E. JOURNALS WERE INDEED CAPITAL ASSETS OF BUSINESS DUL Y REGISTERED WITH THE TRADE MARK AUTHORITIES, THE REGISTRAR OF N EW PAPER OF INDIA, AND POSSESSED THE COPYRIGHTS OF THE JOURNALS UNDER THE INDIAN COPYRIGHT ACT. 5.1 FROM THE CHART AS GIVEN ABOVE IN PARA 4.5 PAGE 8/9 OF THIS ORDER, IT IS CLEAR THAT THE APPELLANT HAS SOL D ALL ITS INTANGIBLE ASSETS LIKE TRADEMARKS, BRANDS, COPYRIGHTS AND GOOD WILL WHICH CONSTITUTED THE ASSETS OF THE BUSINESS OR THE PROF IT EARNING APPARATUS MEANING THEREBY THAT THE APPELLANT, ON SE LLING THE ENTIRE BUSINESS APPARATUS, HAS DEPRIVED ITSELF OF A NY EARNINGS IN THE SUBSEQUENT YEARS. NO INCOME HAS BEEN GENERATE D BY THE APPELLANT COMPANY AFTER SALE OF INTANGIBLES TO M/S MP MEDICA INDIA (P) LTD. CONSEQUENT TO SUCH SALE, THE APPELL ANT COMPANY HAS RELIEVED THE ENTIRE WORKFORCE FROM THEIR DUTIE S/JOBS SINCE THE ENTIRE BUSINESS (EXCEPT FOR CLINICAL TRIALS) WITH ITS DATA BASE, NET WORKS, GOODWILL, TRADEMARK, COPY RIGHT CLIENTEL E ETC. HAS BEEN TRANSFERRED TO M/S CMP MEDICA INDIA (P) LTD. B ANGALORE. I.T.A. NO. 4086 /DEL/2009 10/14 THESE FACTS MAKE IT VERY CLEAR THAT THE APPELLANT HAS WHOLLY GIVEN UP ITS RIGHT TO CARRY ON THE HEALTHCARE JOUR NALS AND COMMUNICATIONS BUSINESS FOR A SPECIFIED PERIOD. REG ARDING THE ASSESSING OFFICERS CONTENTION THAT THE APPELLANT H AS NOT TRANSFERRED THE WHOLE BUSINESS AS EVEN AFTER TRANSF ER, THE APPELLANT IS STILL CARRYING ON THE BUSINESS OF CLI NICAL TRIALS, I HAVE CHECKED UP THE ACCOUNTS OF THE APPELLANT COMPA NY AND FOUND THAT THERE IS NO CORRELATION BETWEEN THE TWO BUSINESSES. BUSINESS OF HEALTHCARE JOURNALS AND COMMUNICATIONS WAS CLEARLY A DISTINCT AND SEPARATE BUSINESS AS BEFORE SALE OF INTANGIBLES LIKE TRADEMARKS, BRANDS, COPYRIGHTS AND GOODWILL, APPELLANT HAD NOT DERIVED ANY INCOME FROM THE CLINI CAL TRAILS. IT IS ONLY AFTER THE SALE OF BUSINESS OF PUBLICATION O F HEALTH CARE JOURNALS AND COMMUNICATIONS THAT THE DIRECTOR OF THE APPELLANT COMPANY STARTED CLINICAL TRIALS AND EARNING INCOME THEREFROM. WITH ABOVE FACTS IN MIND, I AM OF CONSIDERED VIEW T HAT IN GIVING UP ITS ENTIRE HEALTHCARE JOURNALS AND COMMUN ICATIONS BUSINESS, THE APPELLANT HAS LOST THE SOURCE OF IN COME AND SECTION 28(VA) OF THE ACT THEREFORE HAS NO APPLICAT ION TO THE FACTS OF THE CASE. 5.2 IT IS ALSO QUITE CLEAR THAT GIVING UP THE RIGHT TO CARRY ON THE HEALTHCARE JOURNAL & COMMUNICATIONS BUSINESS WAS ON LY ONE PART OF THE AGREEMENT. THE MAIN PART OF THE AGREEME NT WAS THE TRANSFER OF ALL INTANGIBLE ASSETS BEING TRADE MARKS , BRANDS, COPYRIGHTS AND THE ASSOCIATED GOODWILL OF ITS HEALT HCARE JOURNALS AND COMMUNICATIONS BUSINESS. IT FOLLOWS TH AT THE CONSIDERATION OF I.T.A. NO. 4086 /DEL/2009 11/14 RS. 3,80,02,500/- WAS NOT RECEIVED; ONLY FOR GIVING UP THE RIGHT TO CARRY ON THE HEALTHCARE JOURNALS AND COMMUNICATI ONS BUSINESS BUT WAS MAINLY FOR THE TRANSFER OF ALL IN TANGIBLE ASSETS BEING TRADE MARKS, BRANDS, COPYRIGHTS AND THE ASSOC IATED GOODWILL OF THE HEALTHCARE JOURNALS & COMMUNICATION S BUSINESS. AS PER THE LAW, THE CONSIDERATION FOR TH E TRANSFER OF INTANGIBLE ASSETS BEING TRADE MARKS, BRANDS, COPYRI GHTS AND THE ASSOCIATED GOODWILL OF HEALTHCARE JOURNALS AND COMMUNICATIONS BUSINESS IS TAXABLE AS LONG TERM CAP ITAL GAIN. EVEN THE CONSIDERATION AS MAY BE ALLOCATED TO THE G IVING UP OF RIGHT TO CARRY ON HEALTHCARE JOURNALS AND COMMUNICA TIONS BUSINESS IS ALSO TAXABLE AS LONG TERM CAPITAL GAIN BY VIRTUE OF SECTION 55(2)(A) READ WITH CLAUSE (I) OF THE PROVIS O TO SECTION 28(VA). THE A.R. HAS ALSO RELIED ON THE PROVISIO NS OF SECTION 45(1) READ WITH 2(14), 2(11) (B), 48 AND SECTION 55 (2)(II) OF THE ACT. THE COMBINED READING OF THE ABOVE PROVISIONS AND OF SECTION 28(VA) LEAVES NO AMBIGUITY THAT LAW MAKERS SPECIFICALLY EXCLUDED THE INCOME FROM THE PURVIEW OF MAIN SECTIO N 28(VA). 8. THE TRIBUNAL DECISION RENDERED IN THE CASE OF ROHAN SOFTWARE PVT. LTD. ALSO SUPPORTS THE CASE OF THE ASSESSEE AL THOUGH THE BASIS OF DECISION IN THAT CASE IS DIFFERENT. IN TH AT CASE, THE ASSESSEE HAS TRANSFERRED ASSETS OF BUSINESS AND ALS O RIGHT IN BUSINESS AND IMPROVEMENT IN BUSINESS EXCEPT CERTAIN BUILDING AND CARS ETC. THE SALE CONSIDERATION RECEIVED BY T HE ASSESSEE WAS OFFERED BY THE ASSESSEE AS ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAIN. IN THAT CASE, THE ALLEGATION O F THE A.O. WAS I.T.A. NO. 4086 /DEL/2009 12/14 THAT NO ASSET WHATSOEVER MENTIONED IN THE BALANCE S HEET OF THE ASSESSEE COMPANY HAS BEEN TRANSFERRED THE CONSIDERA TION OF RS.1.78 CRORES HAS BEEN RECEIVED FOR UTILIZING THE SERVICES OF TWO DIRECTORS OF THE ASSESSEE COMPANY AND THEIR INT ELLECTUAL PROPERTY AND HENCE THIS IS A RECEIPT OF CONSIDERATI ON FOR RENDERING THE SERVICES BY THE ASSESSEE COMPANY TO M /S. ICICI INFOTEC SERVICES LTD. IT WAS ALSO THE CASE OF THE A.O. THAT FOR THESE REASONS, THE IMPUGNED RECEIPT WAS ASSESSABLE AS BUSINESS INCOME OF THE ASSESSEE COMPANY. UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL HAT THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE OF RS.1.78 CRORES WAS TO BE ASSESSED AS LO NG TERM CAPITAL GAIN BECAUSE THE ASSESSEE HAD TRANSFERRED A LL THE ASSETS AND PROPERTY OF THE ASSESSEE COMPANY IN THE BUSINES S INCLUDING INTELLECTUAL PROPERTY, CODES FORMULAE AND DESIGN OT HER THAN THE BUILDING, CARS ETC. IT WAS HELD BY THE TRIBUNAL TH AT THE BUYER COULD CONTINUE THE ACTIVITIES OF PURCHASE EVEN IN T HE ABSENCE OF BUILDING AND MOTORCARS, WHICH HAS NOT BEEN TRANSFER RED. REGARDING THIS ALLEGATION OF THE REVENUE IN THAT CA SE, THAT EVEN IF THERE WAS A TRANSFER OF BUSINESS, THE TRANSFER WAS NOT PERMANENT BUT ONLY FOR 3 YEARS AND THIS OBJECTION OF THE REVE NUE WAS ALSO REJECTED BY THE TRIBUNAL IN THAT CASE, ON THE BASIS THAT THE PROMOTER OF THE ASSESSEE COMPANY COULD NOT ASSOCIAT E THEMSELVES DIRECTLY OR INDIRECTLY WITH ANY BUSINESS SIMILAR TO OR IDENTICAL WITH THE BUSINESS CARRIED ON EITHER BY IT OR THE TRANSFEREE. IN THE PRESENT CASE ALSO THE FACTS ARE SIMILAR, ALTHOUGH THE REASONING GIVEN BY THE A.O. FOR ASSESS ING THE IMPUGNED RECEIPTS AS BUSINESS INCOME ARE DIFFERENT. BUT STILL I.T.A. NO. 4086 /DEL/2009 13/14 THE FACTS REMAIN SIMILAR AND SAME, RECEIPTS UNDER S IMILAR CIRCUMSTANCES WERE HELD TO BE ASSESSABLE AS CAPITAL GAIN BY THE TRIBUNAL IN THAT CASE, IN THE PRESENT CASE ALSO, TH E RECEIPT IS ASSESSABLE AS CAPITAL BASIS ONLY. 9. ONE MORE OBJECTION IS THERE IN THE PRESENT CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT TRANSFERRED TO THE BUYER, THE TOTAL BUSINESS AND EVEN AFTER THE SALE, THE ASSESSEE WAS DOING THE BUSINESS OF CLINICAL TRIAL. THE CASE OF THE REVENU E IS THAT BOTH THESE BUSINESSES I.E. THE BUSINESS OF HEALTHCARE JO URNAL AND COMMUNICATION AND THE BUSINESS OF CLINICAL TRIAL AR E INTERCONNECTED AND COMPOSITE AND HENCE THE ASSESSEE HAS NOT TRANSFERRED THE BUSINESS AS A WHOLE BUT ONLY ONE AC TIVITY OF THE SAID BUSINESS WAS TRANSFERRED. THE CONTENTION OF T HE ASSESSEE IS THAT BOTH THE BUSINESSES ARE NOT AT ALL CONNECTED A ND ARE INDEPENDENT. REGARDING THE BUSINESS OF CLINICAL TR IAL, IT HAS BEEN SUBMITTED THAT CLINICAL TRIAL IS THE SCIENTIFI C PROCESS BY WHICH A DRUG OR A MEDICAL DEVICE OR ANY OTHER PRODU CT, HAVING HEALTH IMPLICATIONS IS CLINICALLY TESTED AND TRIED ON A REPRESENTATIVE SAMPLE TARGET POPULATION TO ASSESS I TS SAFETY, EFFICACY, AND POTENTIAL SIDE EFFECTS (IF ANY) OF TH E DRUG/PRODUCT. IT WAS ALSO SUBMITTED BEFORE US THAT BEFORE THE SAL E OF THE BUSINESS OF HEALTHCARE JOURNAL & COMMUNICATION, THE ASSESSEE COMPANY WAS HAVING 40 EMPLOYEES WHEREAS 19 WERE SHI FTED TO THE BUYER M/S. CMP MEDICA (P) LTD. AND THE BALANCE 21 EMPLOYEES WERE ALSO RELEASED AND NONE OF THEM IS ON THE PAYROLL OF THE ASSESSEE SOFTWARE COMPANY. CONSIDERING ALL THE FACTS OF THE PRESENT CASE, WE ARE IN AGREEMENT WITH LD. CIT( A) THAT BOTH I.T.A. NO. 4086 /DEL/2009 14/14 THESE BUSINESSES ARE INDEPENDENT BUSINESSES AND HEN CE THE ASSESSEE HAS TRANSFERRED THE FULL BUSINESS OF HEALT HCARE JOURNAL & COMMUNICATION AND NOT ONLY ONE ACTIVITY OF COMPOSIT E BUSINESS. CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REA SON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE AND HENCE WE UPHOLD THE SAME. 10. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. 11. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 2 ND JULY 2010. SD./- SD./- (RAJPAL YADAV) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:02 ND JULY, 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI