Institute for Micronutrient Technology, Pune V. DCIT, Cir.-2, Pune

ITA 648/PUN/2010

• Counselvise Citation: 64824514 RSA 2010
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.648/PN/2010 (ASSESSMENT YEAR : 2006-07) INSTITUTE FOR MICRONUTRIENT TECHNOLOGY 1 A KRISHNA KEVAL NAGAR, KONDHWA KHURD, PUNE 411 048 PAN : AAAFI5576K . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 2, PUNE. . RESPONDENT APPELLANT BY : MR. ARVIND SONDE RESPONDENT BY : MS. ANN KAPTHUAMA ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 19.02.2010 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 28.11.2008 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961(IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. INITIALLY, THE CAPTIONED APPEAL WAS DISPOSED-OFF BY THE TRIBUNAL VIDE ORDER DATED 03.04.2012. SUBSEQUENTLY, THE ASSESSEE MOVED AN APPLICATION UNDER SECTION 254(2) OF THE ACT CONTENDING THAT THE RE WAS A MISTAKE APPARENT FROM RECORD INASMUCH AS GROUND OF APPEAL NO. 2 WAS DISPOSED-OFF BY THE TRIBUNAL WITHOUT ADJUDICATING A MATERIAL PLEA RAISE D BY THE ASSESSEE. ACCORDINGLY, THE TRIBUNAL VIDE ITS ORDER IN MISCELL ANEOUS APPLICATION NO. 67/PN/2012 DATED 12.10.2012 RECALLED THE ORDER OF THE TRIBUNAL DATED 03.04.2012 TO THE LIMITED EXTENT OF HEARING AND ADJ UDICATING AFRESH THE GROUND OF APPEAL NO. 2 CONTAINED IN THE MEMO OF APPEAL, WH ICH READS AS UNDER :- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) II ERRED IN DISALLOWING EXPENDITURE OF RS.72,38,533/- ON LTGC. ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 IN THE AFORESAID BACKGROUND, THE RIVAL CONTENTIONS HAVE BEEN HEARD. 3. BRIEFLY PUT THE RELEVANT FACTS ARE AS FOLLOWS. T HE APPELLANT IS A PARTNERSHIP FIRM PRIMARILY ENGAGED IN RESEARCH AND DEVELOPMENT ACTIVITIES IN THE FIELD OF BALANCED PLANT NUTRITION. THE ASSESSEE FIRM HAD REGISTERED TRADEMARKS, LOGOS, COPYRIGHTS IN ITS OWN NAME IN RE SPECT OF VARIOUS PRODUCTS, CHARTS EVOLVED BY IT OVER A PERIOD OF 40 YEARS. DUR ING THE YEAR UNDER CONSIDERATION, ASSESSEE SOLD CERTAIN INTANGIBLE ASS ETS, IN THE FORM OF TRADEMARKS FOR A CONSIDERATION OF RS. 1,51,00,000 /-. THE ASSESSEE RECEIVED NET CONSIDERATION OF RS. 1,45,19,231/- AFTER DEDUCT ING THE VAT OF RS.5,80,769/- AND IT COMPUTED LONG TERM CAPITAL GAI N (LTCG) OF RS. 72,80,698/- AFTER CONSIDERING THE COST OF ACQUISITI ON AT RS. 72,38,533 WHICH REPRESENTED INDEXED COST OF PROFESSIONAL FEES PAID TO M/S R.K. DEWAN & CO., AS DETAILED IN THE ASSESSMENT ORDER FOR REGISTRATIO N OF TRADEMARKS. THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT DENIED THE CLAIM FOR DEDUCTION OF RS. 72,38,533 /- ON THE GROUND THAT THE COST OF ACQUISITION AS WELL AS COST OF IMPROVEME NT IS LIABLE TO BE TAKEN AS NIL IN VIEW OF SECTION 55(2)(A)(II) AND SECTION 55(1)(B) OF THE ACT RESPECTIVELY. THE ASSESSEE UNSUCCESSFULLY CARRIED THE MATTER IN A PPEAL BEFORE THE CIT(A), AGAINST WHICH IT IS IN FURTHER APPEAL BEFORE THE TR IBUNAL. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RAISED AN ALTERNATIVE ARGUMENT WHICH, ACCORDING TO HIM, GOES TO ROOT OF THE MATTER AND IS TO THE EFFECT THAT THE LTCG ON SALE OF TRADEMARKS I S NOT TAXABLE. IN OTHER WORDS, AS PER THE ASSESSEE, IT WAS NOT LIABLE TO PA Y ANY CAPITAL GAIN TAX IN RESPECT OF THE SALE OF THE CAPITAL ASSET OF THE NAT URE OF TRADEMARKS FOR THE REASON THAT SUCH AN ASSET DOES NOT HAVE ANY COST O F IMPROVEMENT BECAUSE THE SAME CANNOT BE ASCERTAINED AND THEREFORE, THE C OMPUTATION MACHINERY PRESCRIBED IN CHAPTER IV FAILS. AS A CONSEQUENCE, T HE ASSESSEE WAS NOT LIABLE TO PAY ANY CAPITAL GAIN TAX. IN SUPPORT OF THE AFOR ESAID PROPOSITION, OUR ATTENTION HAS BEEN DRAWN TO THE LEGAL POSITION LAID DOWN BY THE HONBLE ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 SUPREME COURT IN THE CASE OF CIT VS. B.C. SRINIVASA SETTY 128 ITR 294 (SC). IN SUPPORT OF THE PLEA THAT COMPUTATION PROVISIONS OF SECTION 48(II) OF THE ACT WOULD FAIL IN THE ABSENCE OF ASCERTAINMENT OF COST OF IMPROVEMENT, A REFERENCE HAS BEEN MADE TO THE JUDGEMENT OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF EVANS FRASER & CO. LTD. VS. CIT 137 ITR 493 (BOM.). THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THOUGH IN TERMS OF SECTION 55(2)(A)(II) OF THE ACT A TRADEMARK, WHICH IS THE SUBJECT-MATTER OF CONSIDERATION, IS DEEMED TO HAVE NIL COST OF ACQ UISITION, HOWEVER, THE PROVISIONS OF SECTION 55(1)(B) OF THE ACT RELATING TO COST OF ANY IMPROVEMENT DOES NOT PRESCRIBE NIL COST OF IMPROVEMENT FOR A TRADEMARK INASMUCH AS AN INTANGIBLE ASSET BY WAY OF A TRADEMARK IS NOT ENU MERATED IN THE SAID PROVISIONS. HE, THEREFORE, SUBMITTED THAT THE COMPU TATION PROVISIONS RELATING TO TAXATION OF CAPITAL GAIN, IN THE PRESENT CASE FAIL AS A TRADEMARK DOES NOT HAVE ANY COST OF IMPROVEMENT, BEING A SELF-GENERATED ASS ET AND IN THE ABSENCE OF ANY SUCH COST OF IMPROVEMENT BEING PRESCRIBED IN SE CTION 55(1)(B) OF THE ACT, THE COMPUTATION PROVISIONS FAIL IN THE LIGHT OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF B.C. SRINIVASA SETTY ( SUPRA) READ ALONGWITH THE PARITY OF REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF EVANS FRASER & CO. LTD. (SUPRA) AND HENCE THERE IS NO LIABILITY ON THE ASSESSEE TO PAY CAPITAL GAIN ON THE SALE OF TRADEMA RKS. 5. ON THE OTHER HAND, THE PLEA RAISED BY THE LEARNE D DEPARTMENTAL REPRESENTATIVE IS TO THE EFFECT THAT THE COST OF A CQUISITION AS WELL AS THE COST OF IMPROVEMENT IS LIABLE TO BE TAKEN AS NIL IN T ERMS OF SECTIONS 55(2)(A)(II) AND 55(2)(A)(II) OF THE ACT RESPECTIVELY AND THEREF ORE, THE CAPITAL GAIN IS LIABLE TO TAX. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE CONTROVERSY IN THE PRESENT CASE RELATES TO CHAPTER IV OF THE ACT DEALING WITH COMPUTATION OF INCOME FROM CAPITAL GAINS. SECTION 45 OF THE AC T IS A CHARGING SECTION AND SUB-SECTION (1) OF SECTION 45 OF THE ACT CHARGES PR OFITS AND GAINS ARISING FROM ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 THE TRANSFER OF A CAPITAL ASSET TO INCOME-TAX UND ER THE HEAD CAPITAL GAINS. SECTION 48 OF THE ACT PROVIDES THE MODE OF COMPUTA TION OF INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS. THE SAID SECTION PROVIDES THAT INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SH ALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET, THE FO LLOWING AMOUNTS : (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER; AND, (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO. IN THE CASE OF B.C. SRINIVASA SETTY (SUPRA ), THE HONBLE SUPREME COURT HELD THAT THE CHARGING SECTION AND THE COMPUT ATION PROVISIONS TOGETHER CONSTITUTE AN INTEGRATED CODE AND THAT WHEN THERE I S A CASE TO WHICH THE COMPUTATION PROVISIONS CANNOT APPLY AT ALL, IT WOUL D MEAN THAT SUCH A CASE WAS NOT INTENDED TO FALL WITHIN THE CHARGING SECTIO N. AS PER THE HONBLE SUPREME COURT, ALL TRANSACTIONS ENCOMPASSED BY SECT ION 45 OF THE ACT MUST FALL UNDER THE GOVERNANCE OF ITS COMPUTATION PROVIS IONS AND A TRANSACTION TO WHICH THOSE PROVISIONS CANNOT BE APPLIED MUST BE RE GARDED AS NEVER INTENDED BY SECTION 45 OF THE ACT TO BE THE SUBJECT-MATTER O F THE CHARGE. IN THE CASE BEFORE THE HONBLE SUPREME COURT, A NEW PARTNERSHIP FIRM TOOK OVER ALL THE ASSETS, INCLUDING THE GOODWILL AND LIABILITIES OF D ISSOLVED FIRM WHICH HAD CARRIED ON THE BUSINESS OF MANUFACTURE AND SALE OF AGARBATTIS. THE QUESTION WHICH AROSE WAS WHETHER ANY CAPITAL GAINS AROSE FOR TAXIN G UNDER SECTION 45 OF THE ACT WITH RESPECT TO THE TRANSFER BY THE ASSESSEE-FI RM OF ITS GOODWILL TO THE NEW PARTNERSHIP FIRM. IT WAS IN THIS BACKGROUND, THE HO NBLE SUPREME COURT LAID DOWN THE PROPOSITION THAT ALL TRANSACTIONS ENCOMPAS SED BY SECTION 45 OF THE ACT MUST FALL UNDER THE GOVERNANCE OF ITS COMPUTATI ON PROVISIONS AND A TRANSACTION TO WHICH THOSE PROVISIONS CANNOT BE APP LIED MUST BE REGARDED AS NEVER INTENDED BY SECTION 45 OF THE ACT TO BE THE S UBJECT-MATTER OF THE CHARGE. AS PER THE HONBLE SUPREME COURT WHAT WAS CONTEMPLA TED BY CLAUSE (II) OF SECTION 48 OF THE ACT WAS AN ASSET IN THE ACQUISITI ON OF WHICH IT WAS POSSIBLE TO ENVISAGE A COST I.E. AN ASSET WHICH POSSESSES TH E INHERENT QUALITY OF BEING AVAILABLE ON THE EXPENDITURE OF MONEY TO A PERSON S EEKING TO ACQUIRE IT. AS PER ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 THE HONBLE SUPREME COURT, NONE OF THE PROVISIONS P ERTAINING TO THE HEAD CAPITAL GAINS SUGGEST THAT THEY INCLUDE AN ASSET IN THE ACQUISITION OF WHICH NO COST AT ALL CAN BE CONCEIVED AND THAT WHEN GOODW ILL GENERATED IN A BUSINESS WAS SOLD AND THE CONSIDERATION WAS BROUGHT TO TAX, WHAT WAS BEING CHARGED TO TAX WAS THE CAPITAL VALUE OF THE ASSET A ND NOT ANY PROFIT OR GAIN ON ITS TRANSFER. AS PER THE HONBLE SUPREME COURT, IN THE CASE OF GOODWILL GENERATED IN A NEW BUSINESS IT WAS NOT POSSIBLE TO DETERMINE THE DATE WHEN IT CAME IN EXISTENCE WHEREAS THE DATE OF ACQUISITION O F THE ASSET WAS A MATERIAL FACTOR IN APPLYING THE COMPUTATION PROVISIONS PERTA INING TO CAPITAL GAINS. UNDER THESE CIRCUMSTANCES, IT WAS HELD THAT THE TRANSFER OF GOODWILL INITIALLY GENERATED IN A BUSINESS DOES NOT GIVE RISE TO A CAPITAL GAIN BECAUSE THE COMPUTATION PROVISIONS CANNOT BE APPLIED IN THE ABSENCE OF COST OF ACQUISITION AND THE DATE WHEN IT CAME TO EXISTENCE. 7. IN TERMS OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF B.C. SRINIVASA SETTY (SUPRA), A PREMISE THAT CAN BE INFERRED IS THAT THOUGH A PARTICULAR PROPERTY MAY BE IN THE NATURE OF A CAPI TAL ASSET BUT MERELY BECAUSE IT IS A CAPITAL ASSET, IT WOULD NOT MEAN THAT IT BECOMES AUTOMATICALLY SUBJECT TO THE CHARGE OF CAPITAL GAIN TAX ON ITS TRANSFER. FOR A TRANSFER OF CAPITAL ASSET TO BE LIABLE FOR CHARGE AS CAPITAL GAINS UNDER SECTI ON 45 OF THE ACT, IT MUST FALL UNDER THE GOVERNANCE OF ITS COMPUTATION PROVISIONS ALSO, AND A TRANSACTION TO WHICH THE COMPUTATION PROVISIONS CANNOT BE APPLIED, IT MUST BE REGARDED AS NEVER REGARDED BY SECTION 45 OF THE ACT TO BE CHARG ED TO TAX UNDER CHAPTER IV OF THE ACT. 8. IN THE CASE BEFORE US, THE FIRST POINT MADE OUT BY THE ASSESSEE IS THAT THE ASSET UNDER CONSIDERATION I.E. TRADEMARKS, WH ICH IS SELF- GENERATED/DEVELOPED, IS NOT AN ASSET WHICH POSSESSE S THE INHERENT QUALITY OF BEING AVAILABLE ON THE EXPENDITURE OF MONEY TO A PE RSON SEEKING TO ACQUIRE IT, AND THUS IT DOES NOT POSSESS A COST OF ACQUISITION . CAN SUCH A PROPOSITION IN THE PRESENT CASE LEAD TO AN INFERENCE THAT THE COMP UTATION PROVISIONS OF ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 SECTION 48 OF THE ACT FAIL ON ACCOUNT OF ABSENCE OF THE COST OF ACQUISITION? IN OUR VIEW, THE AFORESAID POINT MADE BY THE APPELLANT WOULD NOT MAKE THE COMPUTATION PROVISIONS FAIL BECAUSE OF SECTION 55(2 ) OF THE ACT, WHICH READS AS UNDER :- (2) [FOR THE PURPOSES OF SECTIONS 48 AND 49, C OST OF ACQUISITION [(A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS [OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS ] [OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICL E OR THING] [OR RIGHT TO CARRY ON ANY BUSINESS], TENANCY RIGHTS , STAGE CARRIAGE PERMITS OR LOOM HOURS,- (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE; AND (II) IN ANY OTHER CASE [NOT BEING A CASE FALLING UN DER SUB- CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 4 9], SHALL BE TAKEN TO BE NIL; SUB-SECTION (2) OF SECTION 55 OF THE ACT PROVIDES T HE MEANING OF EXPRESSION COST OF ACQUISITION FOR THE PURPOSES OF SECTIONS 48 AND 49 OF THE ACT. FOR OUR PURPOSE, IT IS SUFFICIENT TO OBSERVE THAT IN RELATI ON TO TRADEMARK, THE COST OF ACQUISITION IS MEANT TO BE (I) THE AMOUNT OF PURCHA SE PRICE, IN CASE IT IS ACQUIRED FROM A PROVISIONS OWNER; AND, (II) NIL, IN ALL OTHER CASES. IN THE CASE BEFORE US, THE TRADEMARK UNDER TRANSFER HAS BEEN DEVELOPED BY THE ASSESSEE ON ITS OWN AND HAS NOT BEEN ACQUIRED FROM ANY THIRD PARTY THEREFORE BY OPERATION OF SECTION 55(2)(A)(II) OF THE ACT THE C OST OF ACQUISITION FOR THE PURPOSES OF SECTION 48 OF THE ACT IS DEEMED TO BE T AKEN AS NIL. SINCE THE STATUTORY PROVISIONS PROVIDE FOR COST OF ACQUISITI ON TO BE NIL IN CASE OF A TRADEMARK, THE COMPUTATION PROVISIONS DO NOT FAIL ON THE BASIS OF THE ABOVE PLEA OF THE ASSESSEE. 9. SO, HOWEVER, THE NEXT POINT SOUGHT TO BE MADE OU T BY THE ASSESSEE IS THAT IN CLAUSE (II) OF SECTION 48 OF THE ACT NOT ON LY IS THE COST OF ACQUISITION OF THE ASSET MENTIONED BUT IT ALSO CONTEMPLATES AN ASS ET WHICH HAS THE COST OF ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 ANY IMPROVEMENT THERETO. IN OTHER WORDS, ACCORDING TO THE ASSESSEE IN THE PRESENT CASE THE COMPUTATION PROVISIONS FAILED IN S O FAR AS WHAT IS CONTEMPLATED BY CLAUSE (II) OF SECTION 48 IS NOT ON LY AN ASSET IN THE ACQUISITION OF WHICH IT IS POSSIBLE TO ENVISAGE A COST BUT ALSO AN ASSET THAT IT CAPABLE OF IMPROVEMENT UPON INCURRENCE OF COST ALSO. SINCE ACC ORDING TO THE ASSESSEE, THE ASSET UNDER TRANSFER I.E. TRADEMARK IS NOT AN A SSET WHICH IS CAPABLE OF IMPROVEMENT ON INCURRENCE OF COST IN TERMS OF MONEY , IT CANNOT BE CONTEMPLATED TO BE AN ASSET INTENDED TO BE COVERED IN TERMS OF SECTION 48(II) OF THE ACT AND THEREFORE, THE COMPUTATION PROVISION S FAIL AND AS A RESULT OF WHICH, THE TRANSACTION WOULD NOT BE CHARGEABLE TO T AX IN TERMS OF SECTION 45(1) OF THE ACT. 10. THE AFORESAID PROPOSITION SOUGHT TO BE CANVASSE D BEFORE US IS FURTHER SUPPORTED BY THE ASSESSEE BY REFERRING TO THE PROVI SIONS OF SECTION 55(1)(B) OF THE ACT, WHICH READ AS UNDER :- [(B) COST OF ANY IMPROVEMENT, - (1) IN RELATION TO A CAPITAL ASSET BEING GOODWILL O F A BUSINESS [OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OF T HING] [OR RIGHT TO CARRY ON ANY BUSINESS] SHALL BE TAKEN TO BE NIL; AN D (2) IN RELATION TO ANY OTHER CAPITAL ASSET, - ] (I) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER OR THE ASSESSEE BEFORE THE [1 ST DAY OF APRIL, [198]], [***] MEANS ALL EXPENDITURE OF A CAPITAL NATURE INCURRED IN MAKING ANY ADDITIONS OR ALTERATIONS TO THE CAPITAL ASSET O N OR AFTER THE SAID DATE BY THE PREVIOUS OWNER OR THE ASSESSEE, AN D (II) IN ANY OTHER CASE, MEANS ALL EXPENDITURE OF A CAPITAL NATURE INCURRED IN MAKING ANY ADDITIONS OR ALTERATIONS TO THE CAPITAL ASSET BY THE ASSESSEE AFTER IT BECAME HIS PROPERTY, AND, WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESS EE BY ANY OF THE MODES SPECIFIED IN [SUB-SECTION (1) OF] SECT ION 49, BY THE PREVIOUS OWNER, BUT DOES NOT INCLUDE ANY EXPENDITURE WHICH IS DEDUC TIBLE IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD INTEREST ON S ECURITIES, INCOME FROM HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 PROFESSION, OR INCOME FROM OTHER SOURCES, AND TH E EXPRESSION IMPROVEMENT SHALL BE CONSTRUED ACCORDINGLY. 11. ACCORDING TO THE ASSESSEE, THE MEANING OF COST OF ANY IMPROVEMENT FOR THE PURPOSES OF SECTION 48 OF THE ACT HAS BEEN PROVIDED IN SECTION 55(1)(B) OF THE ACT AND THE SAME DOES NOT INCLUDE A CAPITAL ASSET IN THE SHAPE OF TRADEMARK. AT THIS POINT, THE LEARNED DEPARTMENT AL REPRESENTATIVE APPEARING FOR THE REVENUE CONTENDED WITH REFERENCE TO THE DISCUSSION MADE BY THE ASSESSING OFFICER IN PARA 1 ON PAGE 7 OF THE ASSESSMENT ORDER, THAT AFTER THE PRESCRIPTION OF SECTION 55(2)(A) OF THE A CT TO THE EFFECT THAT A SELF- GENERATED TRADEMARK WOULD BE DEEMED TO HAVE COST OF ACQUISITION AT NIL FOR THE PURPOSES OF SECTION 48 OF THE ACT, IT SHOULD AL SO BE UNDERSTOOD TO MEAN THAT COST OF ANY IMPROVEMENT OF SUCH ASSET FOR TH E PURPOSES OF SECTION 48 IS ALSO TO BE TAKEN AS NIL. IN OUR CONSIDERED OPINION, A CONJOINT READING OF SECTION 55(2)(A) AND SECTION 55(1)(B) OF THE ACT, WHICH ASC RIBE THE MEANING OF COST OF ACQUISITION AND COST OF ANY IMPROVEMENT RESPECTI VELY FOR THE PURPOSES OF SECTION 48, BELIES THE PLEA OF THE REVENUE. CLEARLY SECTION 55(2)(A) OF THE ACT PRESCRIBES COST OF ACQUISITION OF A TRADEMARK FOR T HE PURPOSES OF SECTION 48 AT NIL, WHEREAS NO SUCH PRESCRIPTION IS CONTAINED IN S ECTION 55(1)(B) OF THE ACT DEFINING THE COST OF ANY IMPROVEMENT OF A TRADEMA RK FOR THE PURPOSES OF SECTION 48 OF THE ACT. THEREFORE, THE PLEA OF THE A SSESSEE TO THE EFFECT THAT A SELF-GENERATED TRADEMARK IS NOT CAPABLE OF IMPROVEM ENT AT AN ASCERTAINABLE COST IN TERMS OF MONEY AND COST OF ANY IMPROVEMENT THERETO HAS NOT BEEN DEFINED FOR PURPOSES OF SECTION 48 IN SECTION 55(1) (B) OF THE ACT, IS WELL FOUNDED. 12. THE NEST QUESTION IS AS TO WHETHER IN THE PRESE NT CASE WHERE THE TRANSFER OF TRADEMARK IS NOT CAPABLE OF IMPROVEMENT AT AN ASCERTAINABLE COST IN TERMS OF MONEY, CAN IT BE SAID THAT THE COMPUTATION PROVISIONS OF SECTION 48 FAIL FOLLOWING THE PARITY OF REASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF B.C. SRINIVASA SETTY (SUPRA). THE AF ORESAID CONTROVERSY HAS BEEN ANSWERED BY THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF EVANS ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 FRASER & CO. LTD. (SUPRA). IN THE CASE BEFORE THE H ONBLE HIGH COURT, ASSESSEE HAD PURCHASED GOODWILL FOR A CONSIDERATION WHICH WA S THE SUBJECT-MATTER OF TRANSFER AND THE REVENUE WAS ATTEMPTING TO TAX THE GAIN ON TRANSFER AS CHARGEABLE TO CAPITAL GAINS UNDER SECTION 45(1) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THERE WAS NEITHER ANY COST OF ACQ UISITION OF GOODWILL AND NOR WAS THERE ANY COST OF IMPROVEMENT THERETO, AND THEREFORE THE COMPUTATION PROVISIONS FAIL AND ACCORDINGLY THE CHARGING SECTIO N, NAMELY, SECTION 45(1) OF THE ACT WAS NOT ATTRACTED. NOTABLY, IN THE CASE BEF ORE THE HONBLE HIGH COURT, THE MATTER PERTAINED TO CHARGE OF CAPITAL GAINS U NDER SECTION 12B OF THE ERSTWHILE INCOME TAX ACT, 1922 WHICH CORRESPONDS TO SECTION 45 OF THE PRESENT ACT. THE HONBLE HIGH COURT HAVING REGARD T O THE FACTS OF THE CASE CAME TO THE CONCLUDE THAT THE MOMENT OF ACQUISITION OF GOODWILL THEREIN WAS IDENTIFIABLE, BUT AFTER CONSIDERING THE JUDGEMENT O F THE HONBLE SUPREME COURT IN THE CASE OF B.C. SRINIVASA SETTY (SUPRA), IT WAS PLEASED TO HOLD THAT CAPITAL ASSET IN QUESTION I.E. GOODWILL, WAS AN ASSET WHICH WAS NOT CAPABLE OF IMPROVEMENT AT AN ASCERTAINABLE OF COST IN TERMS OF MONEY. ACCORDING TO THE HONBLE HIGH COURT, THE MODE OF COMPUTATION PRESCRI BED IN SECTION 48 OF THE ACT REQUIRES THAT CAPITAL ASSET, A TRANSFER OF WHIC H IS TAXABLE UNDER SECTION 45 OF THE ACT SHOULD NOT ONLY BE ONE WHICH COSTS IN TE RMS OF MONEY TO THE ASSESSEE BUT IT SHOULD ALSO BE CAPABLE OF IMPROVEME NT BY INVESTING MONEY. THE HONBLE COURT HELD THAT THE ASSET IN QUESTION B EFORE IT I.E. GOODWILL HAD A COST OF ACQUISITION AS WELL AS THE MOMENT OF ACQUIS ITION BUT IT WAS NOT CAPABLE OF IMPROVEMENT BY INVESTING OF MONEY. THEREFORE, I T HELD THAT THERE WAS NO CAPITAL GAIN CHARGEABLE TO TAX ON THE TRANSFER OF G OODWILL OF A BUSINESS TO ANOTHER CONCERN. NEVERTHELESS, IN SO FAR AS THE GO ODWILL OF A BUSINESS IS CONCERNED, WITH THE APPLICATION OF CURRENTLY WORDED SECTION 55(2)(A) AS WELL AS SECTION 55(1)(B) OF THE ACT DEFINING COST OF ACQUI SITION AND COST OF ANY IMPROVEMENT FOR THE PURPOSES OF SECTION 48, THE DE CISION OF THE HONBLE BOMBAY HIGH COURT WOULD NOT BE APPLICABLE AS OF NOW IN CASE OF A TRANSFER OF GOODWILL. SO, HOWEVER, IN CASE OF OTHER TANGIBLE A SSETS, WHICH ARE NOT CAPABLE OF IMPROVEMENT BY INVESTING OF MONEY, ITS TRANSFER WOULD CONTINUE TO BE ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 GOVERNED BY THE PARITY OF REASONING LAID DOWN IN TH E CASE OF EVANS FRASER & CO. LTD. (SUPRA), SO LONG AS SUCH AN ASSET HAS NOT BEEN ASCRIBED COST OF ANY IMPROVEMENT BY THE LEGISLATURE IN TERMS OF SECTION 55(1)(B) OF THE ACT. IN THE CASE BEFORE US, THE ASSET UNDER TRANSFER IS SELF-GE NERATED TRADEMARKS AND IT IS NOT IN DISPUTE BETWEEN THE PARTIES THAT THE SAME IS NOT CAPABLE OF IMPROVEMENT AT AN ASCERTAINABLE COST IN TERMS OF MO NEY AND THEREFORE IN THE ABSENCE OF ANY POSSIBILITY TO DETERMINE THE COST O F ANY IMPROVEMENT REFERRED TO IN SECTION 48(II) OF THE ACT, THE COMPUTATION OF CAPITAL GAINS FAIL AND ACCORDINGLY IT IS OUTSIDE THE SCOPE AND AMBIT OF TH E CHARGE ENVISAGED UNDER SECTION 45(1) OF THE ACT. 13. IN VIEW OF THE AFORESAID DISCUSSION, WE THEREFO RE, CONCLUDE BY HOLDING THAT THERE WAS NO CAPITAL GAIN EXIGIBLE TO TAX UNDE R SECTION 45(1) OF THE ACT ON TRANSFER OF THE IMPUGNED TRADEMARK BY THE ASSESSEE AND THAT THE LOWER AUTHORITIES HAVE ERRED IN TAXING THE SAME WHILE COM PUTING THE TOTAL INCOME OF THE ASSESSEE. 14. IN THE ABOVE MANNER, THE ASSESSEE SUCCEEDS ON T HIS PLEA AND ACCORDINGLY THE ORDER OF THE CIT(A) IS SET-ASIDE AN D THE ASSESSING OFFICER IS DIRECTED TO ALLOW APPROPRIATE RELIEF TO THE ASSESSE E, AS ABOVE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 30 TH SEPTEMBER, 2013 SUJEET ITA NO.648/PN/2010 INSTITUTE FOR MICRONUTRIENT TECHNOLOGY A.Y. 2006-07 COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE