INFOCAST SYSTEMS P.LTD, MUMBAI V. DIT 8(2), MUMBAI

ITA 7207/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 14-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-12-2013
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Assessee Lawyers: SANDEEP SINGHI
• Keywords: Capital asset; Business income; Depreciation; Additional evidence; Question of law; Cost of acquisition; Valuation report; Capital receipt
• Section: 54; 10

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 7207/M/2013 ( AY: 2010 - 2011 ) INFOCAST SYSTEMS P LTD., 6C/5, GR. FLOOR, SANGEET APARTMENTS, JUHU RDM SANTACRUZ (W), MUMBAI 400 049. / VS. DCIT - 8(2), MUMBAI. ./ PAN : AABC14192F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SANDEEP SINGHI / RESPONDENT BY : SHRI SACHCHIDANAND DUBEY / DATE OF HEARING : 15.5 .2015 / DATE OF PRONOUNCEMENT :17 .7 .2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 10.12.2013 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 24.9.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) ERRED IN MAKING ADDITION OF RS. 3,91,44,200/ - BY INVOKING PROVISIONS OF SECTION 28(VA) OF THE ACT IN RESPECT OF CONSIDERATION RECEIVED BY THE APPELLANT IN PURSUANCE OF THE ASSET TRANSFER AGREEMENT DATED 15.12.2009. 2. THE CIT (A) ERRED IN ARRIVING AT THE CONCLUSION THAT THERE WAS NO SALE OF BUSINESS BY THE APPELLANT UNDER THE SAID ASSET TRANSFER AGREEMENT DATED 15.12.2009 ENTERED INTO WITH M/S. DIVERSIFIED COMMUNICATIONS INDIA PVT LTD. THE CIT (A) FAILED TO APPRECIATE THAT PURSUANCE TO SAID ASSET TRANSFER AGREEMENT THE APPELLANT HAD TR ANSFERRED BUSINESS TOGETHER WITH ALL INTANGIBLE ASSETS BEING TRADE MARK, BRANDS, COPY RIGHTS, ASSOCIATED GOODWILL ETC TO M/S. DIVERSIFIED COMMUNICATIONS INDIA PVT LTD. 3. THE CIT (A) ERRED IN ARRIVING AT THE CONCLUSION THAT LARGE NUMBER OF ASSETS WAS RETAI NED BY THE APPELLANT. IT IS SUBMITTED THAT THE SAID FINDING OF THE SAID APPEAL IS BASED ON PURE CONJECTURES AND THE SAME IS NOT SUPPORTED BY ANY KIND OF EVIDENCE WHATSOEVER. 4. THE CIT (A) HAS OVERLOOKED THE ACTUAL TERMS OF AGREEMENT DATED 1512.2009 ENTER ED INTO BETWEEN APPELLANT AND M/S. DIVERSIFIED COMMUNICATIONS INDIA PVT LTD AND ON THE BASIS OF CERTAIN ASSUMPTIONS WHICH ARE NOT SUPPORTED BY 2 ANY INDEPENDENT EVIDENCE HAS ARRIVED AT THE CONCLUSION THAT THE SAID AMOUNT OF RS. 3,91,44,200/ - RECEIVED BY THE APPELLANT IS REVENUE IN NATURE AND TAXABLE UNDER SECTION 28(VA) OF THE ACT. 5. THE CIT (A) ON THE BASIS OF FACTUALLY INCORRECT FACTS ON CERTAIN ASSUMPTIONS CONTRARY TO THE TERMS OF SAID AGREEMENT DATED 15.12.2009 HAS MADE ADDITION OF RS. 3,91,44,200/ - UNDE R SECTION 28(VA) OF THE ACT. IT IS SUBMITTED THAT THE ASSESSMENT ORDER IS BASED ON SEVERAL INCORRECT AND THEREFORE, THE APPELLANT HAD FURNISHED NOTE BEFORE THE CIT (A) POINTING OUT THE CORRECT FACTUAL POSITION, WHICH HAS COMPLETELY BEEN IGNORED BY THE CIT (A). 6. THE CIT (A) HAS PASSED ORDER IN A MECHANICAL MANNER STATING INCORRECT FACTS AND WHICH IS ALSO EVIDENT THAT FROM THE FACT (I) THAT HIS ENTIRE FINDING FOR MAKING ADDITION OF RS. 3,91,44,200/ - UNDER SECTION 28(VA) IS BASED ON APPLICATION OF PROVISIONS OF SECTION 2(42C) AND SECTION 50B DEALING WITH SLUMP SALE, WHICH IN FACT ARE NOT APPLICABLE TO THE CASE OF THE APPELLANT AND (II) THAT IN PARAGRAPH 1.3.6 OF HIS ORDER, THE CIT (A) HAS DEALT WITH THE ISSUE RELATING TO CANCELLATION OF AGENCY ETC W HICH IS NOT A SUBJECT MATTER OF PRESENT APPEAL. 7. THE CIT (A) HAS ERRED IN ARRIVING AT THE CONCLUSION ON THE BASIS OF CERTAIN PRESUMPTIONS AND SURMISES (I) THAT THE APPELLANT WAS NOT OWNER OF LARGE CHUNK OF ASSETS AND (II) THAT THE APPELLANT WAS NOT OWNER OF THE IPRS AND FEW OTHER TRADEMARKS WHICH WERE TRANSFERRED TO M/S. DIVERSIFIED COMMUNICATIONS INDIA PVT LTD. THE CIT (A) HAS ERRONEOUSLY ARRIVED AT THE SAID CONCLUSION OVERLOOKING THE ACTUAL FACTS, SUBMISSION MADE BY THE APPELLANT AND EVIDENCE PRODUCED B EFORE THE AO AS WELL AS CIT (A). 8. THE CIT (A) HAS ERRED IN ARRIVING AT THE CONCLUSION THAT THE CONSIDERATION WHICH THE APPELLANT HAD RECEIVED FROM M/S. DIVERSIFIED COMMUNICATIONS INDIA PVT LTD IN RESPECT OF PATENTS, COPY RIGHTS AND TRADEMARKS WERE NOT OW NED BY THE APPELLANT AND THEREFORE CANNOT BE TREATED A PART OF CAPITAL GAINS AND ACCORDINGLY , SAME TO BE TREATED AS REVEN UE RECEIPTS IN THE HANDS OF APPELLANT. 9. THE CIT (A) FAILED TO APPRECIATE THE BUSINESS MODEL OF THE APPELLANT, THE OWNERSHIP AND NATUR E OF TRANSACTION OF TRANSFER OF CAPITAL ASSET INCLUDING TRADEMARK, PATENTS AND IPRS AND ALSO SUBSEQUENT CONDUCT ON THE PART OF THE APPELLANT FOR THE EFFECTIVE TRANSFER IN THE NAME OF THE BUYERS INCLUDING IN THE RECORDS OF THE COMPETENT AUTHORITIES. 10. THE CIT (A) OUGHT TO HAVE ALLOWED EXEMPTION CLAIMED UNDER SECTION 54EC OF RS. 1,00,00,000/ - INSTEAD OF DIRECTING THE AO TO DECIDE THE SAID ISSUE. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING BOOKS, MAGAZINES, ORGANIZING EXHIBITIONS, SEMINARS ETC. ASSESSEE IMPORTS AND TRADES IN TECHNICAL BOOKS, WEB DESIGNING, HOUSING OF WEBSITES OF IN - HOUSE TRADE MAGAZINES AND IN - HOUSE TRADE EXHIBITIONS. ASSESSEE ALSO ACQUIRED IMPRIN T, A NEWS MAGAZINE AND HOWEVER I T NEVER YIELDED INCOME TO THE ASSESSEE OUT OF THIS BUSINESS ACTIVITY. DURING THE YEAR, ASSESSEE ENTERED INTO AN ASSET PURCHASE AGREEMENT WITH DIVERSIFIED COMMUNICATIONS INDIA PVT LTD (DCIPL) ON 15.12.2009 AND TRANSFERRED THE BUSINESS ASSETS AND THE INTAN GIBLES. THIS IS A TRI - PARTITE AGREEMENT INVOLVING (I) ASSESSEE; (II) ANIL CHOPRA, THE FOUNDER OF THE COMPANY AND (III) DCIPL. THIS AGREEMENT HAS OTHER ASSOCIATE AGREEMENTS I.E., NON - COMPETITION AGREEMENT , IPR ASSIGNMENTS AGREEMENT ETC., COPIES OF THESE A GREEMENTS ARE PLACED ON TO THE RECORD. AS PER THE SAID TRI - PARTITE AGREEMENT READ WITH OTHER ASSOCIATE 3 AGREEMENTS, ASSESSEE TRANSFERRED FIXED ASSETS, DATA BASE, IPRS, NON - COMPETE FEES AND GOODWILL OF THE COMPANY FOR THE TOTAL SALE CONSIDERATION OF RS. 5,58,09,000/ - . THE BREAK - UP OF THE SAME IS AS UNDER: - DESCRIPTION OF ASSET AMOUNT (RS) FIXED ASSETS 18,46,000/ - DATA BASE 93,20,000/ - INTELLECTUAL PROPERTY 1,15,56, 800/ - NON - COMPETE FEES 32,62,000/ - GOODWILL 2,98,24,200/ - TOTAL SALE CONSIDERATION 5,58,09,000/ - 3. A SSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 3,36,61,140/ - . IN THE RETURN, OUT OF THE SAID TOTAL SALE CONSIDERATION OF RS. 5,58,09,000/ - , ASSESSEE OFFERED ONLY THE NON - COMPETE FEES OF RS. 32,62,000/ - AS BUSINESS INCOME OF THE ASSESSEE. FURTHER, THE SALE P ROCEEDS OF THE AFOREMENTIONED FIXED ASSETS OF RS. 18,46,000/ - WAS OFFERED AS SHORT TERM CAPITAL GAINS . THERE IS NO DISPUTE WITH REGARD TO THE SAID TWO TRAN SACTION IN THE PRESENT APPEAL BEFORE US. FURTHER ALSO , THE BALANCE SUM OF RS. 5,07,01,000/ - , RELATABLE TO THE SALE OF GOODWILL, DATABASE AND IPRS , WAS OFFERED BY THE ASSESSEE IN THE RETURN AS LONG TERM CAPITAL GAINS. FURTHER, IN THE RETURN, ASSESSEE CL AIMED THE BENEFIT OF DEDUCTION U/S 54EC OF THE ACT AMOUNTING TO RS. 1 CR ORE . 4. DURING THE ASSESSMENT PROCEEDINGS, AO EXAMINED THE TRANSACTIONS OF SALE OF THE ASSESSEES BUSINESS TO DCIPL AS WELL AS THE RELATED AGREEMENTS AND ISSUED SHOW CAUSE NOTICE AS TO WHY THE AFOREMENTIONED LONG TERM CAPITAL GAINS OF RS. 5,07,01,000/ - SHOULD NOT BE TREATED AS BUSINESS INCOME OF THE ASSESSEE U/S 28(VA) OF THE ACT. AO IS OF THE OPINION THAT THE SAID SALE RECEIPTS RELATABLE TO THE SALE OF GOODWILL, DATABASE AND IPRS ARE IN THE NATURE OF THE NON COMPETE FEE RECEIVED BY THE ASSESSEE. IN REPLY, THE A SSESSEE FURNISHED WRITTEN SUBMISSIONS DATED 25.10.2012 MENTIONING THAT THE ASSESSEE IS UNDER CONTRACTUAL OBLIGATION FOR NON - COMPETE FEES FOR A PERIOD OF TEN YEARS, FOR WHICH HE RECEIVED THE NON - COMPETE FEES OF RS. 32,62,000/ - . FURTHER, IT WAS MENTIONED THAT THE FIXED ASSETS, DATABASE, IPRS AND GOODWILL ARE CAPITAL IN NATURE AND THEREFORE, THE SAME WERE OFFERED UNDER THE HEAD CAPITAL GAINS. FURTHER, THE ASSESSEE RELIED ON V ARIOUS DECISIONS TO SUPPORT THE CLAIM IN THE RETURN OF INCOME. RELEVANT SUBMISSIONS OF THE ARE EXTRACTED BY THE AO AT 4 PAGES 5 TO 9 OF THE ASSESSMENT ORDER. THE SUMMARY OF THE ASSESSEES PRAYER IS THAT THE CONSIDERATION OF RS. 5,07,01,000/ - WAS RECEIVED F OR THE TRANSFER OF INTANGIBLE ASSETS, TRADEMARKS, BRANDS, COPYRIGHTS AND THE ASSOCIATED GOODWILL OF THE BUSINESS AND THE SAME CONSTITUTES LONG TERM CAPITAL GAINS BY VIRTUE OF THE PROVISIONS OF SECTION 55(2)(A) READ WITH CLAUSE (I) OF THE PROVISO TO SECTION 28(VA) OF THE ACT. ASSESSEE ALSO RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MEDIWORLD PUBLICATIONS PVT. LTD, DATED 5.4.2011 IN SUPPORT OF ITS CLAIM. AO CONSIDERED THE SAID SUBMISSIONS OF THE ASSESSEE AS WELL AS THE CIT ED JUDGMENT OF THE HIGH COURT IN THE CASE OF MEDIWORLD PUBLICATIONS (SUPRA) . HE ALSO DISCUSSED THE FACTS OF THE CASE, COPY OF THE AGREEMENTS, RELEVANT PROVISIONS OF THE AGREEMENTS. IN PARA 5.14 OF THE ASSESSMENT ORDER, AO HELD THAT THE SAID CONSIDERATION OF RS. 5,07,01,0 00/ - AS NON - COMPETE FEES IN TOTO . AO OPINED THAT THE ASSESSEE IS PREVENTED FROM COMPETITION ONLY FOR THE PERIOD OF THREE YEARS. IN SUPPORT, HE RELIED ON THE CONTENTS OF THE CITED AGREEMENTS. CONTENTS OF PARA 5.14 OF THE ASSESSMENT ORDER NA RRATING THE S UMMARY OF THE FINDINGS OF THE ASSESSING OFFICER IN THIS REGARD AND JUSTIFYING HIS CONCLUSION , IS RELEVANT IN THIS REGARD . T HE SAME IS EXTRACTED AS UNDER: 5.14............ (I) THE TERM OF THE SAID AGREEMENT IS FOR THREE YEARS. (II) WHATEVER THE AMOUNT IS RECEIVED BY THE ASSESSEE WAS RECEIVED FOR NON - COMPETING . (III) VIDE ARTICLE 10.2 OF THE PURCHASE AGREEMENT, THE ASSESSEE HAS AGREED NOT TO COMPETE IN SIMILAR NATURE OF THE ACTIVITY . (IV) THE ASSESSEE AND ITS ASSOCIATES CAN RESUME THE BUSINESS A FTER THREE YEARS. (V) AS PER THE ARTICLE 10 SECTION 10.2, THE ASSESSEE AND ITS ASSOCIATES, INCLUDING FAMILY MEMBERS OF STOCKHOLDER, WERE RESTRICTED THE BUSINESS OF OWNING, ORGANIZING, PUBLISHING AND PRODUCING CONFERENCE, EXHIBITIONS, TRADE SHOWS, CONVENTIONS A ND PUBLICATIONS COMPETITIVE WITH THE EVENTS OR THE PUBLICATIONS, OR ANY OF THEM, WHICH WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, INCLUDES ANY TRADE CONFERENCES, TRADE EXHIBITIONS OR PUBLICATIONS FOR A MARKED TO THE MUSIC OR MEDIA INDUSTRIES; PROVID ED, HOWEVER, STOCKHOLDER MAY CONTINUE TO OWN AND PUBLISH THE TRADE PUBLICATION KNOWN AS IMPRINT. (VI) THE CONSIDERATION RECEIVED BY INFOCAST SYSTEMS PVT LTD WAS A COMPENSATION FOR NOT COMPETING WITH THE BUSINESS. (VII) PROFIT MAKING BUSINESS STRUCTURE OF THE FIRST PART WAS NOT TO BE DYSFUNCTIONAL PERPETUALLY, I.E., IN OTHER WORDS WAS NOT IMPAIRED PERMANENTLY. (VIII) IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THERE IS NO NEGATIVE COVENANT AND THE ASSESSEE WAS ALLOWED TO START IN PROFIT MAKING BUSINESS STRUCTURE AFTER THREE YEARS. 5. ASSESSING OFFICER RELIED ON THE PROVISIONS OF SECTION 28(VA ) OF THE ACT AS WELL AS THE RELEVANT EXPLANATORY MEMORANDUM, RELEVANT TO THE SAID SECTION AND CONCLUDED THAT THE SUM OF RS. 5,07,01,000/ - DOES NOT CONSTITUTE CAPITAL RECEIPT. IN PARA 5 .19, AO DISCUSSED THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE FOR NON - COMPET ING FOR A 5 PERIOD OF THREE YEARS AND THEREFORE, THE CONSIDERATION RECEIVED CONSTITUTES REVENUE RECEIPT. AO IS OF THE OPINION THAT THE ASSESSEE HAS NOT PERMANENTLY T RANSFERRED THE PROFIT MAKING APPARATUS OF THE ASSESSEE TO THE DCIPL. THE SAID AMOUNT IS RECEIVED TO MEET THE L OSS OF EARNINGS TO THE ASSESSEE. T HEREFORE, THE SAME CONSTITUTES REVENUE RECEIPT S . AO RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S BLUESTAR LTD VS. CIT (217 ITR 514). HE ALSO DISMISSED THE ASSESSEES REQUEST FOR TREATING IT AS A LONG TERM CAPITAL GAIN U/S 55(2)(A) OF THE ACT BY GIVING A REASON THAT THE SAID AMOUNT CONSTITUTES A REVENUE RECEIPT CHARGEABLE U/S 28(VA) OF THE ACT. 5.1. REFERRING TO THE IPR / TRADEMARKS, IT IS THE VIEW OF THE AO THAT THE SAID ASSETS DO NOT BELONG TO THE ASSESSEE. IN PARA 5.25 OF THE ASSESSMENT ORDER, IT IS THE FINDING OF THE AO, WHO OPINED THAT SRI ANIL CHOPRA IS OWNER OF THE IPRS,/TRADEMARKS, THAT THE DCIPL SINCE PURCHASED THE IPRS FROM SHRI ANIL CHOPRA AND NOT THAT OF THE ASSESSEE , RELATED RECEIPTS CONSTITUTES BUSINESS RECEPTS OF THE ASSESSEE . IN PARA 5.26, AO CONCLUDED BY STATING THAT THE SAID RECEIPTS OF RS. 5,07,01,000/ - CONSTITUTES REVENUE REC EIPTS AND CHARGEABLE TO TAX U/S 28(VA) OF THE ACT. 6. IN RETURN OF INCOME, THE ASSESSEE MADE A CLAIM OF DEDUCTION U/S 54EC OF THE ACT IN RESPECT OF THE SUM OF RS. 1 CR OUT OF THE LONG TERM CAPITAL GAINS REPORTED . D URING THE ASSESSMENT PROCEEDINGS, ASSESSE E FURNISHED COPIES OF THE REC (RURAL ELECTRIFICATION CORPORATION) BONDS TO THE AO IN SUPPORT OF THE CLAIM. THE DATES OF INVESTMENTS ARE 31.3. 2010 AND 10.6.2010 (THE INVESTMENTS HAVE FALLEN IN TWO DIFFERENT AYS). CONSISTENT WITH THE AOS DECISION IN INVO KING THE PROVISIONS OF SECTION 28(VA) OF THE ACT ON THE SAID RECEIPTS OF RS 5,07,01,000/ - AND TREATING THE WHOLE OF THE RECEIPTS AS BUSINESS INCOME AND NOT LONG TERM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE, AO DISALLOWED THE SAID CLAIM OF DEDUCTION U/S 54 EC OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE, THE CLAIM OF DEDUCTION WAS RESTRICTED TO RS. 50 LAKHS ONLY AND FOR THIS HE RELIED ON THE PROVISIONS OF THE PROVISO TO SECTION 54EC OF THE ACT. IN RESPECT OF THE RELIEF ON WHOLE INVESTMENT OF RS. 1 CR, ASSESS EE RELIED ON THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF SHRI ASPI GINWALA, SHREE RAM ENGG & MFG. INDUSTRIES VS. ACIT. AO ALSO DISCUSSED THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF AREVA T & D INDIA LTD VS. ACIT [2010] 326 IT R 540, RELATING TO THE COMPLIANCE TO THE CONDITIONS SPECIFIED IN THE NOTIFICATION ISSUED 6 IN CONNECTION WITH THE BONDS ISSUED U/S 54EC OF THE ACT. THE CONDITIONS ARE NOT ULTRA VIRUS FROM THE SAID DECISION OF THE MADRAS HIGH COURT. THE ASSESSING OFFICER R ESTRICTED THE CLAIM TO RS. 50 LAKHS ON THE GROUND RAISED WITHOUT PREJUDICE BY THE ASSESSEE. AGGRIEVED WITH THE ORDER OF THE AO, ASSESSEE IS IN APPEAL BEFORE FFA 7. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY (FAA) , ASSESSE E CONTESTED THE ADDITION OF RS 5,07,01,000/ - AS BUSINESS INCOME AGAINST THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAINS AS WELL AS DENIAL OF DEDUCTION U/S 54EC IN RESPECT OF THE INVESTMENT OF RS. 1 CR IN REC BONDS. BEFORE THE CIT (A), ASSESSEE MADE ELABOR ATE SUBMISSIONS, WHICH ARE SUMMARIZED IN PARA 1.2.3 AND 1.2.4 OF THE IMPUGNED ORDER AND THE RELEVANT PORTION IS EXTRACTED AS UNDER: - 1.2.4. ...........THE ASSESSING OFFICER FAILED TO APPRECIATE: A. THAT THE APPELLANT HAD SOLD AND TRANSFERRED PERMANENTLY AND FOREVER ALL EXISTING ASSETS AND CONTRACTS OF THE JOURNALS, PUBLICATIONS ETC. B. THAT THE MAIN PART OF THE AGREEMENT WAS FOR TRANSFER OF ALL INTANGIBLE ASSETS BEING TRADEMARK, BRANDS, COPYRIGHTS AND THE ASSOCIATED GOODWILL OF THE PUBLICATION AND TRADE EXHIBITI ON BUSINESS. C. THAT THE CONSIDERATION OF RS. 5.07 CRS WAS NOT RECEIVED ONLY FOR GIVING UP THE RIGHT TO CARRY ON EXHIBITION AND PUBLICATION BUSINESS BUT WAS FOR THE INCLUSIVE TRANSFER OF ALL INTANGIBLE ASSETS BEING TRADEMARK, BRANDS, COPYRIGHTS, ASSOCIATED GO ODWILL ETC AND THUS WAS TRANSFER OF CAPITAL ASSET AND THEREFORE TAXABLE AS LONG TERM CAPITAL GAINS. D. THAT THE APPELLANT HAD TO GO THROUGH THE EXTENSIVE PROCEDURAL FORMALITIES FOR THE COMPLETE AND EFFECTUAL TRANSFER IN THE RECORDS IN THE NAME OF THE BUYER. E. T HAT THE CLIENT DATABASE HELD BY THE APPELLANT WAS ALSO SHARED WITH THE BUYER. 8. SUMMARY OF THE ASSESSEES SUBMISSION IS ALSO GIVEN IN PARA 1.2.5 OF THE CIT (A)S ORDER AND THE SAME IS AS UNDER: 1.2.5. THUS, THERE WAS A CLEAR TRANSFER OF THE EXCLUSIVE ASSETS AND ON TRANSFER IT WAS THE BUYER WHO BECAME THE SOLE AND UNDISPUTED OWNER OF THE ASSETS. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT THE ASSESSING OFFICER HAS IGNORED THE DOCUMENTS AND THE EVIDENCE PRODUCED. THE APPELLANT THEREFORE PRAYS THAT THE CONSIDERATION RECEIVED OF RS. 5.07 CRS OFFERED AS LONG TERM CAPITAL GAINS BE TAXED ACCORDINGLY AND CONSEQUENTLY THE DEDUCTION CLAIMED U/S 54EC OF THE INVESTMENTS IN RECL BONDS OF RS. 1 CR BE ALLOWED. 9. ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FAA DISCUSSED THE ASSESSEES INTENTION S ON ONE SIDE AND THE INAPPLICABILITY OF THE PROVISIONS OF SLUMP SALE U/S 50B OF THE ACT ON THE OTHER. A. FURTHER, ON ANALYZING THE OWNERSHIP OF THE IPRS / TRADEMARKS , CIT (A) MENTIONED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF THE IPRS / TRADEMARKS IN ALL RESPECTS . HE ALSO OPINED THAT THE ASSESSEE HAS NOT COMPLETELY TRANSFERRED I TS INTEREST IN THE BUSINESS FULLY TO DCIPL AS THE ASSESSEE CONTINUED THE ACTIVITY OF PUBLICATION OF MAGAZINE . FURTHER, HE MENTIONED THAT THE SAID SALE VIDE TRI - PARTITE 7 AGREEMENT CONSTITUTES A CASE OF ITEMIZED SALE OF ASSETS UNLIKE THE CASE OF SLUMP SALE. ON THIS BASIS, CIT (A) HELD THAT THE SALE PROCEEDS OF RS. 1,15,56,800/ - ATTRIBUTABLE TO THE SALE OF TRADEMARKS AND IPRS CONSTITU TES CAPITAL RECEIPTS IN RESPECT OF THE ASSETS OWNED BY THE ASSESSEE UNDISPUTEDLY AS ON THE DATE OF TRANSFER. TO THAT EXTENT, CIT (A) GRANTED RELIEF TO THE ASSESSEE OUT OF THE TOTAL ADDITION OF RS. 5,07,01,000/ - . FAA ALSO CONS IDERED THE FACT THAT SOME OF TRADEMARKS WERE REGISTERED SUBSEQUENT TO THE SAID TRI PARTITE AGREEMENT. CONTENTS OF PARA 3.5 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. HE ACCORDINGLY, DIRECTED THE AO TO COMPUTE THE CAPITAL GAINS IN RESPECT OF THE ASSETS OWNED BY THE ASSESSEE AS ON THE DATE OF TRANSFER. HE FURTHER, MENTIONED THAT THE ASSETS WHICH ARE NOT OWNED BY THE ASSESSEE CANNOT BE CATEGORIZED AS PART OF THE CAPITAL GAINS . TH US, THESE ARE THE DECISION OF THE FAA WITH REGARD TO IPRS /TRADEMARKS. B. REGARDING THE REMAINING ADDITION OF RS. 3,91,44,200/ - (GOODWILL, DATABSE ETC), CIT (A) OPINED THAT THE SAME CONSTITUTES NON - COMPETE FEES AND CHARGEABLE TO TAX UNDER THE PROVISO TO SECTION 28(VA) OF THE ACT. HE ALSO OPINED THAT WHATEVER MAY BE THE NOMENCLA TURE GIVEN TO THE RECEIPTS I.E., GOODWILL, DATABSE ETC, ALL THESE RECEIPTS ARE RECEIVED BY THE ASSESSEE FOR NON - COMPETING WITH DCIPL. FURTHER, FAA IS OF THE OPINION THAT NO RIGHT IS ACCRUED TO THE ASSESSEE ON ACCOUNT OF GOODWILL OR DATABASE AND BOOKS DO N OT INDICATE THE EXISTENCE OF THE SAID INTANGIBLE ASSETS. ACCORDINGLY, THE SAID AMOUNT IS TREATED AS THE TAXABLE BUSINESS RECEIPTS U/S 28(VA) OF THE ACT. C. REGARDING THE OTHER GROUNDS RELATING TO THE CLAIM OF DEDUCTION U/S 54EC OF THE ACT, CIT (A) HELD T HAT THE SAME CANNOT BE DECIDED UNLESS ISSUE OF QUA NTIFICATION OF TOTAL ELIGIBLE CAPITAL GAINS IS FINALIZED IN THE REMANDING PROCEEDINGS TO THE TRANSFER OF IPRS / TRADEMARKS. CIT (A) ALSO UNDERLINED THE APPLICABILITY OF THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF ASPI GINWALA & ORS VS. ACIT [2012] 52 SOT 16. THUS, THE CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. REVENUE ACCEPTED THE DECISION OF THE FAA AND THE RELIEF GRANTED TO THE ASSESSEE. 8 BEFORE THE TRIBUNAL 10. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE SUMMARIZED THE ABOVE FACTS OF THE CASE AND SUBMITTED THAT THE CONCISE GROUND S . THE FOLLOWING ARE THE ISSUES IN THE SAID GROUNDS AND THEY ARE: (I) THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 3, 91,44,200/ - BY INVOKING THE PROVISIONS OF SECTION 28(VA) OF THE ACT; (II) ERRONEOUS NATURE OF THE FINDING OF THE CIT (A) IN CONNECTI ON WITH THE IPRS AND THE OWNERSHIP OF THE SAME BY THE ASSESSEE ; AND FINALLY (III) AGAINST THE FINDING OF THE CIT (A) IN NOT GRANTING THE RELIEF AGAINST RS. 1 CR OF DEDUCTION CLAIMED U/S 54EC OF THE ACT. THE ISSUE WISE SUBMISSION OF THE ASSESSEE IS TAKEN UP FOR DISCUSSION IN THE SUCCEEDING PARAGRAPHS. ISSUE WISE ADJUDICATION 11. FIRST DISPUTE RELATES TO THE NON - COMPETE FEE. TO SUMMARISE THE RELEVANT DISPUTE, W HILE THE ASSESSEE HOLDS THAT THE NON COMPETE FEE IS ONLY RS 32,62,000 OUT OF TOTAL CONSIDERATION O F RS. 5,07,01,000/ - , ON THE OTHER HAND, THE AO IS OF THE OPINION THAT THE CONSIDERATION RELATABLE TO SALE OF GOOD WILL AND DATA BASE ALSO CONSTITUTES THE NON - COMPETE FEE (NCF) . THEREFORE, THE DISPUTE BETWEEN THE PARTIES REVOLVES AROUND THE NON COMPET E FEE OF RS 32,62,000 (ASSESSEE) VS RS 4,24,06,200/ - OF THE FAA ESSENTIALLY . ACCORDINGLY, THE DISPUTED ADDITION IS THE DIFFERENCE AMOUNT OF RS. 3,91,44,200 / - (RS 4,24,06,2 00 MINUS RS 32,62,000) . THE SAME IS TABULATED AS FOLLOWS. DESCRIPTION OF ASSET AMOUNT (RS) DATA BASE 93,20,000/ - NON - COMPETE FEES 32,62,000/ - GOODWILL 2,98,24,200/ - TOTAL SALE CONSIDERATION 4,24,06,2 00/ - 11.1. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE TRACED THE HISTORY OF THIS COMPANY AND MENTIONED THAT SHRI ANIL CHOPRA STARTED THIS BUSINESS IN THE FORM OF PROPRIETARY CONCERN BY NAME STUDIO SYSTEM IN THE YEAR 1992. THE SAME WAS SUCCEEDED BY THE PARTNERSHIP FIRM IN 2001. FURTHER, THE SAID PARTNERSHIP FIRM WAS SUCCEEDED BY THE ASSESSEE COMPANY AND THE SAME IS REGISTERED WITH THE REGISTRAR OF COMPANIES IN 9 JUNE - 2005. THUS, THE ASSESSEE WAS IN THIS LINE OF BUSINESS EFFECTIVELY SINCE 1992 ONWARDS IN ONE STATUS OR OTHER AND CREATED VARIOUS RIGHTS IN THE FORM OF DATABASE, IPRS / TRADEMARKS, GOODWILL ETC. THEREFORE, LD COUNSEL JUSTIFIES THE EXTENT OF GOODWILL AND THE DATABASE CREATED BY THE ASSESSEE AT THE TIME OF THE SALE OF THE UNIT. FURTHER, HE MENTIONED THAT THE NON - COM PE TI TION IS FOR THE PERIOD OF TEN YEARS AND EXTENDED HIS ARGUMENT BY STATING THAT SRI CHOPRA HAS NOT COMPETED WITH ASSESSEE EVEN TODAY . FURTHER, LD COUNSEL JUSTIFIED THE NON COMPETE FEE OF THE SAID AMOUNT OF RS 32,62,000/ - RELYING ON THE AUDITORS REPORTED QUOTED ABOVE . HOWEVER, HE FAIRLY SUBMITTED THAT THE RS 2,98,24,200/ - MENTIONED AGAINST THE GOOD WIL L ACCOUNT IS THE BALANCE FIGURE AND IT IS NOT QUANTIFIED BASED ON ANY SUSTAINABLE GROUND S . FURTHER, LD COUNSEL MENTIONED THAT THE GOODWILL OR DATABASE RELAT ED RIGHTS WERE NOT ACCOUNTED AS SUCH IN THE BOOKS OF ACCOUNT OF THE ASSESSEE / PROPERTIES OF THE CONCERN TILL THE RIGHTS ARE SUBJECTED THE VALUATION BY THE AUDITORS AND ALSO TILL THE UNIT IS TRANSFERRED TO DCIPL FOR THE TOTAL SALE CONSIDERATION OF RS. 5,5 8,09,000/ - . BRINGING OUR ATTENTION TO THE VARIOUS AGREEMENTS, WHICH INCLUDE THE TRI - PARTITE AGREEMENT DATED 15.12.2009, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PERIOD OF NON - COMPETE IS WRONGLY MENTIONED AS THREE YEARS. OTHERWISE, THE ACTUAL PERI OD IS FOR TEN YEARS AND THE SAME IS EVIDENT FROM THE SPECIFIED NON - COMPETE FEE AGREEMENT DATED THE SAME (15.12.2009). 11.2 FURTHER, BRINGING OUR ATTENTION TO PAGE 69 ONWARDS OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAME CONSTITUTES A R EPORT OF THE CAS ON THE BUSINESS OF THE INTANGIBLES OF THE ASSESSEE WHICH ARE VALUED AT THE INSTANCE OF THE BUYER, DCIPL. LD COUNSEL FOR THE ASSESSEE TOOK US THROUGH RELEVANT PAGES OF ITS VALUATION REPORT AND SUBMITTED THAT THE QUANTIFICATION OF RS. 5,58,09,000/ - IS BASED ON THE SAID VALUATION REPORT. FOR INSTANCE, HE BROUGHT OUR ATTENTION TO PAGE 108 OF THE PAPER BOOK AND MENTIONED THAT THE VALUATION ATTRIBUTED TO NON - COMPETE FEES IS RS. 31,31,696/ - . FURTHER, BRINGING OUR ATTENTION TO PAGE 120 OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID FIGURE IS ARRIVED AT BY THE VALUER CONSIDERING THE NET CASH FLOW IN BOTH CIRCUMSTANCES OF WITH OR WITHOUT NON - COMPETE AGREEMENT S . THE SAID AMOUNT IS FINALLY ROUNDED - OFF AT THE TIME OF TRI - PARTITE AGREEMENT AND THE NON - COMPETE FEES AGREEMENT AT RS. 32,62,000/ - . IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROU GHT OUR ATTENTION TO PAGE 41 OF THE PAPER BOOK, CONTAINING SCHEDULE 1.8 RELATING TO THE ALLOCATION OF 10 PURCHASE PRICE. FURTHER, LD COUNSEL SUBMITTED THAT REGARDING THE GOODWILL OF RS. 2,98,24,200/ - , THE SAME CONSTITUTES A BALANCIN G FIGURE OF RS. 5,58,09,000/ - AND THE SUMMARY OF THE ITEMIZED RECEIPTS ON ACCOUNTS OF FIXED ASSETS, DATABASE, IPRS / TRADEMARKS AND NON - COMPETE FEES OF RS. 32,62,000/ - . 11.3. SIMILARLY, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO VARIOUS DOCUMENT S OF THE VALUATION REPORT AND SUBMITTED THAT THE AMOUNTS OF VALUATION OF DATABASE, IPRS / TRADEMARKS ARE ALSO VALUED BASING ON THE EXPECTATIONS. FURTHER, HE SUBMITTED THAT SO FAR AS THE IPRS / TRADEMARKS ARE CONCERNED, IT IS AN UNDISPUTED FACT THAT T HE RE GISTERED IPRS / TRADEMARKS CONSTITUTE CAPITAL GAINS AS DECIDED BY THE CIT (A) AND THE DECISION OF THE CIT (A) DID NOT QUESTION BY THE REVENUE THROUGH CROSS APPEAL / CROSS OBJECTION. ELABORATING THE SAME, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN ALL THE RIGHTS RELATING TO IPRS / TRADEMARKS AND THE DATABASE ARE TRANSFERRED, MERELY BECAUSE SOME OF THEM WERE NOT REGISTERED, IT CANNOT CONSTITUTE BUSINESS RECEIPTS. THEREFORE, THE RECEIPTS ON ACCOUNT OF DATABASE AND THE IPRS / TRADEMARKS ARE THE LONG TERM CAPITAL ASSETS AND RELEVANT GAINS ARE ACCORDINGLY OFFERED TO TAX IN THE RETURN OF INCOME. LD COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MEDIWORLD PUBLICATIONS PVT. LTD (SUPRA) FOR THE PROPOSITION THAT THE CONSIDERATION RECEIVED ON THE SALE OF INTANGIBLE ASSETS CONSTITUTES LONG TERM CAPITAL GAINS. THIS WAS DECIDED BASING ON THE ESTIMATION THAT WHEN THE INTANGIBLE ASSETS ARE SOLD, THE ASSESSEE LOSE THE SOURCE OF INCOME AND THEREFORE, THE PROVISIO NS OF SECTION 28(VA) OF THE ACT DOES NOT APPLY IN SUCH CASE. THEREFORE, THE SALE ON ACCOUNT OF DATABASE, IPRS / TRADEMARKS AND THE GOODWILL RIGHTLY OFFERED TO TAX UNDER THE HEAD CAPITAL GAINS AND NOT AS A BUSINESS INCOME. WITHOUT PREJUDICE, HE ALSO S UBMI TTED THAT THE ALLEGED ASSETS DO NOT HAVE COST OF ACQUISITION IN SUCH CASE, IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. B.C. SRINIVASA SETTY [1981] 128 ITR 294 NO CAPITAL GAINS IS CHARGEABLE U/S 45 OF THE ACT . THUS, IT I S THE SUMMARY OF THE ARGUMENTS OF THE ASSESSEE ARE REPRODUCED IN THE BRIEF FACTS AND SUBMISSIONS AT PAGE 1G AND THE RELEVANT PORTIONS ARE EXTRACTED AS FOLLOWS: - THE AMOUNT RS. 3,91,44,200/ - WAS RECEIVED ON ACCOUNT OF TRANSFER OF GOODWILL AND DATABASE AND NOT AS NON - COMPETE FEES. SCHEDULE 1.8 OF THE ASSET PURCHASE AGREEMENT GIVES COMPLETE BREAK - UP OF ITEM WISE ALLOCATION OF PURCHASE CONSIDERATION. THE BUSINESS AND ASSETS TRANSFERRED WERE DEFINED IN THE AGREEMENT AND TRANSFER OF INTANGIBLE ASSETS WAS MAI N CONSTITUENT OF THE SAID AGREEMENT. 11 THE COMPLETE PORTFOLIO HAS BEEN TRANSFERRED PERMANENTLY RELATING TO THE ASSET CLASS, NAMELY TRADE EXHIBITION AND RELATED TRADE MAGAZINES. THE APPELLANT CONTINUED TO HOLD A LINE OF BUSINESS, WHICH HAD NO REVENUE BEFORE O R AFTER THE TRANSFER. GOODWILL AND DATABASE WERE RELATED TO TRADE EXHIBITIONS AND TRADE MAGAZINES AND VALUE WERE ASSIGNED FOR THE SAME BY AN INDEPENDENT VALUER. POST TRANSFER THE TRANSFEREE BECAME THE SOLE AND UNDISPUTED OWNER OF THE ASSETS. THE SAME WERE CAPITALISED AS GOODWILL AND INTANGIBLES IN THE BOOKS OF THE BUYER AND DEPRECIATION HAS BEEN ALLOWED BY THE DEPARTMENT. THE BUYER HAS RECENTLY SOLD BUSINESS INCLUDING GOODWILL AND DATABASE. SALE OF INTANGIBLE ASSETS AMOUNTS TO LONG TERM CAPITAL GAIN IN TERMS OF THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. MEDIWORLD PUBLICATIONS PVT LTD. 12. THEREFORE, THE SUMMARY OF THE ARGUMENTS OF THE ASSESSEE INCLUDES THAT THE ASSE SSEE COMPANY OWNS THE RIGHTS OF DATABASE AND THE GOODWILL ON ONE HAND AND THE SALE OF THE SAME YIELDED THE CAPITAL GAINS OF RS. 3,91,44,200/ - . THE SAME ARE REQUIRED TO THE TREATED AS LONG TERM CAPITAL GAINS ONLY AND NOT THE NON COMPETE FEE AS HELD BY TH E FAA . 13. PER CONTRA, ON THIS ISSUE, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO AND THE CIT (A). FURTHER, IN CONNECTION WITH THE PERIOD OF NON - COMPETE, LD DR SUBMITTED THAT THE ASSET PURCHASE AGREEMENT REFERS TO A PERIOD OF THREE YEARS AS NON - COMPETE PERIOD. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO ARTICLE 10.2 OF THE AGREEMENT PLACED AT PAGE 35 OF THE PAPER BOOK. OF COURSE, HE ALSO REFERRED TO THE PERIOD OF 10 YEARS OF NON - COMPETE MENTIONED IN OTHER RELEVANT AGREEMENTS. LD DR FOR THE REVENUE FURTHER SUBMITTED THAT, EXCEPT ASSESSEES CLAIM QUA THE DATABASE AND IPRS, ASSESSEE REDUCED THE NON - COMPETE FEES OF RS. 32,62,000/ - AND INFLATED GOODWILL OF RS. 2,98,24,200/ - IN ORDER TO NOT TO OFFER MORE NON - COMPETE FEES AS BUSINESS INCOME OF THE ASSESSEE. HE ALSO MENTIONED THAT RS. 2,98,24,200/ - ON ACCOUNT OF GOODWILL IS ONLY A BALANCE FIGURE AND IT DOES NOT EMANATE FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE ALSO SUBMITT ED THAT THE VALUATION REPORT IS NOT BASED ON ANY GOODWILL AND THE SAME REVOLVES AROUND FORECAST OF THE ESTIMATED FIGURES, THEREFORE, THE BASIS ON WHICH THE VALUATION OF THE NON - COMPETE FEES OF RS. 32,62,000/ - IS NOT SACROSANCT AND THE SAME SUPPORTED THE AL LEGATION OF THE AO. 14. DURING REBUTTAL TIME, LD COUNSEL FOR THE ASSESSEE EXPLAINED THE DISPUTED RELATING TO THE PERIOD OF COMPUTATION OF NON - COMPETE FEES AND SUBMITTED THAT THE TEN YEARS IS THE PERIOD DURING WHICH ASSESSEE IS NOT SUPPOSED TO COMPETE WI TH THE 12 DCIPL. FURTHER, ON THE ASPECTS OF BONA FID E OF THE VALUATION REPORT, LD COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE NON - COMPETE FEES OF RS. 32,62,000/ - IF CONSIDERED RELEVANT FOR THE PERIOD OF THREE YEARS AT THE MAXIMUM, THE BUSINESS INCOME ON TH IS ACCOUNT PER WORKS OUT TO RS. 3 , 26 , 200 / - P A . 15. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF CONFIRMING OF ADDITION OF RS. 3,91,44,200/ - BY THE CIT (A). WE HAVE ALSO PERUSED COUPLE OF PAPER BOOKS FILED BY THE ASSESSEE. THE PAPER BOOK CONTAINS ALL THE RELEVANT AGREEMENTS AND THE VALUATION REPORT AN D WRITTEN SUBMISSIONS OF THE ASSESSEE APART FROM MANY OTHERS. IT ALSO CONTAINS THE FINANCIAL STATEMENTS OF INCOME AND THE INCOME TAX RETURNS AS WELL AS THE COMPUTATION OF INCOME AND THE ASSESSMENT ORDER OF THE DCIPL. 16. ISSUE RELATING TO IPRS / TRADEMARK S: - THE LIMITED ISSUE FOR ADJUDICATION BEFORE US RELATES TO WHETHER THE IPRS / TRADEMARKS REGISTERED SHOULD BE TREATED AS CAPITAL ASSETS , AND THEREFORE, THE LONG TERM CAPITAL GAINS, WHEREAS THE UNREGISTERED IPRS / TRADEMARKS ARE REQUIRED TO BE TREATED AS BUSINESS RECEIPTS OF THE RELEVANT INCOME H AS TO BE TAXED AS BUSINESS INCOME OF THE ASSESSEE. 17. THIS DECISION OF THE CIT (A) ON THIS ISSUE IS CONTESTED BY THE ASSESSEE BEFORE US. ON THIS ISSUE, IT IS THE PRAYER OF THE LD COUNSEL THAT THIS ISSUE MAY BE REMANDED TO THE FILE OF THE AO FOR EXAMINING THE GENUINENESS OF THE RELEVANT IPRS / TRADEMARKS AFTER CONSIDERING THE FACT THAT THE SAID RIGHTS ORIGINALLY AROSE IN THE PROPRIETORSHIP CONCERN, WHICH IS SUCCEEDED BY THE FIRM AND WHICH IN TURN IS SUCCEEDED BY THE ASSESSEE. IN OUR OPINION, THE DATE OF REGISTRATION IS NOT SACROSANCT AS LONG AS THE RIGHTS ARE ACCRUED TO THE ASSESSEE AND THE SAME WERE TRANS FERRED COMPLETELY TO THE DCIPL IN ALL RESPECTS. THE AO SHALL KEEP THIS IN MIND IN EXECUTING THE DIRECTION O F CIT (A) GIVEN IN PARA 1.3.5 OF THE IMPUGNED ORDER. ACCORDINGLY, THIS PART OF THE GROUNDS IS ALLOWED FOR STATISTICAL PURPOSE. 18 . REGARDING THE DATABASE, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS DATABASE IN THE FORM OF CUSTOMER DETAILS, USERS OF THE WEBSITES AND THE DEBTORS, CREDITORS ETC. TH IS DATA WAS GENERATED BY THE FIRM, WHICH WAS APPROPRIATED BY THE ASSESSEE COMPANY IN SUCCESSION . T HEREFORE, T HE SAME CONSTITUTES CAPITAL ASSET AND THE SALE PROCEEDS OF THE SAME IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS, LONG TERM 13 CAPITAL GAINS IN THIS CASE. SALE PROCEEDS OF THE DATA BALSE CONSTITUTES CAPITAL GAINS AND THERE ARE DECISIONS TO SUPPORT THE SAME. T HEREFORE, ON THIS ISSUE , WE APPROVE THE ARGUMENT OF THE LD COUNSEL AND ALLOW THE RELIEF TO THE TUNE OF RS. 93,20,000/ - . 19 . NON - COMPLETE FEES AND GOODWILL: - B ASED ON THE REPORT OF THE CAS, THE ASSESSEE QUANTIFIED THE NON - COMPETE FEE AT RS. 32,62,000/ - A ND FURNISHED THE SAME IN THE RETURN OF INCOME AS BUSINESS INCOME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 28(VA) OF THE ACT . FURTHER, THE ASSESSEE OFFERED THE BALANCING FIGURE OF RS. 2,92,24,200/ - AS GOODWILL AND THE SAME WAS CLAIMED AS LONG TERM CAPITAL GAINS . WE HAVE ANALYSED THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE LD DR BOTH ON THE ISSUE OF EXISTENCE OF THE INTANGIBLE AS WELL AS ON THEIR QUANTIFICATION RELATED ISSUES. IN THIS REGARD, T HE TANGIBLE SUPPORT FOR THE ASSESSEES CLAIM , B OTH FOR EXISTENCE OF THE GOOD WILL AND NON - COMPETE FEE AS WELL AS ITS QUANTIFICATION , IS THE VALUATION REPORT BY THE CAS . THE COPIES OF THE SAME ARE PLACED AT PAGE 69 OF THE PAPER BOOK. ON PERUSAL OF THE SAME WE FIND THE CAS HAVE CONSIDERED CERTAIN UNSUS TAINABLE FACTORS FOR QUANTIFYING THE SAID INTANGIBLE. THEY ARE NOT BASED ON ANY FACTS. IN RETROSPECT ALSO, CONSIDERING THE RESULTS OF THE TRANSFEREE COMPANY, THE SURMISES ADOPTED BY THE CAS ARE NOT DEMONSTRABLE. HOWEVER, IN OUR CONSIDERED OPINION, ON ONE H AND, THE EXISTENCE OF THE COMPLETION FROM SRI ANIL CHOPRA , THE FOUNDER OF THE BUSINESS IS UNDISU P TED AND ON THE OTHER HAND, THE TRANSFEROR OF THE BUSINESS EARNED GOODWILL SINCE 1992. WE HAVE GIVEN CREDIT TO THE HISTORY OF THE CORPORATISATION OF THE THIS BUSINESS OF SRI ANIL CHOPRA , THE AUTHOR OF STUDIO SYSTEM ( A PROPRIETORSHIP CONCERN) IN 1992 . HAVING HELD SO, NOW THE ISSUE FOR DECISION RELATES TO THE ISSUES OF QUANTIFICATION OF THE GOOD WILL ACCOUNT AND THE NON COMPETE FEE ACCOUNT. 20. QUANTIFICATION OF THE GOODWILL & NON COMPETE FEE ACCOUNT : THEREFORE, THERE IS A NEED FOR REWORKING OF THE GOODWILL AND THE NON - COMPETE FEES . T HE GOODWILL BEING BALANCING FIGURE , LACKS CREDIBILITY. IN THIS REGARD, WE HAVE PERUSED THE WORKING/CHARTS SUBMITT ED BY THE LD COUNSEL FOR THE ASSESSEE DURING THE PROCEEDINGS BEFORE US . IN OUR OPINION, THE SAME CONS TITUTES ADDITIONAL EVIDENCES. PER CONTRA , , WE FIND THAT THE REVENUE HAS NOT REFERRED TO THE DVO TO OBTAIN AN EXPERTS OPINION IN THE MATTER OF QUANTIFICAT ION OF GOODWILL AND NON - COMPETE FEES. CONSIDERING THE INTANGIBLES, WE FIND THERE IS NOT POINT NOW TO DIRECT THE AO FOR MAKING A REFERENCE TO 14 DVO NOW. THEREFORE, CONSIDERING THE DEFICIENCY IN THE ASSESSMENT IN MATTERS OF NON REFERRAL TO DVO FOR AN EXPERTS OPINION FROM REVENUE SIDE, THE SAID REPORT OF THE CAS, THE ONLY EXPERTS REPORT AVAILABLE ON RECORDS OF THIS ASSESSEE, NEEDS TO UTILISED FOR DETERMINING THE NON - COMPETE FEE ACCOUNT. 21. WE HAVE ALSO CONSIDERED THE CONFUSION WHICH CREATED BY THE ASSESSEE IN THE AFORE MENTIONED AGREEMENTS WITH REGARD TO THE PERIOD OF NON COMPETE. AS PER THE ASSESSEE, SUCH PERIOD IS TEN YEARS. ON THE OTHER HAND, AO IS OF THE VIEW, THE SAME IS ONLY FOR THREE YEARS. WE ARE UNABLE TO APPRECIATE THE AVOIDABLE CONTROVERSY GENE RATED ON THIS BASIC FACT. AT THE SAME TIME, WE NEED TO ADJUDICATE THIS ISSUE IN ONE OR OTHER CONSIDERING SOME BASIS GENERATED OUT OF THE RECORDS. THEREFORE, FOR THE PURPOSE OF QUANTIFICATION OF THE NON COMPETE FEE (NCF), WE APPROVE THE AOS VIEWS ON THIS I SSUE AND PROCEED TO HOLD THAT THE NON COMPETE FEE OF RS. 32,62,000/ - , AS OFFERED BY THE ASSESSEE IN THE RETURN U/S 28(VA) OF THE ACT, IS RELEVANT FOR THE PERIOD OF THREE YEARS ONLY QUA PARA 10.2 OF THE ARTICLE 10 OF THE TRI - PARTITE AGREEMENT . T HE SAME IS REQUIRED TO BE PROJECTED TO TEN YEARS. THEREFORE, WE DIRECT THE AO CONSIDER THE AFORE MENTIONED CHARTS SUBMITTED BEFORE US AND MAKE PROJECTION FOR TEN YEARS BASED ON THE DECLARED NON COMPETE FEE OF RS 32.62 LAKHS, WHICH SHOULD BE CONSIDERED AS N CF FOR THREE YEARS ONLY. ON PROJECTION, IF PROPER QUANTIFICATION IS DONE, THE AO SHALL ARRIVE CERTAIN FIGURE AND THE SAME MAY BE CONSIDERED AS THE NON - COMPETE FEE AMOUNT RELEVANT FOR TEN YEARS . AO SHALL ASSESS THE SAME U/S 28(VA) OF THE ACT IN PLACE OF RS 32.62 LAKHS. THE BALANCING FIGURE IF ANY SHALL BE DEEMED AS THE GOODWILL. REGARDING GOODWILL ACCOUNT, IT IS SETTLED ISSUE THAT THE SAME CONSTITUTES AN INTANGIBLE ASSETS AND THE SAME IS IN CAPITAL FIELD. AO IS DIRECTED THE ASSESS THE GAINS EARNED OUT OF THE SALE OF THE GOODWILL UNDER THE HEAD OF INCOME CAPITAL GAINS AS PER THE LAW . ACCO R DINGLY, THE RELEVANT GROUND S 1 TO 6 ARE PARTLY ALLOWED. 22 . THE FINAL ISSUE RELATES TO THE CLAIM OF DEDUCTION U/S 54EC OF THE ACT IN RESPECT OF INVESTMENT OF RS. 1 CRS IN REC BONDS. IN THIS REGARD, THE ARGUMENT OF THE LD COUNSEL INCLUDES THAT THERE IS SUFFICIENT CAPITAL GAINS TO ACCOUNT FOR INVESTMENTS OF RS. 1 CRS, IF NON - COMPETE FEES OF RS. 32,62,000/ - IS CONSIDERED FO R THREE YEARS AND THE SAME IS EXTRAPOLATED FOR TEN YEARS . TO THAT EXTENT, THE ISSUE RAISED IN GROUND NO.10 IS REQUIRED TO BE DECIDED IN FAVOUR OF THE ASSESSEE. THE JUDGMENT OF THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. C. JAYCHANDER IS RELEV ANT, 15 WHEREIN SUBSTANTIAL QUESTION OF LAW ON IDENTICAL ISSUE RAISED BEFORE US IS DECIDED IN FAVOUR OF THE ASSESSEE RELYING ON THE EXPLANATORY MEMORANDUM RELEVANT TO THE PROVISO TO SECTION 54EC OF THE ACT. AS PER THE SAID JUDGMENT, IF THE ASSESSEE IS ABLE T O KEEP SIX MONTHS LIMIT FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET, BUT STILL ABLE TO INVEST RS. 50 LAKHS EACH IN TWO DIFFERENT FINANCIAL YEARS, THE SAME CANNOT BE SAID THAT THE FIRST PROVISO WILL LIMIT THE CLAIM TO RS. 50 LAKHS ONLY. PARA 11 OF THE S AID JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF C. JAYCHANDER (SUPRA) IS RELEVANT IN THIS REGARD, AND THE SAME IS EXTRACTED AS UNDER: 11. IN ANY EVENT, FROM A READING OF SECTION 54EC(1) AND THE FIRST PR OVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVESTMENT IS SIX MONTHS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FALLS UNDER TWO FINANCIAL YEARS, THE BENEFIT CLAIMED BY THE ASSESSEE CANNOT BE DENIED. IT WOULD HAVE MADE A DIFFERENCE, IF THE RESTRICTION ON THE INVESTMENT IN BONDS TO RS. 50,00,000/ - IS INCORPORATED IN SECTION 54EC(1) OF THE ACT ITSELF. HOWEVER, THE AMBIGUITY HAS BEEN REMOVED BY THE LEGISLATURE WITH EFFECT FROM 1.4.2015 IN RELATION TO THE ASSESSMENT YEAR 2015 - 16 AND SUBSEQUENT YEARS. 23 . IN THE INSTANT CASE, THE ASSE SSEE HAS INVESTED RS. 50 LAKHS EA CH IN TWO INSTALMENTS BUT IN DIFFERENT FINANCIAL YEARS. ON THESE FACTS, WE ARE OF THE OPINION, CONSIDERING THE SUFFICIENCY OF THE CAPITAL GAINS TO ACCOUNT FOR RS. 1 CRS INVESTMENT IN TWO FINANCIAL YEARS IN REC BONDS, THE CASE OF THE ASSESSEE STANDS COVERED IN ITS FAVOUR BY THE CITED JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF IN THE CASE OF C. JAYCHANDER (SUPRA). HOWEVER, AO IS DIRECTED (A) TO WORKOUT OUT THE SUFFICIENCY OF THE CAPITAL GAINS TO ACCOUNT FOR THE INVESTMENT OF RS 1 CRORE AFTER THE WORKINGS AS DIRECTED A BOVE AND (B) TO APPLY THE ABOVE CITED JUDGMENTAL LAW ON THE ISSUE OF INVESTMENT IN TWO INSTALMENTS. ACCORDINGLY, GROUND NO.10 RAISED BY THE ASSESSEE IS ALLOWED PRO TANTO . 2 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN COURT ON 17 TH JULY , 2015. SD/ - SD/ - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 17.7 . 201 5 . . ./ OKK , SR. PS 16 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT - 4. / 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI