M/S VIGHANHARTA INVESTMENT AND FINANCE CO. PVT. LTD., Nagpur V. ACIT, CIRCLE-6, Nagpur

MA 22/NAG/2013

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3498 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: K K THAKKAR
• Keywords: Business income; Capital receipt
• Section: 28

Judgement Text

1 M.A. NO. 22/NAG/2013. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. M. A. NO. 22/NAG/2013 (ARISING OUT OF ITA NO. 110/NAG/2012) ASSESSMENT YEAR : 2007 - 08. VIGHNAHARTA INVESTMENT & FINANCE ASSTT. COMMISSIONER OF COMPANY PVT. LTD., VS. INCOME TAX, 727 VRINDAWAN, DESHPANDE LAYOUT, CIRCLE - 6, NAGPUR. C.A. ROAD, NAGPUR. APPLICANT RESPONDENT. APPLICANT BY : SHRI K.K. THAKKAR. RESPONDENT BY : SHRI NARENDRA KANE.. DATE OF HEARING : 07 - 08 - 2015 DATE OF PRONOUNCEMENT : 11 TH SEPT. 2015. O R D E R PER SHRI SHAMIM YAHYA, A.M . THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THIS TRIBUNAL IN ITA NO. 110/NAG/2012 VIDE ORDER DATED 22 - 02 - 2013. IN THIS MISCELLANEOUS APPLICATION THE ASSESSEE HAS SUBMITTED AS UNDER : THE ABOVE ORDER WAS PASSED ON 22/02/2013 ALLOWING THE APPEAL OF THE DEPARTMENT TREATING THE RECEIPTS OF 98,00,000/ - AS INCOME UNDER SECTION 28(VA) (V) OF THE INCOME TAX ACT. THE SALE OF THE BUSINESS OF THE ASSESSEE WAS ENTIRE SALE OF THE WHOLE BUSINESS, THEREBY THE ASSESSEES SOURCE OF INCOME CAME TO AN END AND THEREAFTER HE DID NOT CONTINUE ANY BUSINESS AT ALL. IN COURSE OF THE HEARING THE COUNSEL OF THE ASSESSEE REFERRED TO THE FIND ING OF THE CIT(A) WHICH IS AS UNDER 2 M.A. NO. 22/NAG/2013. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSION OF THE APPELLANT AND THE REMAND REPORT SUBMITTED BY THE AO. IT IS SEEN THAT ONLY ` 5,00,000 IS FOR NON COMPETE C LAUSE AND HAS BEEN RIGHTLY TAXED BY THE AO UNDER SECTIO N 28(VA)(A) OF I.T. ACT, 1961. BUT THE REST OF THE MONEY (I.E.) ` 98 LACS IS RECEIVED BY THE APPELLANT FOR THE ENTIRE SALE OF STAKES IN ERSTWHILE BUSINESS CARRIED ON BY THE APPELLANT (I.E.) BUSINESS OF SHARE BROKING AND THE ENTIRE EARNING MACHINERY / ASS ETS ALONG WITH THE CLIENT BASE HAS BEEN SOLD OF HENCE IT ASSUMES THE NATURE OF THE CAPITAL RECEIPT AND THEREFORE CAPITAL GAIN AND IS EXCLUDED FROM THE OPERATION OF THE SECTION 28 AND NOW IN CASE OF APPELLANT IT HAS SOLD OFF ENTIRE BUSINESS EARNING APPARATU S OR THE ENTIRE BUSINESS ACTIVITY TAKEN AS A WHOLE AND AS PER DEFINITION OF UNDERTAKING IN SECTION 2(19AA) AND THE DEFINITION OF THE SLUMP SALE IN SECTION 2(42C) THE CASE OF APPELLANT FALL UNDER SECTION 50B SOF THE I.T. ACT WHICH A SPECIAL PROVISION FOR SUCH SALE OF ENTIRE BUSINESS UNDERTAKING AND TO BE TAXED IN ACCORDANCE WITH THE SPECIAL PROVISIONS. HENCE, THE APPELLANTS GROUNDS OF APPEAL THAT IT IS EXEMPTED AS CAPITAL RECEIPTS IS REJECTED AND AOS CONTENTION THAT IT IS BUSINESS INCOME IS ALSO UNTENABL E. AO WAS GIVEN OKPPORTUNITY TO COMMENT ON THE ADDITION OF THE ISSUE OF LUMP SALE AS MENTIONED ABOVE HE HAS SUBMITTED THAT IT IS NOT A SLUMP SALE. HOWEVER, INFACTS AND CIRCUMSTANCES OF THE CASE, IT IS A SLUMP SALE AS SUBMITTED DURING THE APPELLATE PROCEE DINGS BY THE APPELLANT AND HAS TO BE TAXED AS CAPITAL GAIN IN ACCORDANCE OF SECTION 50B OF THE I.T. ACT, 1961 . THE FINDING OF THE CIT(A) THAT THE ENTIRE BUSINESS HAS BEEN SOLD IS NOT DISPUTED. IT WAS SUBMITTED BY THE COUNSEL FOR THE ASSESSEE THAT THE AMOUN T OF ` 98,00,000/ - RECEIVED WAS FOR THE ENTIRE LOSS OF BUSINESS AND THE INCOME EARNING SOURCE OR APPARATUS AFFECTING THE TRADING STRUCTURE DOF THE ENTIRE BUSINESS. IT WAS ALSO SUBMITTED THAT THE BUSINESS WAS NOT ONE OF THE MANY OTHER BUSINESS OF THE ASSESSEE AND LOSS OF ONE DOES NOT AFFECT THE OTHER INCOME EARNING APPARATUS OR SOURCE. WHEN THE SOURCE OF INCOME ITSELF HAS COME TO AN END ANY MONEY RECEIVED IS CAPITAL IN THE HAND OF THE ASSESSEE AND NOT THE REVENUE IN NATURE. FOR THIS PURPOSE COUNSEL RELIED ON THE D ECISION OF THE SUPREME COURT IN KETTLEWELL BULLETIN & CO. LTD. VS. CIT 53 ITR 261, 282 (SC). SINCE IT IS A RECEIPT OF CAPITAL NATURE SEC. 50B APPLIES. HOWEVER, THERE IS NO DISCUSSION ABOUT THAT ARGUMENT IN THE WHOLE ORDER AS WELL AS THE DECISION OF THE SUP REME COURT WHICH ARE THE FUNDAMENTAL ASPECT OF THE SALE OF THE BUSINESS. ONCE IT IS A CAPITAL RECEIPT IT GOES OUT OF SECTION 28(VA) AND ONCE IT IS CAPITAL SECTION 50B AUTOMATICALLY APPLIES. THIS BEING A MISTAKE 3 M.A. NO. 22/NAG/2013. APPARENT FROM RECORD THE ORDERS OF THE HONOUR ABLE TRIBUNAL WILL NEED AMENDMENT UNDER SECTION 254(2). 2. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. A PERUSAL OF THE ITATS ORDER SHOWS THAT THE ITAT HAS CONSIDERED THE ENTIRE ISSUE, THE SUBMISSIONS AND THE CASE RECORDS AND THEREAFTER IT HA D CONCLUDED AS UNDER : FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE AND NOT SOLD THE PROVERBIAL LOCK - STOCK AND BARREL TO SKL O F FICE BUILDING, WHICH IS THE MAIN ITEM OF THE ASSETS OF THE ASSESSEE, WAS NOT SOLD. SECONDLY SKL DID NOT TAKE OVER THE LIABILIT IES OF THE ASSESSEE - COMPANY. CLAUSE 4(IV) IS NOTEWORTHY IN THIS REGARD WHICH PROVIDES THAT ALL THE LIABILITIES OF THE TRANSFEROR WHETHER PERSONAL OR RELATING TO THE UNDERTAKING SHALL CONTINUE TO BELONG TO AND SHALL BE BORNE PAID AND DISCHARGED BY THE TRANS FEROR ONLY. THOUGH, THE A GREEMENT TALKS OF THE ASSETS AS PER SCHEDULE, BUT IN THE SCHEDULE THERE IS NO DESCRIPTION OF TANGIBLE AND INTANGIBLE ASSET IS GIVEN. EVEN IF THE TRIAL BALANCE OF 31 ST MARCH OF THE YEAR UNDER CONSIDERATION IS LOOKED IN TO IT BECOME S CLEAR THAT STAND TAKEN BY THE FAA WAS NOT BASED ON FACTS. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT FAA WAS NOT RIGHT IN HOLDING THAT TRANSACTION UNDER CONSIDERATION WAS A SLUMP SALE. SO REVERSING HIS ORDER WE HOLD THAT IT WAS BASICALLY A NON - COM PETE AGREEMENT TITLED AS AGREEMENT FOR SALE OF ASSETS. IN OUR OPINION NOMENCLATURE OR RECITAL OF AN AGREEMENT DO NOT AND CANNOT CHANGE THE REAL NATURE OF A RECEIPT. SUBSTANTIALLY, PAYMENT MADE BY SKL WAS TO PREVENT THE ASSESSEE FROM SHARE BROKING BUSINESS ESPECIALLY WITH 2400 CLIENTS. ANY PAYMENT MADE IN PURSUANCE OF AN AGREEMENT TO WARD OFF COMPETITION IS A REVENUE RECEIPT W.E.F. 1 ST APRIL, 2003, AS ENVISAGED BY SECTION 28(VA) OF THE ACT. THEREFORE, REVERSING THE ORDER OF THE FAA WE DECIDE BOTH THE GROUNDS OF APPEAL IN FAVOUR OF THE AO. 3. IN OUR CONSIDERED OPINION, THE ISSUE NOW BEING RAISED BY THE ASSESSEE IN THE MISCELLANEOUS APPLICATION IS IN FACT REQUEST FOR THE REVIEW OF THE ORDER OF ITAT. IT IS SETTLED LAW THAT A REVIEW IN THE GARB OF RECTIFICAT ION OF MISTAKE IS NOT PERMISSIBLE. WE FIND THAT THE REVIEW OF THE ORDER OF THE TRIBUNAL CAN BE DONE ONLY BY THE 4 M.A. NO. 22/NAG/2013. HONBLE HIGH COURT. IT IS NOT PERMISSIBLE BY THE ITAT UNDER SECTION 254(2) OF THE I.T. ACT. 4. BEFORE PARTING WE MAY ADD THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF KETTLEWELL BULLEN AND CO. LTD. 53 ITR 261 WHICH IS BEING REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE AS A REASON FOR RECALL OF THIS ORDER, WE MAY NOTE THAT THE SAID ORDER OF THE HONBLE APEX COURT WAS RENDERED MUCH PRIOR TO THE ENACTMENT OF SECTION 50B PERTAINING TO SLUM P SALE WHICH IS THE MATTER UNDER CONSIDERATION IN THIS CASE. HENCE IN THE BACKGROUND OF AFORESAID DISCUSSION, IN OUR CONSIDERED OPINION, THERE IS NO MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL. ACCORDINGLY WE DISMISS THIS MISCELLANEOUS APPLICATION. 5. IN THE RESULT, THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPT. 2015. SD/ SD/ (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 11 TH SEPT., 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. 5 M.A. NO. 22/NAG/2013. TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR