SHUKLENDU A BAJI, MUMBAI v. ACIT 24(2), MUMBAI

ITA 5356/MUM/2009 | 2006-2007
Pronouncement Date: 16-12-2010 | Result: Allowed

Appeal Details

RSA Number 535619914 RSA 2009
Assessee PAN AAEPB3851G
Bench Mumbai
Appeal Number ITA 5356/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 24 day(s)
Appellant SHUKLENDU A BAJI, MUMBAI
Respondent ACIT 24(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 16-12-2010
Date Of Final Hearing 25-11-2010
Next Hearing Date 25-11-2010
Assessment Year 2006-2007
Appeal Filed On 22-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI. BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI V. DURGA RAO JUDICIAL MEMBER ITA NO.5356/MUM/2009 (ASSESSMENT YEAR : 2006-07) SHRI SHUKLENDU A. BAJI 901 WHISPERING HEIGHTS MIND SPACE CHINCHOLI BUNDER RD. MALAD (WEST) MUMBAI 400 064 (PAN AAEPB3851G) VS. ASSTT. COMMISSIONER OF INCOME-TAX 24(2) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : MR. K. GOPAL RESPONDENT BY : MR. D. SONGATE PER V. DURGA RAO : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-XXIV MUMBAI DATED 15/07/2009. 2. GROUND NOS. 1 TO 5 ARE IN RESPECT OF ADDITION OF ` . 38 50 000/- ON ACCOUNT OF TRANSFER OF GOODWILL. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF DEVELOPING S OFTWARE AND DEALING IN SOFTWARE AS PROPRIETOR UNDER THE NAME AND STYLE OF M/S COGITO SYSTEMS SINCE 01/07/1994. IN THE PREVIOUS YEAR REL EVANT TO ASSESSMENT YEAR 2006-07 THE ASSESSEE HAD TRANSFERR ED THE BUSINESS IN FAVOUR OF CYBERSOLE TECHNOLOGIES PVT. LTD. (IN S HORT CTPL) VIDE AGREEMENTDATED 01/04/2005 FOR A CONSIDERATION OF ` . 38 50 000/-. THE ASSESSEE FILED RETURN OF INCOME AND SHOWED THE AMOUNT RECEIVED ON TRANSFER OF ASSETS OF ` . 38 50 000/- AS GOODWILL AND THE SAME WAS INVESTED IN THE PRESCRIBED BONDS AS REFERRED IN SEC TION 54EC OF THE ACT WHICH WAS CLAIMED AS EXEMPTION U/S 54EC OF TH E ACT. THE AO ITA NO. 5356/M/08 SHUKLENDU A. BAJI 2 WAS OF THE VIEW THAT THE SAID AMOUNT CANNOT BE CONS IDERED AS PAYMENT IN RESPECT OF GOODWILL BUT IT WAS IN RESPEC T OF SALE OF COMMERCIAL RIGHTS AND FOR NOT CARRYING OUT ANY ACTI VITY IN RELATION TO ANY BUSINESS. THEREFORE THE AO HELD THAT THE SAID CONSIDERATION WAS ASSESSABLE AS BUSINESS INCOME IN VIEW OF THE PROVIS IONS OF SECTION 28(VA) OF THE ACT AND ACCORDINGLY HE ASSESSED THE SAID SUM OF ` . 38 50 000/- AS BUSINESS INCOME AND DISALLOWED THE C LAIM OF EXEMPTION U/S 54EC OF THE ACT. AGGRIEVED BY THE O RDER OF AO THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). 4. IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE AMOU NT RECEIVED BY THE ASSESSEE ON TRANSFER OF CAPITAL ASSETS AND THE SAME IS A LONG TERM CAPITAL GAIN ELIGIBLE FOR DEDUCTION U/S 54EC OF TH E ACT. IT WAS FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE AO HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 28(VA) OF THE ACT WHICH ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. THE LEARNED CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS SOLD VARIOUS BUSINESS ASSETS AND RECEIVED ` . 38 50 000/- AND CLAIMED THE SAME AS GOODWILL U/S 54EC OF THE ACT. MOST OF THE ASSETS SOLD BY THE ASSESSEE ARE DEPRECIABLE ASSETS AND SALE OF SUCH AS SETS SHOULD HAVE BEEN OFFERED FOR TAXATION AS SHORT TERM CAPITAL GAI NS IN VIEW OF THE PROVISION OF SECTION 50 OF THE ACT. IN THAT CASE T HE ASSESSEE WOULD NOT BE ELIGIBLE FOR EXEMPTION U/S 54EC AS SUCH EXEMPTI ON IS ALLOWABLE IN RESPECT OF LONG TERM CAPITAL GAIN ONLY. THE PROFIT ON SALE OF ASSETS VIDE THE SAID AGREEMENT IS EITHER ASSESSABLE AS SHO RT TERM CAPITAL GAINS OR BUSINESS INCOME U/S 28(VA) OF THE ACT FO R THE REASONS GIVEN IN THE ASSESSMENT ORDER. IN NONE OF THESE CASES EXE MPTION U/S 54EC OF THE ACT IS ALLOWABLE. SOME SMALL PORTION OF THE GAIN MIGHT BE ATTRIBUTABLE TO LONG TERM CAPITAL ASSETS. THE CIT(A ) OBSERVED THAT THE ASSESSEE DID NOT PROVIDE ANY SUCH DETAILS ENTIRE PR OFIT IS HELD AS ASSESSABLE AS SHORT TERM CAPITAL GAIN/BUSINESS INCO ME. HE FURTHER OBSERVED THAT THE ASSESSEE HAS NOT SOLD THE ENTIRE BUSINESS AS A GOING CONCERN AND ALSO IT CANNOT BE SAID THAT IT WAS A SL UMP SALE WITHIN THE ITA NO. 5356/M/08 SHUKLENDU A. BAJI 3 MEANING OF SECTION 50B OF THE ACT. THE CIT()A) POIN TED OUT THAT THE ASSESSEE HIMSELF HAS NOT MADE ANY SUCH CLAIM IN THE RETURN OF INCOME. FINALLY THE CIT(A) HELD THAT THE INCOME ON TRANSFER OF ASSETS VIDE THE IMPUGNED AGREEMENT IS ASSESSABLE AS SHORT TERM CAPITAL GAIN/BUSINESS INCOME AND THEREFORE EXEMPTION CLAI MED U/S 54EC OF THE CANNOT BE ALLOWED. STILL AGGRIEVED THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT THE AMOUNT IN QUESTION HAS ACTUALLY BEEN RECEIVED BY TH E ASSESSEE FOR TRANSFER OF BUSINESS ASSETS AS A GOING CONCERN. HE CONTENDED THAT THE CASE OF THE ASSESSEE THUS COVERED BY THE PROVISO (I) OF SECTION 28(VA) AND THE PROFIT ARISING FROM TRANSFER OF BUSINESS AS SETS IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. IN SUPPORT OF H IS CONTENTION HE HAS RELIED ON THE RELEVANT CLAUSE OF THE AGREEMENT TO T RANSFER PLACED AT PAGE 7 OF THE PAPER BOOK. HE HAS ALSO RELIED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. ACE BUILDERS (P) LTD. [2006] 281 ITR 210 (BOM.) AND CONTENDED TH AT THE AMOUNT IN QUESTION BEING CHARGEABLE TO TAX AS A CAPITAL GAIN EXEMPTION U/S 54EC OF THE ACT IS ALLOWABLE TO THE ASSESSEE. 6. THE LEARNED DR ON THE OTHER HAND HAS RELIED UP ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT SINCE THE CONTENTI ONS RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE HAVE NOT BEEN SPEC IFICALLY EXAMINED EITHER BY THE AO OR BY THE CIT(A) IN THE LIGHT OF T HE AGREEMENT TO TRANSFER WE SET ASIDE THE IMPUGNED ORDER OF CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH BY TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE AND BY FOLLOWING THE JUDGMENT OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF ACE BUILDERS (P.) LTD. (S UPRA). THE AO IS ALSO ITA NO. 5356/M/08 SHUKLENDU A. BAJI 4 DIRECTED TO EXAMINE THE CONTENTION RAISED BY THE LE ARNED DR RELYING ON THE CLAUSE 2.13 OF THE AGREEMENT TO TRANSFER THA T AMOUNT RECEIVED BY THE ASSESSEE IS PARTLY ATTRIBUTABLE TO NON-COMPE TE FEES AND THE SAME TO THAT EXTENT IS CHARGEABLE AS BUSINESS INCOM E U/S 28(VA) OF THE ACT. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF DECEMBER 2010. SD/- SD/- (P.M. JAGTAP) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT. 16 TH DECEMBER 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE E BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV