COMMISSIONER OF INCOME-TAX; DEPUTY COMMISSIONER OF INCOME-TAX Vs. ASSOCIATED ELECTRONICS & ELECTRICAL INDUSTRIES (BANGALORE) PVT LTD

JUDGEMENT

(1.) This appeal is filed by the Revenue under section 260-A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for short) challenging the Order passed by the Income Tax Appellate Tribunal, Bangalore Bench [B] dated 6.2.2009 for the Assessment Year 1996-97.

(2.) The facts in brief are that the Assessee was carrying on the business of manufacture and marketing of electrical appliances and the search was conducted in the premises of the Managing Director of the Company. During the search and survey proceedings, it was noticed that Rs. 3,99,75,400/- had been paid by M/s. Sharp Corporation, Japan to the Assessee-Company for the transfer of trademark 'SHARP' and the common law rights and goodwill accompanying it. In respect of Block Assessment 1988-89 to 1998-99, the entire amount of Rs. 3,99,75,400/- was brought to tax on substantive basis under the head 'capital gains'. The Assessing Officer brought to tax the entire amount of Rs. 3,99,75,400/- holding that under the Settlement Agreement, the registered trademark 'SHARP' along with its goodwill and all other benefits accompanying it came to be transferred in favour of M/s. Sharp Corporation, Japan. The Appellate Commissioner confirmed the additions made under the head 'capital gains' in the hands of the Assessee in Block Assessment though the same was deleted in regular assessments. On further appeal before the Tribunal by the Assessee, the Tribunal proceeded to hold that in the case of transfer of good will, the cost of acquisition attributed to 'capital gains' could be taken at Rs. 'Nil'. So far as trade mark is concerned, it is liable to tax under section 55(2)(a) of the Act with effect from 01.04.2002. It is held, what was transferred by the Assessee-Company to M/s. Sharp Corporation, Japan, was only the trademark and not the goodwill of the business. This order is impugned in this appeal raising the following substantial questions of law:

(3.) Learned Counsel Sri. K.V. Aravind, appearing for the Revenue, would contend that section 48 of the Act would contemplate mode of computation for the income chargeable under the head 'capital gains'. The same is computed by deducting from the full value of consideration: