COMMISSIONER OF INCOME TAX Vs. MILK FOOD LTD

JUDGEMENT

(1.) The respondents-assessee is engaged in the business of manufacturing and marketing of various milk products like milk powder, ghee etc. During assessment year 1996-97, the respondent appears to have finalised agreements with M/s.Brooke Bond Lipton India Limited effective from 1st of April, 1995 for assignment of its trade mark `Milk Food 100% Ice Cream' in favour of the said company. A non-competition agreement in ice cream/frozen desert was also separately entered into between these two companies. In consideration of the two agreements, the assessee company received a sum of Rs.5 crores for assignment of its trademark and Rs.8 crores for non-competition in manufacturing, selling and distribution of ice cream. The trade mark was assigned for a period of eight years while non-competition in ice cream was to last for ten years.

(2.) In the course of assessment, the assessee claimed that the amounts received by it from M/s.Brooke Bond Lipton India Limited were not exigible to tax. The assessing officer declined to accept that contention and declared the receipt exigible to tax in the hands of the assessee. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax and, inter alia, relied upon instructions issued by the Central Board of Direct Taxes, according to which, receipts of the kind referred to above could be brought to tax only from the assessment years 1998-99 onwards in view of the amendment made in Section 55 of the Income Tax Act, 1961. The Commissioner upheld the claim and the contention urged by the assessee. Relying upon the decision of the Supreme Court as also the instructions issued by the Central Board of Direct Taxes, the Commissioner held that the receipts in question were not, exigible to tax for the periods they were actually received.

(3.) A further appeal taken to the Tribunal by the revenue failed and was dismissed by the order impugned in the present appeal. The Tribunal also placed reliance upon the instructions issued by the Central Board of Direct Taxes and held that the amendment to Section 55 notwithstanding, receipts of the kind we are concerned with were not exigible to tax as the same were to be treated as capital receipts. The present appeal assails the correctness of the said order.