VYSALI CHEMOTHERAPEUTICS PVT LTD Vs. COMMISSIONER OF INCOMETAX

JUDGEMENT

(1.) THE short question that arises for consideration in this appeal is as to whether the brand name in respect of eight items of medicines sold by the assessee for a consideration of Rs. 4 lakhs to M/s Vysali Pharmaceuticals (P) Ltd. is exigible to capital gains tax under the IT Act, 1961 (for short the Act).

(2.) ASSESSEE is the appellant. The assessment year is 1992 -93, the relevant accounting period ended 31st March, 1992. During the accounting period relevant to the assessment year, the assessee sold the 'brand name' in respect of eight items of medicines to a sister -concern by name M/s Vysali Pharmaceuticals (P) Ltd. for a consideration of Rs. 4 lakhs. The AO wanted to assess the said amount to tax by resorting to the provisions of Section 55(2) of the Act. The said provision, as it stood at the relevant time, provided that for the purpose of Sections 48 and 49 'cost of acquisition' in relation to a capital asset, being goodwill of a business, in the case of such acquisition by the assessee by purchase from a previous owner means the amount of the purchase price and in any other case, shall be taken to be nil. The case of the assessee was that the brand name cannot be equated to or treated as part of goodwill of the business of the assessee. The AO and the two appellate authorities have taken the view that the brand name is definitely a part of the goodwill of the business of the assessee and, therefore, it is liable to be assessed to capital gains under Section 48 of the Act.

(3.) SRI Geroge K. George, learned Standing Counsel for the Revenue, submits that all the three authorities have clearly considered the question whether brand name sold by the assessee will fall within the ambit of goodwill occurring in Clause (a) of Sub -section (2) of Section 55 of the Act and found as a fact that it does. The Standing Counsel further submitted that none of the authorities including the Tribunal had occasion to consider the effect of the amendment made by the Finance Act, 2001, w.e.f. 1st April, 2002, since all the three orders impugned in this appeal were passed long before such amendment.