Case Note & Summary
The case involves an appeal by the Revenue under Section 260A of the Income Tax Act, 1961, challenging an order of the Income Tax Appellate Tribunal dated 6/7/2009. The respondent-assessee, M/s. Fernhill Laboratories and Industrial Establishment, had received a sum of Rs.15,20,00,000/- as consideration for the transfer of a trade mark and design. The Revenue sought to tax this receipt as capital gains. The Tribunal had confirmed the order of the Commissioner of Income Tax (Appeals) holding that the receipt was not taxable. The Revenue raised three substantial questions of law: (a) whether the Tribunal was correct in holding that the receipt was not taxable; (b) whether the provisions for computation of capital gains fail due to absence of specific provision for cost of acquisition of self-generated assets; and (c) whether the sale proceeds of self-generated assets like trade mark or brand name cannot be taxed in the assessment year 1999-2000 as the amendment to Section 55(2) became effective only from 1/4/2002. The court, after hearing the parties, dismissed the appeal, holding that the questions of law are covered by the decision of this court in the case of CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) and subsequent decisions. The court found that the Tribunal had correctly applied the law, and no substantial question of law arises. The appeal was dismissed with no order as to costs.
Headnote
A) Income Tax - Capital Gains - Self-Generated Assets - Taxability of consideration received on sale of trade mark and design - The issue was whether the receipt of Rs.15,20,00,000/- on account of consideration for trade mark and design was taxable as capital gains - The court held that in the absence of a specific provision for cost of acquisition of self-generated assets, the provisions for computation of capital gains fail, and the sale proceeds cannot be taxed - The amendment to Section 55(2) of the Income Tax Act, 1961 effective from 1/4/2002 is prospective and does not apply to the assessment year 1999-2000 (Paras 2-3).
Issue of Consideration
Whether the receipt of Rs.15,20,00,000/- on account of consideration for trade mark and design was taxable as capital gains in the assessment year 1999-2000, given the absence of a specific provision for cost of acquisition of self-generated assets under the Income Tax Act, 1961.
Final Decision
Appeal dismissed. No order as to costs.
Law Points
- Capital gains on self-generated assets
- Cost of acquisition of self-generated assets
- Section 55(2) amendment prospective
- Taxability of trade mark sale proceeds
