Commissioner of Income Vs DCIT (Madras High Court)
Summary: The Madras High Court dismissed the Department’s appeal against the Income Tax Appellate Tribunal’s order dated 21 November 2012 concerning deletion of an addition of ₹9 crore towards non-compete fee. The substantial questions admitted on 26 August 2013 challenged the Tribunal’s affirmation of the CIT(A)’s relief, questioned its finding because the entire ₹9 crore was received in the financial year relevant to AY 1999-00 while ₹7 crore was paid to Mohan Breweries & Distilleries Ltd. only in the following financial year, and raised the Department’s contention that the consideration represented a slump sale attracting long-term capital gains. Both sides relied on the High Court’s decision dated 30 March 2012 in Commissioner of Income Tax v. Mohan Breweries & Distilleries Ltd., T.C.(A) No.319 of 2008. That decision concerned ₹7 crore forming part of the ₹9 crore non-compete fee received from Vijay TV, with the remaining ₹2 crore received by the respondent assessee in the present case.
The questions concerning the ₹7 crore receipt had been answered in favour of Mohan Breweries by applying the Supreme Court’s ruling in Guffic Chem. P. Ltd. v. Commissioner of Income Tax, 332 ITR 602. Both counsel accepted that the present dispute was covered by the same judgment. In the interests of uniformity, the High Court answered the substantial questions in the assessee’s favour and dismissed the Revenue’s appeal without costs.
Cases Discussed
- Commissioner of Income Tax v. Mohan Breweries & Distilleries Ltd., T.C.(A) No.319 of 2008, decided on 30 March 2012 (Madras High Court) — The questions concerning taxability of ₹7 crore out of the same ₹9 crore non-compete fee were answered in favour of the assessee by applying Guffic Chem. Both parties accepted that this decision covered the present dispute, and the Court followed it in the interests of uniformity.
- Guffic Chem. P. Ltd. v. Commissioner of Income Tax, (2011) 332 ITR 602 (Supreme Court) — Its ratio formed the basis of the earlier Mohan Breweries ruling, which the High Court followed in disposing of the present appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The present appeal has been filed by the Department challenging an order dated 21.11.2012 of the Income Tax Appellate Tribunal (‘Tribunal’/’ITAT’). The substantial questions of law that have been admitted at the hearing on 26.08.2013 are as follows:
(i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in upholding the order of the CIT(A) who deleted the addition of Rs. 9 crores made towards non compete fee ?
(ii) Is not the (finding of the Tribunal bad since the assessee received the entire sum of Rs.9 crores in the financial year relevant to AY 1999-00 and a sum of Rs.7 crores was paid to MBDL only in the next financial year?
(iii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was proper in its finding especially when the consideration was a slum(p) sale and consequent assessment of long term capital gains arise in the hands of the assessee?
2. Both Mr.Ravikumar, learned Senior Standing Counsel for the Department and Mr.Vijayaraghavan, learned counsel for the assessee rely on the order passed by this Court on 30.03.2012 in T.C.(A) No.319 of 2008 in Commissioner of Income Tax v. Mohan Breweries & Distilleries Ltd.
3. The issue in that case related to assessment in the hands of Mohan Breweries, of a sum of Rs.7.00 crores. The aforesaid amount was part of a sum of Rs.9.00 crores, received from Vijay TV as non-compete fee, the remaining amount of Rs.2.00 crores received by the assessee/respondent in this case.
4. The substantial questions of law relating to the taxability of non- compete fee of Rs.7.00 crores received by Mohan Breweries were answered in T.C.(A) No.319 of 2008 in favour of the assessee relying on the ratio of judgment of the Supreme Court in Guffic Chem. p. Ltd. v. Commissioner of Income Tax (332 ITR 602).
5. Both learned counsel before us accede to the present matter also being covered by the same judgment. Hence, and in the interests of uniformity, we answer the substantial questions of law in favour of the assessee.
6. With this, this Tax Case (Appeal) is dismissed. No costs.
