Case Law Details
Brief of the Case
Delhi High Court held In the case of CIT vs. HCL Infosystems Ltd. that the receipt by the Assessee as a result of the termination of the JVA during AY 1998-99 was a capital receipt but in light of Section 55 (2) (a) as it stood at the relevant time, the said amount cannot be brought to capital gains tax. At the relevant time, there was no provision in regard to determining the cost of acquisition of the above intangible assets for the purposes of computing capital gains tax.
Facts of the Case
The Assessee, HCL Infosystems Limited (HIL), which was initially incorporated as HCL Limited under the Companies Act, 1956 on 17th April 1986, was engaged in the manufacture, distribution and sale of computers and services in India. Hewlett Packard Inc (HP), a company incorporated in the United States of America (USA), is engaged in the design, engineering, manufacture, assembly and sale of certain types of computers, along with their components and peripherals. It has substantial experience, expertise and reputation in its area of operations. Hewlett-Packard India Pvt. Ltd. (HPI) is the subsidiary of HP in India and is engaged in the manufacture of computers in India under licences from HP.
On 2nd April 1991 HCL Limited, HP, HPI and a majority of its shareholders and the companies and individuals named in Exhibit ‘A’ attached to the Agreement (‘the Control Group’) entered into a ‘Joint Venture Agreement (JVA). The agreement was described as ‘An Agreement Regarding HCL HEWLETT-PACKARD LTD’. This JVA was further amended on 27th May 1991. In terms of the JVA, the parties agreed to combine their respective computer manufacturing, marketing, servicing and sales activities in India of both HCL Limited (subsequently renamed as HIL, the Assessee) and HPI. 26% equity in the JVA was held by HP, through its wholly-owned subsidiary, Hewlett-Packard Delaware Capital Inc. (‘HPDC’). HIL was permitted to use the name ‘Hewlett Packard’ under the JVA. The joint venture company was accordingly renamed as HCL Hewlett-Packard Ltd (‘HCL HP Ltd.’).
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