the Tribunal was right in holding that a sum of Rs. 1,25,00,000/- representing the value of technical know-how is liable to tax under the head Long Term Capital Gain the context of Section 45 read with Section 55 of the Income Tax Act, 1961.
M/s. Indo Tech Electric Co. Versus The Deputy Commissioner of Income-Tax TAX CASE (APPEAL) NOS. 2209 AND 2210 OF 2006
PRAYER: Tax Case Appeals filed Under Section 260-A of the Income-Tax Act, 1961, against the orders of the Income-Tax Appellate Tribunal “A” Bench, Chennai, passed in I.T.A. No. 2092/Mds/1998 and I.T.A. No. 115/Mds/1999 respectively, dated 23.12.2005 for the assessment year 1995- 96.
COMMON JUDGMENT
M.M.SUNDRESH, J
In view of the fact that both the appeals have arisen from the same Assessment Year and order, coupled with the further fact that the parties are one and the same, they have been taken up together and a common order is passed.
2.T.C.(A)No. 2209 of 2006 has been filed by the assessee, challenging the order of the Tribunal which in turn has reversed the order of the Commissioner of Income Tax (Appeals) by confirming the order of the Assessing Officer. T.C.(A)No. 2210 of 2006 has been filed by the assessee, challenging the order of the Tribunal which confirmed the order of the Commissioner of Income Tax (Appeals) as well as the Assessing Officer. Both these two appeals are pertaining to the Assessment Year 1995-96.
3. The Tribunal has allowed the appeal filed by the revenue and dismissed the appeal filed by the assessee and hence these two appeals have been filed by the assessee by raising the following substantial questions of law:
3.1. The substantial questions of law raised in T.C.(A)No.2209 of 2006 are as follows:
“1.Whether the Tribunal was right in holding that a sum of Rs.1,25,00,000/- representing the value of technical know-how is liable to tax under the head Long Term Capital Gain the context of Section 45 read with Section 55 of the Income Tax Act, 1961?
2. Whether the Tribunal was right in holding that a sum of Rs.36,16,139/- lakhs representing the compensation received for pending orders was liable to Long Term Capital Gain Tax in the context of Section 45 read with Section 55 of the Income Tax Act, 1961?”
3.2. The substantial question of law raised in T.C.(A)No.2210 of 2006 is as follows:
“Whether the Tribunal was right in upholding the additions made of Rs.33,00,000/- received by the appellant towards compensation for expected orders under negotiation as taxable under the head Long Term Capital Gain in the context of Section 45 read with Section 55 of the Income Tax Act, 1961?”
4. Brief Facts:-
4.1 . The assessee is a Manufacturer of Transformers being a partnership concern. For the Assessment Year 1995-96 it filed its return of income admitting a sum of Rs.93,33,201/-. The partners of the assessee firm are father and son. The business of the assessee firm was taken over as a going concern by a limited company known as “Indo Tech Transformers Limited” by virtue of an agreement dated 15.07.1994. The partners of the assessee firm are also the Directors of the limited company. The limited company made the following payments to the assessee.
