Case Law Details
SBM Chemicals & Instruments Pvt. Ltd. Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that amount received by the appellant from VMI in terms of the Settlement Agreement was consideration for transfer of goodwill and the same is taxable under Capital Gains and cannot be treated as business income.
Facts- The Appellant is an Indian private limited company engaged in the business of trading in Rubber, Chemicals, & equipment. Further, the Appellant also acted as commission agent for various parties.
For the Assessment Year 2013-14, the case of the Appellant was selected for regular scrutiny. AO noted that in the revised statement of income the Appellant had offered to tax Long Term Capital Gains of INR 13,83,15,000/-.
Vide order sheet, the Appellant was asked to show cause why the amount of INR 14,33,15,000/- should not be brought to tax under the head ‘Business Income’. AO was not convinced with the explanation furnished by the Appellant. According to the Assessing Officer, the Euro 20,00,000/- (INR 14,33,15,000/-) paid to the Appellant in lieu of future profits/commission which the Appellant would have earned from the agency business. The Appellant was free to carry on its business and therefore, the source of the profits/income was intact. In any case, the source of income was business of the Appellant as a whole and each client of the Appellant could not be regarded as a separate source of income. Thus, AO concluded that the aforesaid amount was connected to the business carried on by the Appellant and was, therefore, taxable in the hands of the Appellant as business income.
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