Income Tax Appellate Tribunal - Delhi
Sunil Lamba vs Deputy Commissioner Of Income Tax on 7 May, 2003
Equivalent citations: (2004)83TTJ(DELHI)174
ORDER
Assessing officer accepted, amount received under restrictive covenant and for assignment of trade mark, as capital receive Catch Note:
The assessee received certain amount under a restrictive covenant of not engaging himself directly or indirectly in the activities carried on by it and the assessing officer accepted the same a capital receipt. Commissioner has nowhere given any finding to the effect that order passed by the assessing officer was erroneous insofar as the same was prejudicial to the interest of the revenue. Therefore, merely because the assessing officer has adopted one view which is not in consonance with the Commissioner's views, the order passed by the assessing officer cannot be said to be erroneous. Further, even on merits, the Commissioner was not justified in assuming jurisdiction under section 263, therefore, the order passed under section 263 is quashed.
Ratio:
Commissioner has nowhere given any finding to the effect that order passed by the assessing officer was erroneous insofar as the same was prejudicial to the interest of the revenue. Therefore, merely because the assessing officer has adopted one view which is not in consonance with the Commissioner's views, the order passed by the assessing officer cannot be said to be erroneous. Further, even on merits, the Commissioner was not justified in assuming jurisdiction under section 263, therefore, the order passed under section 263 is quashed.
Held:
Admittedly, Commissioner has nowhere given any finding to the effect that order passed by the assessing officer was erroneous insofar as the same was prejudicial to the interest of the revenue. In order, the Commissioner exercises his powers conferred upon him by this section two prerequisites must be present. The first is that the order of the assessing officer must be erroneous and secondly that the error must be such that it is prejudicial to the interest of the revenue. If the order is erroneous but it is not prejudicial to the interest of the revenue, the Commissioner cannot exercise his revisional jurisdiction. In the instant case, nowhere the Commissioner has held so.
It is necessary to confer jurisdiction on the Commissioner that there must be some material which enables him to come to the conclusion that the order of the assessing officer is erroneous so as to be prejudicial to the interest of the revenue. In the instant case, nothing new finds place on the record of the Commissioner. The same documents were before the Commissioner which were before the assessing officer. Merely because the assessing officer has adopted one view which is not in consonance with the Commissioner's views, the order passed by the assessing officer cannot be said to be erroneous.
Merely because the assessing officer has not dealt with this issue or recorded specific findings in the assessment order, it cannot be said that there was no application of mind by the assessing officer to the facts and details before him. Similarly, if the assessing officer acts in accordance with the decisions of the High Court/Tribunal, there can be said to be no error in the order of the assessing officer which may cloth the Commissioner with powers to exercise jurisdiction under section 263. Where two views were possible and the assessing officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue. On this basis alone, the order passed by the Commissioner suffers from infirmity and deserves to be cancelled.
It cannot be said that the order passed by the assessing officer was erroneous insofar as prejudicial to the interest of the revenue. Thus even on merits, the Commissioner was not justified in assuming jurisdiction under section 263. The order under section 263 is, therefore, quashed.
Case Law Analysis:
Dwarka Nath v. ITO & Anr. (1965) 57 ITR 349 (SC), Sitapur Paper Mills Ltd. v. CWT v. (1970) 77 ITR 6 (SC) and Malabar Industrial Co. Ltd. v. CIT (2000) 14 DTC 146 (SC) : (2000) 243 ITR 83 (SC) relied on.Universal Radiator v. CIT (1993) 201 ITR 800 (SC), J. C. Chandiok v. Dy. CIT (1999) 11 DTC 707 (Del-Trib) (SB) : (1999) 69 ITD 75 (Del-Trib) (SB), Gillanders Arbuthnot & Co. Ltd. v. CIT (1964) 53 ITR 283 (SC), Rao Raja Kalyan Singh (1974) 97 ITR 690 (Raj), Asstt. CIT v. A.S. Wardekar (2001) 77 ITD 405 (Cal), Saroj Kumar Poddar v. Jt. CIT (2001) 22 DTC 597 (Cal-Trib) : (2001) 77 ITD 326 (Cal-Trib), M. N. Karani v. Asstt. CIT (1998) 64 ITD 119 (Mum-Trib), Asstt CIT v. Prakash G. Hebalkar (2003) 32 DTC 26 (Mum-Trib) : (2002) 83 ITD 495 (Mum-Trib), CIT v. Saraswati Publicities (1981) 132 ITR 207 (Mad) and Shiv Raj Gupta's case (ITA No. 489/Del/98) dated 30-5-2001) applied.
Application:
Principle enunciated in this case is applicable to current assessment year.
Decision:
In favour of assessee.3 Assessment Year:
1995-96 Cases Referred:
Ajai Choudhary v. Dy. CIT (2000) 74 ITD 350 (Del-Trib), CIT v. Arvind Jewellers (2003) 32 DTC 561 (Guj-HC) : (2003) 259 ITR 502 (Guj), CIT v. B. C. Srinivas Setty (1981) 128 ITR 294 (SC), CIT v. Best & Co. (P) Ltd. (1966) 60 ITR 11 (SC), CIT v. Gabrial India Ltd. (1993) 203 ITR 108 (Bom), CIT v. Govindam Seksariya Charity Trust (1987) 166 ITR 580 (MP), CIT v. O.P. Seth (1993) 201 ITR 635 (Del), CIT v. Prithvi Raj & Co. (1993) 199 ITR 424 (Del), CIT v. Ratlam Coal Ash Co. (1988) 171 ITR 141 (MP), CIT v. Tej Cloth Weaving Factory (1989) 178 ITR 474 (P&H), Dy. CIT v. Goodricke Group Ltd. (2001) 77 ITD 245 (Cal-Trib), J. P. Srivastava & Sons (Kanpur) Ltd. v. CIT (1978) 111 ITR 326 (All), Jhulelal Land Development Corpn. v. Dy. CIT (1996) 56 ITD 345 (Bom-Trib), Kettle Well Bullen & Co. Ltd. v. CIT (1964) 53 ITR 261 (SC), Machino Techno Sales (P) Ltd. v. Dy. CIT (1996) 59 ITD 303 (Cal-Trib), Oberoi Hotel (P) Ltd. v. CIT (1999) 8 DTC 627 (SC) : (1999) 236 ITR 903 (SC), Sahara India Mutual Benefit Co. Ltd. v. Asstt. CIT (2002) 74 TTJ (All-Trib) 67, Srinivasa Hatcheries (P) Ltd. v. Dy. CIT (2002) 81 ITD 36 (Hyd-Trib), Super Cassettes Industries (P) Ltd. v. CIT (1992) 41 TTJ (Del-Trib) 530 and Vidisha Tractors v. Asstt. CIT (1995) 53 TTJ (Ind-Trib) 432.
Income Tax Act 1961 s.263 ORDER Keshaw Prasad, A.M.
1. The appeal has been directed by the assessee against CIT's order under Section 263 of the Act pertaining to asst. yr. 1995-96.
2. Briefly, the facts of the case are that the assessee Shri Sunil Lamba was engaged in the business of marketing on wholesale/retail distribution of icecream, ice lollies, dairy and non-dairy based frozen desserts manufactured by the companies, firms and other concerns owned/controlled and managed by Sh. B.C. Lamba and Shri Sunil Lamba in the states of J&K, Himachal Pradesh, Punjab, Haryana, U.P., Rajasthan and the Union territories of Chandigarh and Delhi under the brand name "Kwality" with logos and designs. He was engaged in these activities for about two decades.
Under a strategic alliance agreement, the assessee agreed to transfer, assign and convey such rights in favour of Brooke Bond, Lipton India Ltd. (in short BBL). Under the said strategic agreement, the assessee was required to surrender in favour of BBL for 10 years from the effective date of agreement, all rights to marketing, sale and distribution of ice-cream, ice lolly, dairy and non-dairy based frozen dessert either manufactured by associates or any other manufacture and further was to undertake that he would desist from engaging directly or indirectly in the business of marketing, selling, distribution of the said product in competition to BBL. In consideration thereof a sum of Rs. 1 crore was received by the assessee from BBL. As per agreement dt. 14th Oct., 1994, the assessee surrendered in favour of BBL for 10 years all his rights in respect of marketing, selling and distribution of ice-creams, ice lollies and frozen desserts, etc. The assessee also agreed that for a period of 10 years, he will not engage himself directly or indirectly in the business of distribution of products of its associates or any other manufacturer of ice-cream, ice lollies and frozen desserts. The effective date of agreement was 1st Jan., 1995.
3. The assessee also had 50 per cent co-ownership of the registered trade-mark "Kwality". Under a deed of assignment dt. 14th Oct., 1994, the assessee assigned his co-ownership in the registered trade-mark "Kwality" in favour of Digital Securities (P) Ltd. (DSPL for short) in the territories mentioned above. In consideration of such an assignment, the assessee received a sum of Rs. 1.85 crores from DSPL.
4. When the assessee filed his return of income on 31st Oct., 1995, in part 4 of its return, he showed both the amount as capital receipt not liable to tax. The assessment under Section 143(3) of the Act was completed on 31st Dec., 1997, accepting the claim of the assessee. However, subsequently, the CIT examined the records of the assessee. He found that the assessee has not filed the details to show the nature of amount received from BBL. He also has not shown that how the asset was acquired or whether it was a self-generated asset. Therefore, non-taxing the above two amounts was an error of law. The CIT, therefore, issued a show-cause notice on 13th Feb., 2000, in response to which the assessee filed a detailed reply vide letters dt. 22nd March, 2000 and 27th March, 2000. In his submissions, the assessee, inter alia, stated that the amount of Rs. 1 crore received by him from BBL was in consideration for surrender by the assessee in favour of BBL. for a period of 10 years of all his rights to market, sell or distribute ice-cream, ice lollies and dairy and non-dairy based frozen desserts, either manufactured by any concern with which the assessee was associated or by any other manufacturer and to refrain from engaging directly or indirectly in the business of selling, marketing or distribution of the said product in competition to BBL, Such non-competition fee was capital receipt not liable to capital gains tax. The reliance was placed on the decision of Hon'ble Supreme Court in the case of Kettle Well Bullen & Co. Ltd. v. CIT (1964) 53 ITR 261 (SC) and in the case of CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC).
5. The assessee also submitted that the consideration received by the assessee from DSPL under the deed of assignment dt. 14th Oct., 1994, for assigning to that company his 50 per cent co-ownership in the proprietary rights in trademark in the name of "Kwality" in respect of which the cost of acquisition to the assessee was nil, does not fall within the special provisions of Section 55(2)(a) of the Act. The said provisions do not cover any capital asset of the nature of any trade-mark or merchandise mark of which the cost of acquisition to the assessee was nil. Thus, the consideration received by the assessee for assignment of his 50 per cent co-ownership share in the proprietary rights of registered trade-mark of the name "Kwality" apparently does not fall within the ambit of charge of tax under "capital gain".
6. Regarding assumption of jurisdiction under Section 263, the assessee relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Gabrial India Ltd. (1993) 114 (CTR) (Bom) 81 : (1993) 203 ITR 108 (Bom) and submitted that no error of law or facts arise out of the assessment order and, therefore, the assumption of jurisdiction under Section 263 of the Act was illegal.
7. The CIT considered the submissions of the assessee regarding payment received for assignment of the trade-mark "Kwality", the CIT observed as under:
"1. Firstly, the trade-mark of 'Kwality' is not a self-generated asset of Shri Sunil Lamba. He was not at all associated with the trade-mark when it was initially registered.
2. Secondly, M/s Pure Ice-cream Co., M/s Pure Ice-cream Co. (P) Ltd. and M/s Gaylord (P) Ltd. are separate legal entries quite distinct from Shri Sunil Lamba. He has acquired rights over the trade marks from these concerns. It is not clear whether any consideration has passed for acquiring the trade-mark rights by Shri Sunil Lamba. Even if no consideration was paid to these concern acquiring the trade-mark rights, the cost of acquisition is clearly determinable for the purpose of computation of capital gains."
In view of the above, I am unable to accept the contention of the assessee's representative that the above capital receipts of Rs. 1.85 crores are not taxable. I, therefore, set aside the assessment order with the directions that the AO will pass order according to law"
8. Regarding payments received for non-competition, the CIT observed as under:
"I am not giving any direction regarding the other issue of the receipt of Rs. 1 crore on non-compete agreement. Since I am setting the order of the AO, this issue may be decided as per law."
9. The assessee is in appeal before us. It is argued by the learned counsel that before assuming jurisdiction under Section 263 of the Act, the CIT has to give a findings to the effect that the order passed by the AO was erroneous insofar as it was prejudicial to the interest of Revenue. In the whole body of the order, nowhere the CIT has held that the order passed by the AO was erroneous in so far as the same was prejudicial to the interest of the Revenue. This was a condition precedent for assuming jurisdiction under Section 263 of the Act. As this was not complied with, the CIT has illegally assumed jurisdiction Under Section 263 of the Act.
10. He further argued that merely because the AO in his order had not recorded a specific findings about both the amounts received by the assessee, it did not mean that there was no application of mind by the AO before passing the assessment order. The reliance was placed on the decisions CIT v. Ratlam Coal Ash Co. (1988) 171 ITR 141 (MP), CIT v. Shri Govindram Seksariya Chanty Trust (1987) 166 ITR 580 (MP), CIT v. Arvind Jewellers (2003) 124 Taxman 615 (Guj), Srinivasa Hatcheries (P) Ltd. v. Dy. CIT (2002) 81 ITD 36 (Hyd), Sahara India Mutual Benefit Co. Ltd. v. Asstt. CIT (2002) 74 TTJ (All) 67, and Vidisha Tractors v. Asstt. CIT (1995) 53 TTJ (Ind) 432. Learned counsel also stated that before setting aside an assessment order under Section 263 of the Act, the CIT must give a specific finding that the assessment order was erroneous insofar as the same was prejudicial to the interest of the Revenue. Reliance was placed on the decisions J.P. Srivastava & Sons (Kanpur) Ltd. v. CIT (1978) 111 ITR 326 (All), CIT v. Tej Cloth Weaving Factory (1989) 178 ITR 474 (P&H), CIT v. Ptithvi Raj & Co. (1993) 199 ITR 424 (Del) and CIT v. O.P. Seth (1993) 201 ITR 635 (Del). It was argued that as the CIT has not given any definite finding, the assumption of jurisdiction under Section 263 was illegal. Learned counsel further argued that the non-competition fee was a capital receipt not liable to capital gains tax. The reliance was placed on the decision Kettlewell Bullen & Co. Ltd. v. CIT (1964) 53 ITR 261 (SC), CIT v. Best & Co. (P) Ltd. (1966) 60 ITR 11 (SC), Oberoi Hotel (P) Ltd. v. CIT (1999) 236 ITR 903 (SC), Gillanders Arbuthnot & Co. Ltd. v. CIT (1964) 53 ITR 283 (SC), Dy. CIT v. Goodricke Group Ltd. (2001) 72 TTJ (Cal) 961 : (2001) 77 ITD 245, 326 & 405 (Cal). It was argued by the learned counsel that if the order passed by the AO was in accordance with the decisions of the Court/Tribunal, there can be no error of law in the order of the AO which could clothe the CIT with powers to exercise jurisdiction under Section 263 of the Act. The reliance was placed on the decisions Super Cassettes Industries (P) Ltd. v. CIT (1992) 41 ITD 530 (Del), Jhulelal Land Development Corporation v. Dy. CIT (1996) 56 ITD 345 (Bom), Machino Techno Sales (P) Ltd. v. Dy. CIT (1996) 56 TTJ (Cal) 613 : (1996) 59 ITD 303 (Cal) and CIT v. Gabnal India Ltd. (supra). Learned counsel argued that where two views were possible and the AO has taken one views with which the CIT does not agree, it cannot be treated an erroneous order and prejudicial to the interest of the Revenue. The reliance was placed on the decisions in Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC), CIT v. Gabnal India Ltd. (supra), Srinivasa Hatcheries (P) Ltd. v. Dy. CIT (supra) and Ajai Choudhary v. Dy. CIT (2001) 70 TTJ (Del) 220 : (2000) 74 ITD 350 (Del).
11. It was further argued that the provisions of Section 55(2)(a) were amended subsequently according to which though such receipts continued to be capital receipt but the same was exigible to capital gains tax. The amount received for assignment of trade-mark became exigible to capital gain tax w.e.f 1st April, 2002, whereas the amount received for not carrying on business or right to manufacture produce or process any article or thing became capital receipt exigible to capital gain tax w.e.f. 1st April, 1998. Both these amendments were prospective in nature and accordingly were not applicable to the assessment year in question. Learned counsel stated that it was evident from the Board's Circular No. 1964 dt. 17th March, 1989, which has mentioned the dates of its operation. Learned counsel further stated that Section 28 of the Act was amended by inserting Clause (va) w.e.f. 1st April, 2003. As per Sub-clause (a) of Clause (va), the amount received or receivable in cash or kind under an agreement for not carrying out any activity in relation to any business became taxable as revenue receipt. However, a proviso was attached to it which provided that if the amount was chargeable to capital gain tax, then the same will not be treated as revenue receipt. Learned counsel, therefore, argued that as there was no error either of law or of fact in the assessment order, the order passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. The CIT has, therefore, wrongly assumed jurisdiction under Section 263 of the Act and his order, therefore, deserves to be quashed. On the other hand, learned Departmental Representative supported the order of the CIT.
12. We have considered the rival submissions.
13. Keeping in view the ratios laid down by various Courts, as mentioned above, we have examined the facts of the case. Admittedly, the CIT has nowhere given any finding to the effect that order passed by the AO was erroneous insofar as the same was prejudicial to the interest of the Revenue. In order, the CIT exercises his powers conferred upon him by this section two prerequisites must be present. The first is that the order of the AO must be erroneous and secondly that the error must be such that it is prejudicial to the interest of the Revenue. If the order is erroneous but it is not prejudicial to the interest of the Revenue, the CIT cannot exercise his revisional jurisdiction. In the instant case, nowhere the CIT has held so.
14. It is necessary to confer jurisdiction on the CIT that there must be some material which enables him to come to the conclusion that the order of the AO is erroneous so as to be prejudicial to the interest of the Revenue. In the instant case, nothing new finds place on the record of the CIT. The same documents were before the CIT which were before the AO. Merely because the AO has adopted one view which is not in consonance with the CIT's views, the order passed by the AO cannot be said to be erroneous, Hon'ble Supreme Court in the case of Dwarka Nath v. ITO and Anr. (1965) 57 ITR 349 (SC) has held that the CIT must act in a judicial manner. Similar view was expressed by the Hon'ble Supreme Court in the case of Sirpur Paper Mills Ltd. v. CWT (1970) 77 ITR 6 (SC). The Hon'ble Supreme Court held as under:
"The powers of revision conferred on the CIT is not administrative, it is quasi judicial. In the exercise of that power, the CIT must bring to bear an unbiased mind, consider impartially the objection raised by the aggrieved party and decide the dispute according to procedure consistent with the principles of natural justice. He cannot permit his judgment to be influenced by matter not disclosed to the assessee..........nor by detection of another authority".
15. In the cases mentioned earlier, it has been held that merely because the AO has not dealt with this issue or recorded specific findings in the assessment order, it cannot be said that there was no application of mind by the AO to the facts and details before him. Similarly, if the AO acts in accordance with the decisions of the High Court/Tribunal, there can be said to be no error in the order of the AO which may cloth the CIT with powers to exercise jurisdiction under Section 263 of the Act. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) has held that where two views were possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue. On this basis alone, the order passed by the CIT suffers from infirmity and deserves to be cancelled.
16. However, we have also considered the issue on merits. The assessee was engaged in the marketing and distribution of ice-cream and other related products. Under an agreement, he assigned his rights of marketing to BBL with the conditions that he will not engage himself directly or indirectly in such activities for a period of 10 years not only in relation to the products of the affiliated concerns but of any other concern. A sum of Rs. 1 crore was received in consideration thereof. Such amount was, therefore, received under a restrictive covenant of not engaging himself directly or indirectly in the activities carried on by it. The Hon'ble Supreme Court in the case of Universal Radiater v. CIT (1993) 201 ITR 800 (SC) has indicated the following norms to decide whether the amount was revenue receipt or capital receipt "Whether payment is made to compensate any loss of the use of any goods in which the assessee does not carry on any business or the payment is a test equivalent to the cost incurred by the assessee but excess accrues due to fortuitous circumstances or is a windfall than the accrual may be a receipt but it would not be an income arising from business and therefore not taxable under the Act."
17. Similarly, in the case of J.C. Chandiok v. Dy. CIT (1999) 64 TTJ (Del)(SB) 1: (1999) 69 ITD 75 (Del)(SB) decided by the Special Bench of the Tribunal, Delhi, it was held as under:
"All receipts by an assessee cannot necessarily be deemed to be income of the assessee for the purpose of income-tax. The question whether a particular receipt is an income or not depends on the nature of the receipt and the true scope and effect of the relevant taxing provision. The AO cannot assess any receipt by using panoply of Section 10(3). He can assess only those receipts that amount to income. The taxability of an amount would depend on the nature and character of the receipt".
18. The Hon'ble Supreme Court in the case of Gillanders Arbuthnot & Co. Ltd (supra) considered similar issue and held as under:
"Compensation paid for agreeing to refrain from carrying on competitive business in the commodities in respect of terminated agency is prima facie of the nature of a capital receipt".
19. Hon'ble Rajasthan High Court in the case of Rao Raja Kalyan Singh (1974) 97 ITR 690 (Raj) held as under :
"Where compensation is received for the sterilization or destruction of a revenue yielding asset the character of such receipt cannot be anything but capital."
20. The Calcutta Bench of the Tribunal in the case of Asstt. CIT v. A.S. Wardekar (2001) 71 TTJ (Cal) 915 : (2001) 77 ITD 405 (Cal) considered similar issues. It held as under:
"In this case, the amount was received by the assessee in consideration of his agreeing and undertaking not to engage himself directly or indirectly in any activity, industrial, commercial or otherwise which in any manner competes or conflicts with the existing business and activity of WTEL (taken over by UBL) for a period of five years from the date of agreement. This was, thus, a restrictive covenant between the assessee and the UBL (who acquired controlling interest in WIEL). This receipt of a sum of Rs. 175 lakhs, thus, was capital in nature and not liable to income-tax as per ratio of the case reported at Gillanders Arbhuthnot & Co. Ltd v. CIT (1964) 53 ITR 283 (SC)."
21. The same view was taken by Calcutta Bench of the Tribunal in the case of Saroj Kumar Poddar v. Jt. CIT (2001) 72 TTJ (Cal) 120 : (2001) 77 ITD 326 (Cal), by Bombay Bench of the Tribunal in the case of M.N. Karani v. Asstt. CIT (1998) 64 ITD 119 (Mumbai) and in the case of Prakash Ji Hebalkar v. Asstt. CIT v. (2002) 77 TTJ (Mumbai) 911: (2002) 83 ITD 495 (Mumbai), by Hon'ble Madras High Court in the case of CIT v. Saswati Publicities (1981) 132 ITR 207 (Mad).
22. The Delhi Bench of the Tribunal in the case of Shiv Raj Gupta (ITA No. 489/Del/98) considered similar issues, On a difference of opinion, the Third Member vide its order dt. 30th May, 2001 has held as under:
"On the basis of above discussion, I am of the considered view that assessee got this amount of Rs. 6.6 crores under restrictive covenant and that was a capital receipt not taxable and there was no colourable device adopted by the assessee in getting this amount and case is not hit by the ratio of decision of Hon'ble Supreme Court in the case of McDowell (supra). Accordingly, I concur with the finding and conclusion arrived at by the learned AM."
23. The same view was taken by the Delhi Bench of the Tribunal in the case of Inder Kumar Khosla (ITA No. 2047/Del/2001). Looking to the above judicial pronouncement, it cannot be said that the order passed by the AO was erroneous insofar as prejudicial to the interest of the Revenue. Thus even on merits, the CIT was not justified in assuming jurisdiction under Section 263 of the Act. The order under Section 263 is, therefore, quashed.
24. As regards the taxability of the amount received on the assignment of trade-mark, there was a consistent view that the amount received on the assignment of trade-mark was not taxable to capital gains as the cost of acquisition was nil. The provisions of Section 55(2)(a) of the Act were amended w.e.f. 1st April, 1998. After the amendment for the purposes of Sections 48 and 49, the cost of acquisition in relation to capital asset being goodwill of the business tenancy right, state carriage permit or loom hours has to be adopted at nil. The amount received by the assessee on account of assignment of trade-mark for prohibition to manufacture, produce or process any article or thing or right to carry on any business was not exigible to capital gain tax. With effect from 1st April, 1998, the amount received on account of assigning the right to manufacture, produce or process any article or thing became exigible to capital gains tax. Similarly, w.e.f. 1st April, 2003, any amount received to assign the right to carry on any business also became exigible to capital gains tax. The amount received on assigning trade-mark became taxable w.e.f 1st April, 2002. But these amendments were prospective in nature and will not apply to the assessment year in question. This was clarified by the Board vide its Instruction No. 1964 dt. 17th March, 1999. In view of the facts mentioned above, we hold that the assumption of jurisdiction by the CIT under Section 2 of the Act was illegal and the order passed by him is quashed.
25. In the result, the appeal filed by the assessee is allowed.