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(i) Limca Flavours and Fragrances Ltd. (for short "LFFL")

(ii) Parle Exports Ltd.

(iii) Parle International Ltd.

     (iv)    Golden Agro Products Pvt. Ltd. and

     (v)     Aqua Minerals Pvt. Ltd.

The aforesaid parties along with Mr. Ramesh Chauhan and Mr. Prakash Chauhan, have been referred to as "seller" in the master agreement and Parle Soft Drinks Pvt. Ltd., etc. TCCC is the buyer along with Coca Cola South Asia Holding Inc., as a confirming party. After the transfer of trade-mark, etc., as per the master agreement, bottling of soft drink was continued by Mr. Ramesh Chauhan and Mr. Prakash Chauhan, through Parle Bottling Co. Ltd., having bottling rights in the territory of Pune while LFFL now known as "Aqua Bislery" having bottling rights in the territory of Bangalore respectively. The master agreement was in the nature of memorandum of understanding which provided the drafts and understanding of individual agreements for transfer of various trade marks, franchisee rights, non-compete covenants, letter of arrangement, etc. which was to be executed by the respective parties. In the said agreement, there was an Article-7.01(d) which contemplated execution of ROFR (right of first refusal) agreement for bottling rights in the territories of Bangalore and Pune. The said clause reads as follows:-

5. The draft of ROFR agreement was elaborated in Exhibit-J of the master agreement. For bottling rights in the territory of Bangalore, LFFL was assigned to become licensed bottler of TCCC in the city of Bangalore. It was also agreed upon by the parties in the master agreement itself, that a new company i.e., a Bangalore subsidiary was to be established for carrying out bottling operations in Bangalore. The Article-1 of the master agreement contained the definition of Bangalore subsidiary which, inter-alia, means that the company to be formed for the production, distribution and sale of products of TCCC for the city or nearby territories of the city of Bangalore. For this purpose, Exhibit-L of the master agreement provided the manner and the guideline on which this Bangalore subsidiary was to be established, which would be initially owned by Parle Group entities and the TCCC would later on invest up to 30% in the equity shares of Bangalore subsidiary under the terms of BIC shareholder agreement. The definition of Bangalore investment agreement and BIC shareholder agreement was also mentioned in the definition clause of Article-1. Prior to the agreement with the TCCC, the Bangalore territory was served by an independent third party bottler, M/s. Brindavan Beverages Pvt. Ltd., (for short "BBPL") under franchisee agreement dated 13th November 1988, with Parle Export Ltd., which was to run for a period of 10 years up to the year 1998. The said company BBPL was bottling, soft drinks and beverages of the brands owned by Parle group.

Parle Soft Drinks Pvt. Ltd., etc. This franchisee agreement was later on terminated. The assessee company i.e., Parle Soft Drinks Pvt. Ltd. had come into the existence, solely for the purpose of bottling rights in the territory of Bangalore in terms of ROFR agreement and the terms given in Exhibit-L. The history of coming into the existence of this company is that, one of the companies of the Parle Group was having possession of land at Bangalore, which was incorporated on 18th October 1991, as "General Knitwear Exports Pvt. Ltd." through Parle International Ltd. and Golden Agro Products Pvt. Ltd. On 3rd July 1993, 100% shares of General Knitwear Exports Pvt. Ltd. was transferred to Parle International Ltd. and Golden Agro Products Pvt. Ltd. Later on, the name of this company was changed to "Parle Soft Drinks Pvt. Ltd." w.e.f. 10th October 1994. In terms of Exhibit-J r/w Exhibit-L, the Parle Soft Drinks Pvt. Ltd. i.e., the assessee herein, was to construct the factory and install bottling facilities for doing bottling for the TCCC for the Bangalore territory. In order to prove its credentials that it had necessary resources and qualifications to set-up bottling operations in Bangalore, business plans were submitted to TCCC in May 1994 and was also followed up in June 1994. However, as submitted by the assessee, no positive response was received from TCCC. Later on, in the wake of liberalization environment in India, TCCC took strategic policy decision to set-up its own bottling at Bangalore. This inherently lead to breach of obligation by TCCC in respect of ROFR given to the Parle Group in the master agreement and lead to dispute between the Parle Group and TCCC. This dispute was ultimately settled with TCCC agreeing to pay US$ 4.5 Parle Soft Drinks Pvt. Ltd., etc. million which in terms of INR was ` 16,05,82,500. Such a receipt of compensation which was in breach of ROFR is the subject matter of dispute before us whether it is a capital receipt or revenue receipt or casual income or to be taxed as long term capital gain or short term capital gain and also in whose hands it should be taxed.

9 May 1994 Resolution passed to rename GKEPL as Parle Softdrinks (Bangalore) Pvt Ltd 10 October Name of General Knitwear Exports Private Limited 1994 changed to Parle Soft Dninks (Bangalore) Pvt Ltd 21 July 1997 Letter from TCCC to settle Bangalore bottling rights dispute at USD 4.5 million Certificate of inward remittance of USD 4.5 million 28 July 1997 i.e. INR 16.05 crores