Marshall Sons & Co. [India] Ltd vs Income Tax Officer on 27 November, 1996
Pursuant thereto, a non- compete agreement was entered into dt. 4.1.1997
and Raymond Ltd. received a sum of Rs. 60 lakhs and assessee company
received a sum of Rs. 1 crore by way of consideration. There is no dispute to
the fact that said Non-compete fee of Rs. 1 crore was received by assessee in
the assessment year under consideration i.e. after the scheme was
sanctioned by Hon'ble Bombay High Court by its order dt. 31st July, 1997 but
undisputedly the said scheme is effective from appointed date which is 1st
July, 1996 as per Joint Venture Agreement. The Hon'ble Apex Court has held
in the case of Marshall Sons & Co. (India) Ltd.(supra) that date of scheme of
amalgamation of company is the date with effect from which it is provided in
the scheme if the same is not altered by the Company Court sanctioning
amalgamation even though amalgamation is sanctioned by Company Court
later on and the amalgamating company is struck off the register of
companies later on. In view of decision of Hon'ble Apex Court (supra), we
agree with Ld. AR that even if scheme is approved by Hon'ble High Court by
its order dt. 31st July, 1997 but said scheme of transfer of assets and liabilities
is effective from 1st July, 1996. Therefore all rights and liabilities have
become effective under the said agreement as on 1st July, 1996. There is no
dispute to the fact that profit in respect of Condom Division which have taken
place after 1st July, 1996 have been shown in the name of JKAL on approval
of scheme by Hon'ble High Court. There is also no dispute to the fact that
shares which have been allotted to assessee-company as per Joint Venture
Agreement, though allotted after the scheme was approved by Hon'ble High
Court i.e. after 31.3.1997 and the capital gain which has arisen thereon on
account of transfer/allotment of shares to assessee-company after 31.3.1997,
but same has been assessed and considered by department in assessment
year 1997-98. We also observe that assessee in the return filed for
assessment year 1997-98 has shown in the return, non compete
allowance/fees of Rs. 1 crore and claimed it to be exempted from income tax.
We are of the considered view that the right to receive the said compete fee
of Rs. 1 crore accrued to assessee in assessment year 1997-98 even though it
has been received by assessee in the assessment year 1998-99 because said
10 ITA No. 1671/M/2010
non compete fee is linked with transfer of business of Condom Division by
assessee to JKAL which has taken place with effect from 1.7.1996 i.e.
relevant to assessment year 1997-98. Not only this, we observe that similar
amount received by Raymond Ltd., for Rs. 60 lakhs under same Non Compete
Agreement has been brought to tax by department in assessment year 1997-
98 and not in subsequent year. Hence we hold that Ld. CIT(A) has rightly
concluded that amount of Rs. 1 crore received by assessee as per Non
Compete Agreement dt. 4.1.1997 is to be assessed in the assessment year
1997-98 and not in assessment year 1998-99.