Mehta, A.M. - (1.) THIS appeal is directed against the order passed by the Commissioner of Income-tax (Appeals) raising for our consideration two separate and specific issues which are embedded in the various grounds raised.
(2.) The first issue raises the question whether the "excess" of Rs. 2.52 crores realised on the transfer of shares of HCL Ltd. (old) to Hewlett Packard America as per the scheme of arrangement between HCL Ltd. (old) and H.P. America is "an adventure in the nature of trade" liable to be taxed as "income from business" as is the case of revenue or under the head "Long term capital gain" as is the claim made by the assessee. Before we deal with the aforesaid issue we find it necessary to refer to certain relevant facts that are noted and discussed in the orders of the tax authorities as follows :- A company by the name of M/s. H.C.L. Ltd. (existing Co.) was incorporated on 17-4-1986 and was engaged in "the manufacturing, marketing, maintenance and selling of micro and many range of computers, engineering work stations, for computer-aided design, paper copiers, printed, EPABX, PC based telex, computer preference and test and measuring equipments". On 2-4-1991 it entered into a "joint venture agreement" with H.P. Company (USA), inter alia, for the purpose of combining the respective computer manufacturing, marketing, servicing and sales activities in India of the existing company and H.P. Company. The joint venture agreement contemplated that H.P. Company would participate in the existing company where certain divisions such as computer, CAD/CAM etc. were to be retained whereas certain other divisions such as reprographics, communications, instruments and investments were to be "spun off" to a new company in which the H.P. Company of USA was not to participate.
(3.) A "new company" by the name of M/s. HCL - HP Ltd. was incorporated on 15-5-1991 with a paid-up capital of Rs. 70 its main objectives being "identical" to those of the "existing company" i.e. HCL Ltd. It was formed for the purpose of taking over certain divisions of the existing HCL Ltd. which did not form part of the joint venture agreement between the "existing company" and H.P. Company of USA.;