- (1.) The above appeal has been admitted against the judgment and order dated 15-10-2001 passed by the learned Income-tax Appellate Tribunal in relation to assessment year of 1996-97. It was admitted by this Court by an order dated 31-7-2002 on the following substantial question of law: (1) Whether the amount received by the Appellant for transfer of its entire marketing undertaking by way of slump sale in terms of the agreement was a capital receipt to which the provisions of Section 50(1) of the Income-tax Act, 1961 had no application and no capital gains could be assessed and the purported findings of the Tribunal rejecting the said contention of the Appellant have been arrived at by ignoring the relevant materials and/or by taking into consideration irrelevant and/or extraneous materials and/or is otherwise arbitrary, unreasonable and perverse? (2) In the event of it being held that there was any liability to tax in respect of transfer of the marketing undertaking, whether the consideration of Rs. 3 crores received for transfer of the said undertaking had to be apportioned between the physical depreciable assets and other assets and only the amount referable to physical depreciable assets less the written down value could be subjected to tax as short-term capital gains, the rest being capital receipt was not chargeable to tax and the purported findings of the Tribunal rejecting the said contentions of the Appellant have been arrived at by ignoring the relevant materials and/or by taking into consideration irrelevant and/or extraneous materials and/or are otherwise arbitrary, unreasonable and perverse? (3) Whether the entirety of Rs. 3 crores is exempt in law from the incidence of capital gains tax by reason of the consideration thereof being of a compendious and joint nature, as a whole not attracting capital gains tax? (4) ff the answer to the question (3) is given against the Assessee and in favour of the Revenue, then whether the whole of Rs. 3 crores and if not, which part of it is liable to the incidence of capital gains lax and at what rate?
(2.) The short fact for which the present appeal has been preferred and being admitted for hearing are stated hereunder: The Appellant above-named at all material times carried on the business of manufacturing and marketing ice creams. The marketing undertaking of the Petitioner comprised of physical depreciable assets such as cabinets, vans, pushcarts etc., as also the entire dealership network built over several years, management and non-management employees with complete marketing data and know-how and developed by the Appellant over the years, vending, licenses, sales contracts, relationship with franchisees.
(3.) On 2-6-1995 the Appellant entered into a strategic alliance agreement and several other agreements with M/s. Brooke Bond Lipton (India) Limited (subsequently amalgamated with Hindustan Lever Limited) [hereinafter referred to as (Brooke Bond)]. By the said agreements the Appellant transferred its ice cream business and agreed not to compete, and to function merely as a job worker of Brooke Bond. In substance, the Appellant by the said agreements was merely to manufacture, and supply the ice creams agreed to Brooke Bond's instructions and requirements as its employed contractor. The agreements had the effect of depriving the Appellant of its main business. The particulars of said agreements are as under: (i) Assignment of self-generated trade marks for consideration of Rs. 3.25 crores. (ii) Assignment of marketing undertaking as a going concern comprising physical depreciable assets like cabinets, vans, pushcarts, etc., as also the entire dealership network, management and non-management employees, complete marketing data and know-how vending licences, sales contracts, relationship with franchisees, etc., for a sum amount of Rs. 3 crores. (iii) Non-competition agreement wherefrom the Appellant gave up its ice cream business and agreed not to compete with Brooke Bond for a consideration of Rs. 4 crores. (iv) Acquisition of franchisees' marketing assets by Brooke Bond for a consideration of Rs. 15 crores. The strategic alliance agreement further provided for termination of franchisees' operations for which a fund of Rs. 1 crore was to be created with equal contributions from the Petitioner and Brooke Bond. The fund was to be held by Brooke Bond for settlement of all claims of the franchisees. (v) Sourcing agreement under which Brooke Bond undertook to source its ice cream requirements from the Appellant. The said agreement provided for interest-free deposit of Rs. 3.5 crores by Brooke Bond.;