Soumitra Pal, J. - (1.) THIS appeal, preferred by the assessee against the order dated 23rd April, 2004 passed by the Income Tax Appellate Tribunal 'C' Bench Kolkata for the assessment year 1998 -99, was admitted on the following substantial questions of law: - - "a) Whether on a true and proper construction of the agreements dated March 29, 1997 and March 31, 1997 and related documents, the Tribunal was justified in law in holding that (i) there was no outright/absolute transfer of the technical know -how developed by the appellant without any cost of acquisition for the consideration of Rs. 59 lakhs; (ii) the consideration of Rs. 59 lakhs was not only for the transfer of the self -developed technical know -how, (iii) there was no such transfer in association with disposal of the appellant's business/capital asset; (iv) such technical know -how was not a capital asset; (v) the said sum was revenue receipt and not a capital receipt outside the purview of taxation; and its purported findings in that behalf are without and/or in excess of jurisdiction, arbitrary, unreasonable and perverse? (b) Whether the Tribunal was justified in law in holding that transfer of the capital asset took place not during the previous year relevant to the assessment year 1997 -98 but during the previous year relevant to the assessment year 1998 -99 or that the sum of Rs. 59 lakhs was chargeable to capital gains tax in the assessment year 1998 -99 in view of the amended provisions of section 55 of the Income Tax Act, 1961 and its purported findings in that behalf are arbitrary, unreasonable and perverse -
(2.) THE facts in brief are as follows: - - "The appellant, the assessee was engaged in the manufacture of closure systems required for plastic bottles at Silvassa. The moulds required for the manufacture of the said goods were imported. In the course of carrying on the said business over a period of 13 years, the appellant developed its own fool proof system and got the manufacturing process relating thereto registered in India and thus acquired patent rights for manufacture of the closures. The appellant in the course of its said business developed its own designs, know -how, etc. in respect of the manufacturing process and used such self -developed technical know -how along with patent rights for the purpose of carrying on its business." With the object of going out of the said business, during the financial year ended 31st March, 1997 the appellant sold its plant and machinery including the imported moulds to SPBP Tea (India) Ltd. (hereinafter referred to as "SPBP"), a sister concern, and the self -developed technical know -how to M/s. Truepack Pvt. Ltd. (hereinafter referred to as "Truepack"). Truepack purchased the said plant and machinery and moulds from SPBP along with certain other plant and machinery belonging to SPBP.
(3.) FOR the sale of the self -developed technical know -how, comprising drawings, designs, manuals, process know -how, etc. the appellant entered into an agreement dated March 29, 1997 ('first agreement' for short) with Truepack. The consideration for the said transfer was agreed at Rs. 59 lakhs out of which a sum of Rs. 15 lakhs was to be paid upon handing over of the drawings and related technical information. The balance sum of Rs. 44 lakhs was payable after the installation and commissioning of the plant and machinery purchased by Truepack from SPBP and trial production. It was agreed between the appellant and Truepack that the plant and machinery so purchased required renovation so as to achieve the stipulated production which could be carried out at a cost of Rs. 28 lakhs. In the event the cost of renovation exceeded the sum of Rs. 28 lakhs, such excess was to be funded by the appellant and treated as a loan by the appellant to Truepack carrying interest @18% per annum repayable within a period of three years. The first agreement further provided that on request the appellant would depute a technical person for providing supervision, guidance and assistance in areas pertaining to manufacture and also to guide, assist and train the staff of Truepack for a separate consideration including the expenses for travel, lodging and boarding of such person.;