PANKAJ INDER WADHWA ,MUMBAI vs. INCOME TAX OFFICER CIRCLE 1(3)(1), MUMBAI

This is an appeal by the assessee against the order dated 12.02.2025 passed by National Faceless Appeal Centre (NFAC), Delhi pertaining to Assessment Year (AYs) 2019-20. 2. The grounds raised by the assessee read as under: “1. The learned National Faceless Appeal Centre [hereinafter referred as 'learned CIT(A)') has erred in upholding the action of learned National Faceless Assessment Centre [hereinafter referred as "learned AO'] in treating receipt of INR 3,68,38,400 from Nimblepace Packaging Private Limited and Others (collectively referred to as "BK parties") as taxable under section 28(ii)(e) and section 28(va) of the Income-tax Act, 1961 (hereinafter referred as 'Act']. Vs. Income Tax Officer

The learned CIT(A) ought to have held that the amount of INR 3,68,38,400 received pursuant to settlement agreement filed before Hon'ble Delhi High Court is a capital receipt not chargeable to income tax.”

As could be seen from the grounds raised, the solitary dispute is with regard to nature of receipt of Rs.3,68,38,400/- whether revenue or capital. 4. Briefly, facts are, assessee is a resident individual. For the assessment year under dispute, the assessee had filed his return of income on 28.08.2019, declaring income of Rs.14,02,750/-. The assessee and other family members known as ‘Wadhwas’ were involved in the manufacturing and trading of packaging materials and were carrying on such business in India since the year 1960. For the purpose of such business, the Wadhwas used to import raw materials for use of export boxes in the corrugated packaging Industry. PACCESS, USA, a partnership registered in port land, Goregon, United States of America (USA) engaged in supply chain management and brokerage, paper medium LCC and other fiber board products wanted to explore the Indian market. Looking at the reputation and experience of Wadhwas in the corrugated package industries, PACCESS, USA desired to collaborate with Wadhwas to make their presence in India. Accordingly, PACCESS, USA and Wadhwas agreed to form a joint venture company under the laws of India with equals shareholding of 50% each. 5. In terms with the above, joint venture (JV) agreement was executed between the parties on 12.12.2000 laying down certain terms and conditions. The JV Vs. Income Tax Officer company named as Paccess India carried on the business exclusively within the geographical territories of India and Sri Lanka. Subsequently, PACCESS, USA converted to a company called PACCESS LLC. However, it continued to be governed by the JV agreement. Subsequently, some time around end of 2011 and May 2012, PACCESS LLC hived off its packaging business into a separate Joint Venture Company, namely, Paccess Packaging LLC, wherein 30% of the equity was held by Billerudkorsnas A.B. a Swedish Company (hereinafter known as ‘B.K. Parties’). After the entry of the Swedish company, the Wadhwas found that in certain instances bypassing PACCESS, India, BK Parties were dealing directly with customers in India and Sri Lanka and were also advising the customers of PACCESS India to directly process order with them instead of Paccess India. Since the BK Parties continued its activity of directly dealing with customers in India and Sri Lanka overlooking PACCESS India, the Wadhwas sent a legal notice to the Swedish Company, pointing out that during the subsistence of the JV agreement, the Swedish company is bound by the terms of the JV agreement. In reply, BK Parties denied any obligation in terms with JV agreement by stating that it was not a party to the JV agreement. 6. It appears from facts and record, subsequently the Swedish Company purchased remaining 70% stake in PACCESS Packaging LLC and became the sole owner. Subsequently, in August, 2013, lawyers acting on behalf of Vs. Income Tax Officer the liquidators of PACCESS LLC informed the Wadhwas and PACCESS India that PACCESS LCC has been wound up w.e.f. August, 2013 and the name of PACCESS LLC has been struck off from the records of the