DCIT, CIR-7(1), KOLKATA, KOLKATA vs. M/S BRITANNIA INDUSTRIES LTD, KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “D” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “D” KOLKATA Before Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member ITA No.557/Kol/2017 Assessment Year:2009-10

DCIT, Circle-7(1), M/s Britannia Industries बनाम Aayakar Bhvan, 5th Floor, Ltd., 5/1A, Hungerford / Room No. 5/15, P-7, Street, Kolkata-17 V/s. Chowringhee Square, [PAN No.AABCB 2066 P] Kolkata-69 .. अपीलाथ� /Appellant ��यथ� /Respondent

Shri G, Hanshing, Ld. CIT-DR अपीलाथ� क� ओर से/By Appellant Shri D.S. Damle, FCA ��यथ� क� ओर से/By Respondent 05-04-2018 सुनवाई क� तार�ख/Date of Hearing 25-04-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-16, Kolkata dated 26.12.2016. Assessment was framed by JCITO Range-7, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 26.03.2013 for assessment year 2009-10. The ground raised by the Revenue per its appeal is as under:- “1. The on facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal on the basis on the judgement of Ld. ITT in the same case where the impugned order the Pr. CIT u/s. 263 was quashed by the ITAT.

ITA No.557/Kol/2017 A.Y. 2009-10 DCIT Cir-7(1) Kol Vs. M/s Britannia Inds. Ltd. Page 2 2. That the appellant craves leave to add, alter, amend or modify any or all grounds of appeal at or before the time of hearing of the appeal.” 2. At the outset, it is noticed that the appeal of Revenue is barred by limitation of 23 days though Revenue has not filed any condonation petition. On query, from the Bench Ld. counsel for the assessee has not opposed the condonation rather he conceded that delay can be condoned. In view of the above reasons given and concession given by Ld. AR for the assessee, we condone the delay and admit the appeal. 3. At the outset it was brought to our notice by the ld. AR that the assessment u/s 143(3) was framed by the Ld. JCIT vide order dated 26.03.2013. Subsequently the assessment order was revised u/s 263 of the Act by the ld. CIT vide his order dated 27.3.2015. Accordingly the AO passed giving effect order u/s 143(3)/263 dated 17-7- 2015 of the Act in pursuance to the directions issued by the ld. CIT u/s 263 of the Act.

ITA No.557/Kol/2017 A.Y. 2009-10 DCIT Cir-7(1) Kol Vs. M/s Britannia Inds. Ltd. Page 3 “9. We have heard rival submissions and carefully examined th4e record in the light of the submissions made by both the sides. Learned CIT in his order observed that the agreement that was entered into between the assessee and M/s Group Danone is in the nature o non-compete agreement, not to launch the biscuit products under the trade mark ‘TIGER’ in Singapore and Malaysia and the amount that was received by the assessee was towards loss of profits on account of the assessee company's inability to launch its products in Singapore and Malaysia, it is only because the assessee withdrew its right to expand business in Singapore and Malaysia, and consequently incurred loss of future profit, which they could have otherwise arranged, the compensation was paid. In his attempt to refute these observations of learned CIT, Ld. AR brought to our notice the terms of settlement dated 14.04.2009 between the assessee and Group Danone SA. Under clause 5 and 6 of this agreement both the parties agreed to resolve the dispute on the terms set out in schedule 2 thereof and the parties thereafter will not bring any claims against each other in this respect. Vide clause 7 (b) and (c) thereof, the parties agreed that the assessee agreed that they shall not have any objection for the other party investing or participating by any means in any entity in India engaged in any activity whatsoever but not limited to the same field as any business of BIL etc., and if any time thereafter any notice was served by Group Danone and affiliates on the assessee requiring any certification or confirmation, within three weeks thereof the assessee will issue such certification of confirmation. Clauses 4 and 11 of schedule 2, the terms of agreement thereof read as follows: "4. For the avoidance of doubt the release and payment referred to above: (a) is without any admission by Danone, its Affiliates or the Danone Individuals that the Claims made in the IP Proceedings or raised in the IP Disputes are valid; (b) is without prejudice to the rights of the Kraft Parties in respect of the intellectual property registered in the name of Generale Biscuit and the other intellectual property which is the subject of the IP Proceedings; (c) does not release any Claim by BIL against the Kraft Parties or their Affiliates except as set out in paragraph I(c) above (the Kraft Damages Claims); (d) (in respect of the period commencing 1 December 2007), is without prejudice to BIL's right to (i) continue and/or initiate any proceedings in any court in respect of infringements of its intellectual property rights against the Kraft Parties or their Affiliates other than the Kraft Damages Claims (including claims for an injunction or other remedies requiring the Kraft Parties to cease such infringements or to claim damages for such infringements); and (ii] continue the IP Proceedings (other than in respect of the Kraft Damages Claims) and proceedings before the Trade Marks Registry in Malaysia and to bring proceedings against the Kraft Parties or their Affiliates in other countries including in Indonesia, Pakistan and Egypt; but (e) does extend to any former officer or employee of Generale Biscuit or Kraft Foods Pte. Ltd. who was or is an officer or employee of Danone or any of their Affiliates. "

ITA No.557/Kol/2017 A.Y. 2009-10 DCIT Cir-7(1) Kol Vs. M/s Britannia Inds. Ltd. Page 4 11. Notwithstanding any possible application of the provisions of paragraph 10 above, (a) B1L and its Affiliates may use the B1L Tiger Logo in any country and Danone and its Affiliates will not take any steps to prevent the registration or use thereof (b) BIL and its Affiliates shall be permitted to use the word "tiger" or any mnemonic depicting a tiger without restriction anywhere in the world and Danone and its Affiliates will not take any steps to prevent the registration or use thereof, provided that save as provided in (a) above, neither BIL nor its Affiliates are hereby permitted to use any logo or mark similar to or likely to be confused with any Danone mark or logo. " 10. A reading of the above agreement and the terms set out in schedule 2 indicates that at any point of time the Group Danone neither conceded the claims made by the assessee nor admitted to have infringed the trade mark rights of the assessee. At the same time, the assessee did not surrender or part with any part of their rights in respect of the trade mark either in brand name or in logo in favour of either Danone or its affiliates. On the other hand, the settlement was reached neither of the parties relinquishing their claims put forth before the adjudicatory forums. In other words, neither Danone admitted to have committed any breach of trade mark of the assessee nor the assessee agreed to forego any of its rights in respect of the brand name and logo of 'TIGER'. 11. Taking strength from this factual position, Learned AR submitted it cannot be stated that either of the parties has given any concession to the other in consideration of which such payment was made by Danone to the assessee and only as a consideration for the assessee to give up their right to sue the Danone paid this amount. He further submitted that when the matter was argued before the Assessing Officer basing on facts and law, the Assessing Officer considered all these factors and has reached a view that the income in dispute is chargeable under the head "Capital Gains". Placing reliance on a decision of a Coordinate bench of Hyderabad Tribunal in Orient Blackswan (P) Ltd. Vs. ACIT (2016) 71 Taxmann.com 319 wherein under similar circumstances the question arose as to whether the compensation received under compromise in respect of putting an end to litigation and neither of the party precluded from using the trade mark then such a compensation cannot be treated as business income, he submitted that the view taken by the CIT also is equally lopsided. 12. Now coming to the proceedings before the Assessing Officer, we find from the Paper book that Page No. 46 thereof is the letter dated 05.12.2012 where under the AO sought some information from the assessee and such information includes the following question also: "What is the nature of capital receipt towards the settlement of litigation of Rs.22. 79 cr. during the financial year? Also furnish the details, names and addresses of the parties with whom such transactions were made. " 13. To this query the assessee submitted an elaborate reply which is incorporated in page nos. 50 to 62 of the paper book. In this reply, the assessee set-forth the background of the matter vide Page nos. 50 to 53, reasons for their request to treat it as capital receipt in page nos. 54 to 55, the reasons for their objection to treat it as

ITA No.557/Kol/2017 A.Y. 2009-10 DCIT Cir-7(1) Kol Vs. M/s Britannia Inds. Ltd. Page 5 business income in page nos. 56 to 58 and the reasons not to consider the same as capital gain in page no. 59 to 62. AO in his order vide page nos. 7 to 10 elaborately discussed the contentions raised by the assessee and while brushing aside their submissions in respect of the capital receipt and business income AO preferred to take the view that such an amount is to be taxed under the head capital gain. It could be seen from the submissions of the assessee before the AO, the assessee placed reliance on so many decisions in respect of their contentions to object the treatment of the amount either as business income or as capital gain. Having considered all these facts and also the law laid down in such decisions, the AO consciously reached a conclusion that the income is to be treated as capital gain but not as either capital receipt or business income. This is one of the probable views that could have validly be taken. By no stretch of imagination could it be said that the AO mechanically passed this order taking the view that the income has to be charged as capital gain. The AO made enquiries, called for details of such income and having considered the submissions of the assessee in respect of all the three probable views i.e. capital receipt, business income and capital gain, the AO for the reasons recorded in his order at page nos. 7 to 10, came to the conclusion that the income in dispute has to be charged as capital gain but not as capital receipt or business income. In this factual context, we are called upon to examine the question whether the CIT is justified in terming the order of AO as erroneous and without proper enquiry or on wrong assumption of the facts. 14. Since at this stage we are not concerned with the legality or otherwise of the order of the Assessing Officer, we are not inclined to delve deeper into that aspect canvassed by the learned AR basing on the following citations: 1) DCIT Vs. Mls. Arimganj Estates Pvt. Ltd. in ITA No. 7351Ko1J2012 dated 05.09.2014 2) authority For Advance Rulings (Income-Tax), New Delhi, Lead counsel of Qualified Settlement Fund (QSF) reported in (2016) 65 Taxmann.com 197 3) Aberdeen Claims Administration Inc. reported in 381ITR 55 (AAR) 4) Satyam Food Specialities P. Ltd. Vs. DeIT 57 Taxmann.com 194 (Jaipur). Suffice for us to say that it is only the facts and circumstances of the case that shall decide which one of the three views amongst capital receipt, capital gain or business income is correct and the AO has elaborately considered all these three aspects before reaching one of the probable view that this particular income of the assessee has to be charged under the head capital gains but not otherwise. 15. In JMC Projects (India) Ltd. Vs. Pr. CIT, central (2016) 67 Taxmann.com 258 (Gujarat), Hon'ble Gujarat High Court held that the power u/s. 263 of the Act cannot be exercised when though addition has been made on the footing or the premise which are not to the satisfaction of the Commissioner to make additions on better premise with better reasoning or on different application of legal principles. 16. For these reasons, we are of the firm conclusion that the Assessment Order is not the result of non application of mind or wrong assumption of facts or without any proper enquiry. And it, therefore, follows that assumption of jurisdiction u/s. 263 of the Act by the Ld. CIT is unwarranted and the order cannot be sustained. We, therefore, quash the same. Appeal of assessee is allowed.

ITA No.557/Kol/2017 A.Y. 2009-10 DCIT Cir-7(1) Kol Vs. M/s Britannia Inds. Ltd. Page 6 17. In the result, the appeal of assessee is allowed.” From the above proposition, there remains no doubt that the impugned order passed by Ld. CIT u/s 263 of the Act was held as unsustainable. Therefore, the order passed in consequent to direction issued u/s. 263 of the Act becomes infructuous. Hence, we find no reason to interfere in the order passed by the ld. CIT(A) on the ground that the consequential order passed u/s 143(3)/263 of the Act is not maintainable and thus becomes infructuous. Hence the additions made by the AO in his giving effect order are not sustainable. Thus we dismiss the appeal filed by the Revenue. 6. In the result, Revenue’s appeal stands dismissed. Order pronounced in open court on 25/04/2018 Sd/- Sd/- (�या%यक सद'य) (लेखा सद'य) (S.S.Viswanethra Ravi) (Waseem Ahmed) Judicial Member Accountant Member *Dkp, Sr.P.S )दनांकः- 25/04/2018 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DCIT,Circle-7(1), Aayakar Bhavan, 5th Floor, Room No.5/15 P-7, Chowringhee Square, Kolakta-69 2. ��यथ�/Respondent-M/s Britannia Industries Ltd. 5/1A, Hungerford St. Kolkata-17 3. संबं,धत आयकर आयु-त / Concerned CIT 4. आयकर आयु-त- अपील / CIT (A) 5. .वभागीय �%त%न,ध, आयकर अपील�य अ,धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड2 फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary Head of Office/DDO आयकर अपील�य अ,धकरण, कोलकाता