Capital gains v. Business Income: Section 28(va) of Income-tax Act, 1961: A.Y. 2006- 07: Consideration received on transfer of rights of trade mark, brands and copy rights: Business given up distinct from business continued: Consideration not arising out of business: Not business income, but is longterm capital gain.

The assessee was engaged in the business of healthcare, print media and electronic media communications. The assessee entered into a specified assets transfer agreement with one CMP for sale of all its rights, title and interest in specified assets of its healthcare journals and communications business. In consideration of the transfer the assessee had received Rs.3.80 crores. In the return of income the receipt was shown as the long-term capital gain. The Assessing Officer taxed it as business income u/s.28(va) of the Income-tax Act, 1961. The CIT(A) and the Tribunal accepted the assessee’s claim that it is long-term capital gain.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under: “

(i) By the agreement, the assessee had transferred the rights of trade marks, brands, copyrights, etc., in the journals and publications. The clinical trials business which the assessee continued to carry on was distinct and separate from the business of healthcare journals and communications. As far as the healthcare journals and communication business is concerned, it had been given up in entirety in favour of the transferee.

(ii) Thus section 28(va) was not applicable to any sum received on account of transfer of right to carry on any business which was chargeable under the head ‘Capital gains’. In the specified asset transfer agreement, ‘business’ was to mean the business of publishing, distributing and selling the periodicals and products as carried on by the seller (assessee).

(iii) There was a transfer of exclusive assets and on the transfer it was the transferee which had become the sole and undisputed owner of these assets which were the business assets of the assessee.

(iv) We find no merit in this appeal and dismiss the same.”