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The Ld. Commissioner of Income Tax (Appeals) erred in holding that the gain on the sale of assets is Long Term capital gain and not the Short Term Capital Gains as held by the Assessing Officer.

Shanti Prime Publication Pvt. Ltd.

Sec. 2(42A) & 49(1) of Income Tax Act, 1961 – Capital Gain – The assessee is a private limited company. For the assessment year 2011-2012, the return of income was filed a total income of Rs.10,81,85,559. High Court of Kerala had sanctioned a scheme of amalgamation with appointment date being 01.04.2008, whereby all the assets and liabilities of two transferor companies were transferred and vested with the assessee (the transferee company). The assessee vide a manufacturing and assets transfer agreement sold to another company, its “brand name”, “package design”, “knowhow” etc. and also “product intangibles” and “marketing intangibles”. Since there was no cost of acquisition, the assessee offered the entire sale consideration as LTCG in the return of income filed. The AO held that since the period of holding of the assets transferred is less than 36 months and same being financial assets, thus, the sale proceeds are to be treated as STCG. Accordingly AO assessed total income (STCG) 10,74,35,409. CIT(A) while allowing the appeal of the assessee, treated the sale of asset as LTCG. ITAT while dismissing the appeal of revenue held that:– The Hon’ble Delhi High Court in the case of CIT vs. Mediward Publication (P) Ltd. in ITA No.549 of 2011 (judgment dated 05.04.2011) had held that transfer of intangible assets with right to carry on business was taxable as LTCG. In view of aforesaid reasoning and judicial pronouncement cited supra, we hold that the CIT(A) is justified in treating the sale of assets as LTCG – ASSTT. CIT Vs. FEROKE BOARDS LTD. [2020] 79 ITR (TRIB) 022 (ITAT-COCHIN)