Reserved On : 18/02/2026 Pronounced On : 12/03/2026 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO.640 of 2022 With R/TAX APPEAL NO.113 of 2023 FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-

and HONOURABLE MR. JUSTICE PRANAV TRIVEDI Sd/-

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Approved for Reporting Yes No a ===========================================================

AMBALAL SARABHAI ENTERPRISES LIMITED Versus THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, VADODARA ===========================================================

Appearance:

MR SAURABH SOPARKAR, SENIOR ADVOCATE, with MR B.S.

SOPARKAR, ADVOCATE (6851) for the Appellant MR MAUNIL G. YAJNIK for the Opponent ===========================================================

CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA and HONOURABLE MR. JUSTICE PRANAV TRIVEDI

COMMON CAV JUDGMENT

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. The captioned cross appeals filed under section 260A of the Income Tax Act, 1961(for short “the Act”) emanates from the judgement and order dated 25.05.2022 passed by the Income Tax Appellate Tribunal (ITAT), Ahmedabad in ITA No.1771/AHD/2015 for Assessment Year (AY) 2001- 2002, and ITA No.1762/AHD/2015 for AY 2001-02, wherein the Tribunal has partly allowed the cross-appeals filed by the assessee and the Revenue. Both the assessee and the revenue had challenged the orders passed by Commissioner of Income Tax (Appeals) (for short “the CIT(A)”), in which the ITAT partly allowed the Appeals.

2. In Tax Appeal No.640 of 2022 the following substantial questions of law were formulated vide order dated 22.01.2024:

(a) Whether in the facts and circumstances of the case, was the Income Tax Appellate Tribunal right in confirming dis-allowance of Rs.5,49,22,119/- in relation to the payment for gratuity and leave encashment?

(b) Whether in the facts and circumstances of the case, was the Income Tax Appellate Tribunal right in law in holding that Receipt of Rs.25 crores on account of transfer of trademarks were not capital receipt in nature?

(c) Whether in the facts and circumstances of the case, was the Income Tax Appellate Tribunal right in law in holding that Receipt of Rs.20 crores on account of transfer of marketing rights were not capital receipt in nature?

(d) Whether in the facts and circumstances of the case, was the Income Tax Appellate Tribunal right in law in holding that Receipt of Rs.2 crores on account of transfer of marketing rights were not capital receipt in nature?

3. In Tax Appeal No.113 of 2023, this Court framed the following substantial question of law was formulated vide order dated 20.06.2023:

“Whether in the facts and circumstances of the case and in law , the learned ITAT has erred in treating Rs.18 crore out of Rs.25 crore shown by the assessee company as consideration received for the so called trademark agreement, as capital gains and deleting Rs.7 crores as capital receipt instead of the treating of entire sum of Rs.25 crore as revenue receipt chargeable to tax as business income?

BRIEF FACTS

4. The appellants - assessee - Ambalal Sarabhai Enterprise Ltd. and M/s.Cadila Health Care formed 50:50 Joint Venture Company (for short “JV Company”) called ‘Sarabhai Zydus Animal Health Ltd.’ vide Deed of Assignment dated 29.01.2000, by selling / transferring 46 veterinary trademarks/ brand names ‘along with goodwill of the business’ for the consideration of Rs.73 crores, out of which Rs.25 crores were paid for the assignment of trademarks and were claimed as capital receipt, Rs.20 corers for the assignment marketing rights, the same are also claimed as capital receipt, Rs.28 crores for the transfer of know-how, which is offered as revenue receipt and Rs.2 corers for five years for marketing rights of ABIC, Bomac and Bristol Myers Squibb which is also claimed as capital receipt. Thus, the assessee had transferred its veterinary/ animal health business to the JV Company.

5. The Assessing Officer (for short the “AO”)