This is Department s appeal for asst. yr. 1998-99 against order dt. 16th Aug., 2002 passed by learned CIT(A)-I, Ludhiana. following grounds have been taken: "1. learned CIT(A) has erred both in law and on facts of case in holding that sale of Betalactum Division by assessee company is slump sale on which ss. 50 and 50A are not applicable and long-term capital gain has to be computed by indexing cost of acquisition. In consequence, he has deleted addition made by AO on account of disallowance of depreciation of Rs. 5,81,99,106 as result of reduction of block of assets by Rs. 25,02,69,344 and holding long-term capital loss of Rs. 12,67,69,823 against capital gain assessed at Rs. 4,39,64,437 by AO. learned CIT(A) has erred both in law and on facts of case in deleting disallowance of Rs. 5 lacs paid for securing membership of club for Mr. Ashwani Windlass, Jt. Managing Director, which was otherwise of nature of personal benefit. learned CIT(A) has erred both in law and on facts of case in deleting addition on account of expenses of Rs. 4,22,084 incurred for revaluation of fixed assets. expenses on valuation required for purpose of sale of that division was not incidental to business. learned CIT(A) has erred both in law and on facts of case in holding that non-compete fee of Rs. 5 crores received by assessee company from M/s MAX GB Ltd. is capital receipt not liable to tax and is not capital gain, whereas, this amount was self-declared by assessee as capital gain during assessment proceedings, where revised computation of income was filed dt. 29th May, 2000. assessee transferred its right to manufacture for definite period and in turn amount received as its gain liable to be taxed. Even if it is accepted that no right is extinguished permanently as held by learned CIT(A) then those receipts of Rs. 5 crores should be treated as revenue receipts earned by lending of rights and taxed as income. learned CIT(A) has erred both in law and on facts of case in treating amount of Rs. 50 lacs received by assessee on assignment/sale of trademark from M/s Rhone Poulene (India) Ltd. and declared by assessee as capital gain in its return of income. learned CIT(A) has erred both in law and on facts of case in allowing project development expenses amounting to Rs. 29,25,019 which were carried forward as deferred revenue expenditure. assessee is following mercantile system of accounting and these expenses were required to be claimed in relevant year. learned CIT(A) has erred both in law and on facts of case in allowing deductions under s. 35D." Apropos ground No. 1, AO observed that in return filed, assessee had claimed loss of Rs. 12,67,69,823 under head "Long-term capital gains", regarding sale of its Betalactum Division w.e.f. 1st July, 1997, on slump sale basis, for sale consideration of Rs. 30 crores. assessee had reduced from such sale proceeds, indexed cost of acquisition and improvement amounting to Rs. 42,67,69,823, thereby showing therein loss of Rs. 12,67,69,823. production in Betalactum Division had been started on 1st Feb., 1985. AO required assessee to explain basis of claim and application of indexed cost of acquisition as per Annex. III attached to return for working out income from sale. assessee submitted that indexed cost of acquisition/improvement had been claimed by relying on decision of Hon ble Supreme Court in case of CIT vs. Mugneeram Bangur & Co. (Land Department) (1965) 57 ITR 299 (SC) and on CBDT Circular No. 23-D (LXXV III-6) of 1965 [as referred by Pune Tribunal in case of Mrs. Mangla S. Paranjape & Ors. vs. ITO (1994) 48 TTJ (Pune) 78: (1994) 116 CTR (Pune)(Trib) 312]. AO pointed out to assessee that case law and Board s circular cited by assessee related to law as it existed before insertion of ss. 50 and 50A in IT Act, laying down that in case of sale of depreciable assets forming part of block of assets, indexed cost of acquisition was not admissible. AO pointed out to assessee that Betalactum Division of assessee comprised such assets along with lands and other assets, etc., and that according to special provisions of ss. 50 and 50A of IT Act, where sale of any or all of depreciable assets was involved, excess of sale consideration and WDV of such assets would amount t o short-term capital gain. It was also pointed out that upto asst. yr. 1999- 2000, there existed no special provision in IT Act for computation of income in case of slump sale and it was only w.e.f. 1st April, 2000, that special provision for computation of capital gain in case of slump sale had been inserted in Act by way of s. 50B and that dealing with case of assessee, provisions of ss. 50 and 50A of Act would come into play. assessee was, in this manner, asked to show cause as to why income in respect of depreciable assets of sold Betalactum Division of assessee be not computed on said basis. assessee submitted before AO that sale of its Betalactum Division was slump sale of undertaking as whole, as going concern, including land, building, plant and machinery, inventory, stock, intellectual property, right contracts and employees registration along with liability. AO, however, observed that perusal of terms and conditions of MoU, dt. 30th June, 1997 between assessee and Max GB Ltd., regarding t h e sale of assessee s Betalactum Division showed that assessee company had sold its Betalactum Division on 30th June, 1997, whereas intellectual property and know-how including technical know-how pertaining to Betalactum Division, which was inseparable part of undertaking, had not been transferred on said date; and that rather, it had been agreed that it would be transferred by seller to purchaser on future date, i.e., 1st July, 2000, which fell much after asst. yr. 1998-99. AO observed that as per s. 2(47) of IT Act, transfer in relation to capital asset includes extinguishment of any rights in capital asset. It was observed that same was case in respect of technical know-how developed and improved by assessee company and constituting business activities of assessee s betalactum division, which had not been transferred during assessment year under consideration; that in this background, prerequisite for transfer of Betalacum Division as whole, as going concern in slump sale, did not get fulfilled, as all interests in betalactum division belonging to assessee company had not been transferred to buyer during year under company had not been transferred to buyer during year under consideration. AO thus asked assessee to elaborate its claim of transfer of Betalacum Division in slump sale and to justify basis of working out loss of Rs. 12,67,69,830 under head "Long-term capital gain". AO further noted that before transfer of Betalactum Division, assets thereof were got revalued by assessee. assessee, in this regard, submitted that revaluation of reserve of Rs. 1,11,95,525/74 was created in consequence of assets relating to Betalactum Division, which was revalued on 31st March, 1997; that revaluation reserve was created for amounts of difference between peak value of assets and amount as per revaluation report; that details of break-up of assets as on 31st March, 1997, as per revaluation report, had been furnished, according to which, revaluation of various blocks of assets had been shown at aggregate amount of Rs. 27,01,39,328/17, as on 31st March, 1997; that similarly, revaluation of various blocks of assets had been shown at Rs. 25,96,95,009/79, after claim of depreciation as on 30th June, 1997, date when C&BC unit was transferred; that copies of source of fund and assets and liabilities statement of Betalactum Division as on 31st March, 1997 and 30th June, 1997 had also been filed. AO noted that revaluation of various assets of Betalacum Division was solitary exercise conducted by assessee company amongst various divisions/units owned by it and that too, earlier to transfer of said unit; that purpose of such revaluation was apparent, i.e., to have basis of value of various assets of said division in view, before arriving at figure of total consideration for transfer of unit and extent of revaluation of these assets, giving appreciation by about Rs. 11,10,95,525 which, added to existing value of various assets, nearly, amounted to final consideration agreed to at Rs. 30 crores, which showed wide gap between consideration received and book value of assets; that assets had been revalued block-wise, based on revaluation of various assets as per revaluation reports which finally determined sale consideration; that so, sale consideration had apparently been received by evaluating assets forming part of undertaking and variation in consideration received and net worth may be attributable to goodwill, which had been admitted as part of Betalactum Division sold as per MoU, for purpose of computing income/loss from transfer of said unit. In response, assessee submitted that what had been sold by assessee company was undertaking and not depreciable assets per se and that accordingly, special provisions dealing with sale in case of depreciable assets had no application on sale of assets as depreciable assets; that undisputedly, assessee company had never claimed any depreciation on undertaking; that various case law cited by assessee continued to have applicability in case of slump sale; that apropos judgment relating to pre-1988 period also, there were provisions in Act relating to profit/loss arising on sale of depreciable assets, like s. 41(2) and that despite such provisions, it had been held in various decisions that undertaking is separate asset and it is not permissible to break-up consideration, etc.; that s. 50 only seeks to change manner of computation and head regarding excess/surplus arising on sale of depreciable assets and not undertaking and it does not affect concept/principle/settled law relating to sale of undertaking on slump sale basis; that apropos observation that s. 50 should apply in case of slump sale also, for reasons that s. 50B had been inserted only w.e.f. 1st April, 2000, s. 50 is special provision dealing with particular subject-matter and if that special provision were to apply to slump sale, there was no need to introduce any special provisions in Act; that had legislature been of view that slump sale was covered by s. 50, but different mechanism was to be provided regarding computation of capital gain/loss, suitable amendment would have been made in s. 50 itself, instead of inserting new provision without providing any exclusion in existing s. 50; that if it were to be taken that s. 50 covers slump sale also, it would lead to unharmonious interpretation that two special provisions had parallel jurisdiction over subject-matter; that this was not intention of legislature and only harmonious interpretation would be that s. 50 does not have any applicability to slump sale; that s. 50 does not get attracted in case of slump sale and assessee company was eligible to deduct indexed cost of acquisition and indexed cost of improvement and thus, loss of Rs. 12,67,69,823, as computed by assessee company, was allowable in computation under head "Capital gain"; that cl. 1.1(i) of MoU, dt. 30th June, 2000 defined Betalactum business ; that vide sub-para (c) thereof, "All intellectual property and know-how including technical know-how pertaining to Betalactum Division" was included; that cl. (ii), which dealt with sale, provided that sale or transfer of Betalactum Division shall be of going concern/running business or as is where is basis, together with all intangible rights comprising of all licences, permits, registrations, approvals, quotas, consents and benefits pertaining thereto and shall be completed on or before effective date, except for technical know-how developed and improved by seller, which shall be transferred by seller to purchaser on 1st July, 2000, however, purchaser shall be entitled to use such technical know-how from effective date till 30th June, 2000; that cl. 3(a) of MoU dealt with purchase consideration and royalty, while para (1) thereof dealt with purchase consideration on slump price basis; that para (2) dealt with royalty for use of know-how; that cl. 3(b) further clarified that purchase consideration as referred to in cl. (a)(1) had been mutually agreed between parties as slump price and parties accepted same as final; that cl. 4, which dealt with effective date, which had been defined in cl. 1.1(iii) as 1st July, 1997, provided that from effective date, sale shall become irrecoverable, irrespective of whether formal transfer/sale of various assets comprised in Betalactum business has been completed by effective date or not; that thus, sale of Betalactum business, including know-how was on slump sale basis; and that fact that know-how developed and improved by assessee company was transferred not on 1st July, 1997, but on 30th June, 2000, with right to purchaser to use same for intervening period, would not have affected same being slump sale. assessee also filed copy of CBDT. Circular No. 23-D of 1965, wherein, CBDT referred to Supreme Court decision in case of Mugneeram Bangur & Co. (supra) in which it was held that where sale was concerned as whole and lump sum price was paid, no portion of this price was attributable to stock-in-trade and therefore, it was not possible to hold that there was profit other than what resulted from appreciation of capital. CBDT noted that, therefore, where business was sold as going concern, excess which may not be business profit, would be capital gain chargeable to tax, and this view was also supported from decision in case of R.B. Lachman Das Mohanlal & Sons vs. CIT (1964) 54 ITR 315 (All). AO, however, observed that assessee had itself assigned entire consideration of Rs. 30 crores to cost of land, plant and machinery, furniture, building, etc., belonging to Betalactum Division exclusively, while working out capital gain on sale of Betalactum Division; that in doing so, special provisions of ss. 50 and 50A of IT Act, as relevant to assessment year under consideration were not taken into account; that these provisions deal with manner of computation of income in cases of depreciable assets and do not permit application of indexed cost of acquisition in respect of such assets; that special provisions of law have precedence over general provisions, including s. 48 of Act and its proviso; that further, in view of these special provisions of s. 50 of IT Act having come into force subsequent to decision of Hon ble Supreme Court in case of M/s Mugneeram Bangur & Co. (supra), sale consideration pertaining to depreciable assets would fall under provisions of these sections which do not provide for working out indexed cost of acquisition for purpose of arriving at short-term capital gain or reduced WDV in case of sale of such assets forming part of block of assets in case of assessee; that further, CBDT circular referred to by assessee also reiterates that where business is sold as going concern, profit is chargeable under head Capital gain and not as business profit; and further that, no portion of price is attributable to stock-in-trade; that this was what assessee had done by assigning entire consideration received entirely to land and other depreciable assets like plant and machinery, vehicles and furniture, etc., and therefore, provisions of s. 50 of Act were applicable; that loss declared by assessee company in respect of sale of various depreciable assets by applying indexed cost of acquisition was not appropriate in view of special provisions of s. 50 of Act; that further, sale of Betalactum Division as whole was not complete since interest of assessee in intellectual property forming part of Betalactum Division, as per MoU, did not pass on to buyer during asst. yr. 1998-99 but much later; that purpose of getting revaluation of various depreciable assets, i.e., land building, plant and machinery, furniture and vehicles, etc., belonging to Betalactum Division, as solitary case, before execution of MoU for sale of unit was that sale consideration apparently had been arrived at by evaluating these assets and variation in consideration received and cost of assets after revaluation may be fairly attributable to goodwill which had been admitted as part of Betalactum Division sold as per MoU for purpose of computing income from transfer; that expenses regarding revaluation of various assets, i.e., machinery land, plant, building, furniture, etc. had been debited round date of execution of MoU regarding sale of Betalactum Division; that as such, AO was of opinion that assessee had undertaken to assign values to various assets of Betalactum Division by resorting to revaluation of same and transfer of assets without relinquishment of assessee s rights in technical know-how developed and improved forming part of Betalactum Division, during asst. yr. 1998-99, did not constitute sale of Betalactum Division as whole; and that as such, method of computation of loss from sale of Betalactum Division was not acceptable and same was being computed keeping in view mandatory provisions of s. 50 of IT Act. AO observed that assessee had itself assigned sale consideration of Rs. 30 crores to cost of land, building, machinery, vehicles and furniture; that assessee had worked out WDV of various assets by getting same revalued before sale; that, therefore, same value was being taken as forming part of consideration received aggregating to Rs. 30 crores and balance related to goodwill which had been admitted to be part of business, but for which no valuation had been assigned by assessee. AO thus arrived at figure of Rs. 5,81,99,106 representing excessive depreciation claimed. This amount was disallowed and added to total income of assessee. long-term capital gain on land was worked out at Rs. 35,89,446. Apropos goodwill, AO reduced from total sale consideration of Rs. 30 crores, amount of Rs. 25,96,25,009 representing consideration received in respect of other assets. long-term capital gain in this regard was thus worked out at Rs. 4,03,74,991. total long-term capital gain was hence worked out at Rs. 4,39,64,437 which was added to income of assessee against loss declared by assessee from sale of its Betalactum Division, at Rs. 12,67,69,823. learned CIT(A) observed, inter alia, that he agreed with contention of assessee that valuation of its fixed assets had been made by AO himself and not by assessee; that revaluation of fixed assets of Betalactum Division was got done on 31st March, 1997, whereas sale was made w.e.f. 1st July, 1997 and depreciable valuation of assets could not be equated with market value; that there being nothing in MoU filed by assessee during assessment proceedings to suggest that sale was not on slump sale basis, it was acceptable that sale was on slump sale basis; that decision of Hon ble Supreme Court in case of CIT vs. Electric Control Gear Mfg. Co. (1997) 141 CTR (SC) 302: (1997) 227 ITR 278 (SC) clearly applied to facts of assessee s case, since assessee had never disclosed break-up of sale consideration; that AO was not right in assigning slump price over various assets and that too, selectively, at his own discretion; that in any case, AO was not justified in assigning values to hold that sale was not slump sale; that s. 50 does not have any applicability in case of slump sale; that Betalactum Division of assessee constituted separate asset of assessee; that Betalactum Division was long-term asset of assessee; that sale of Betalactum Division was completed during previous year ending on 31st March, 1998; that sale was on slump sale basis, to which s. 50 did not apply; that capital gain was to be computed by deducting indexed cost of acquisition and indexed cost of improvement from sale consideration as computed by assessee; and that only WDV of assets pertaining to Betalactum Division be reduced from respective blocks. With these observations, learned CIT(A) held that: "(a) disallowance of depreciation of Rs.5,81,99,106 would stand deleted. Consequently, reduction of block of assets by Rs. 25,02,69,344, as done by AO would also be deleted. block of assets will be reduced by Rs. 8,04,93,280 only, as done by assessee in return filed; (b) capital gain arising out of sale of Betalactum Division would result in loss of Rs. 12,67,69,823 instead of gain of Rs. 4,39,64,437 as worked out by AO." Before us, learned Departmental Representative has argued, challenging impugned order, that assessee sold its Betalactum Division; that sale was claimed to be that of going concern; that it was claimed to be slump sale; that, however, for computing capital gain, assessee took into account cost of all assets and worked out loss of Rs. 42,67,69,823; that AO held that sale was not slump sale because assessee got its assets revalued as on 31st March, 1997 and appropriate valuation was shown in details filed with return; that taking cost of acquisition, unit having started in 1985, same cost was indexed, after taking for depreciation, etc. learned Departmental Representative, arguing that capital gain does arise in slump sale, has relied on 66 ITR 764 (SC) (sic) and 59 ITR 690 (Mad) (sic). learned Departmental Representative has next argued that just because sale was stated to be slump sale, loss has been worked out by assessee against capital gain. It has been submitted that CIT(A) has mainly stated that from evidence on record, sale was, in fact, slump sale. According to learned Departmental Representative, even so, capital gain has to be worked out. learned counsel for assessee, on other hand, reiterating stand taken by assessee before taxing authorities, has submitted that as per definition of slump sale under s. 2(42C) of IT Act, as applicable from 1st April, 2000, if undertaking is transferred as going concern with all its assets, liabilities, rights, obligations and personnel, without values being assigned to individual assets, it would be regarded as slump sale; that "undertaking" is defined in Expln. 1 to s. 2(19AA) of Act to include any part of undertaking, or unit or division of undertaking, or business activity taken as whole, but does not include individual assets or liabilities or any combination thereof, not constituting business activity; that it thus follows that where assets and liabilities of undertaking or assets of undertaking are sold as group lumped together, such sale would qualify as slump sale; that undertaking is distinct capital asset capable of being transferred by itself; that s. 2(14) of Act defines capital asset to mean property of any kind itself; that s. 2(14) of Act defines capital asset to mean property of any kind held by assessee, whether or not connected with his business or profession, but does not include any stock-in-trade, stores, raw materials, etc. held for purpose of business; that Hon ble Gujarat High Court in case of Sarabhai M. Chemicals (P) Ltd. vs. P.N. Mittal, IAC (1980) 16 CTR (Guj) 315: (1980) 126 ITR 1 (Guj) has held that undertaking of business is capital asset; that Hon ble Madras High Court in West Coast Electric Supply Corporation Ltd. & Anr. vs. CIT (1977) 1977 CTR (Mad) 64: (1977) 107 ITR 483 (Mad) has held that word "property" is comprehensive enough to include undertaking; that undertaking per se is distinct capital asset separate from assets composing it; that sale of undertaking as whole would comprise of land, building and plant and machinery, furniture, fixtures, spares, licenses, goodwill, trademark, non-compete and many such privileges and rights accruing to undertaking over period of time, etc., and also trained and experienced work force including executives; that when undertaking is transferred as composite unit, it cannot be said that its different ingredients are separately acquired; that what is required is undertaking as composite unit, which is wholly different from this component; that where undertaking is sold as going concern for slump price without values being assigned against different and definite items, agreed price cannot be apportioned on capital assets in specie; that what is sold is not individual item of property forming part of aggregate, but capital asset consisting of business of whole concern or undertaking; that in order to constitute slump sale, it is not necessary that all assets and liabilities must be transferred; that even if some assets and liabilities are retained by transferor, same would nevertheless be slump sale, so long as transfer is on going concern basis and transferee is in position to carry on business without any intervention or interruption; that in present case, assessee granted to transferee, right to use technical know-how developed by assessee, against payment of separate consideration, while retaining proprietary rights therein upto 30th June, 2000; that thus, what transferee acquired was going concern and carried on business without any disruption; that s. 50B inserted in IT Act, by Finance Act, 1999, w.e.f. 1st April, 2000 does not have retrospective operation; and that in case these submissions were not to be accepted, AO be directed to work out capital gain by allocating slump price over assets comprising non-depreciable assets such as land, depreciable assets, use of intangible assets, such as trademark, goodwill and trained work force, etc. We have heard parties and have perused material on record. assessee claimed loss of Rs. 12,67,69,823 under head Long-term capital gain . This loss was claimed regarding sale by assessee, of its Betalactum Division, w.e.f. 1st July, 1997. assessee claimed that this sale was made on slump sale basis, for sale consideration of Rs. 30 crores. From such sale proceeds of Rs. 30 crores, assessee reduced indexed cost of acquisition and improvement, amounting to Rs. 42,67,69,823. In this manner, loss of Rs. 12,67,69,823 was shown. AO was of opinion that Betalactum Division of assessee comprised depreciable assets forming part of block of assets, along with loans and other assets. It was his view that sale of these assets attracted provisions of ss. 50, 50A and 50B of IT Act. submission of assessee that sale in question was slump sale of undertaking as whole as going concern, was rejected by AO, observing that assessee company had sold its Betalactum Division on 30th June, 1997, whereas intellectual property and know-how had not been transferred on said date, but they were agreed to be transferred on 1st July, 2000, which date fell beyond asst. yr. 1998-99. AO observed that, as such, technical know-how developed and improved by assessee company and constituting business activities of assessee s Betalactum Division had not been transferred during year under consideration and, therefore, transaction did not comprise "transfer" within meaning of s. 2(47) of IT Act, which lays down "transfer", in relation to capital asset, to include extinguishment of any rights in such capital asset. AO also observed that revaluation of various assets of Betalactum Division by assessee was solitary exercise conducted by assessee amongst its various divisions and that this revaluation was also prior to transfer of Betalactum Division. According to AO, this revaluation was done in order to assess total consideration for transfer of unit. AO further noted that this revaluation gave appreciation by about Rs. 11,10,95,525; and that this added to existing value of various assets, which amounted to roughly about final sale consideration of Rs. 30 crores. AO observed that provisions of ss. 50 and 50A of Act do not permit application of indexed cost of acquisition in respect of capital assets and where business was sold as going concern, profit was chargeable as capital gain and not as business profit, no portion of price being attributed to stock-in-trade. AO observed that by assigning entire consideration to cost of land and other depreciable assets like plant and machinery, furniture and vehicles, etc., assessee had attributed price to its stock-in-trade and that therefore, provisions of s. 50 of Act were applicable, and in view of this, loss declared by assessee regarding sale of various depreciable assets by applying indexed cost of acquisition, was not proper. AO observed that as such, method of computation of loss from sale of Betalactum Division was not acceptable. learned CIT(A) accepted stand of assessee that assessee had not disclosed break-up of sale consideration and that assignment of value had been done by AO. learned CIT(A) held that revaluation of fixed assets of Betalactum Division was done on 31st March, 1997, whereas sale was made w.e.f. 1st July, 1997. It was also be held that depreciated value of any asset could not be equated with its market value. That sale made was on slump sale basis was also accepted by learned CIT(A), holding that there was nothing in MoU nor in any papers filed by assessee during assessment proceedings to suggest otherwise. learned CIT(A) held that decision of Hon ble Supreme Court in case of CIT vs. Electric Control Gear Mfg. Co. (supra) was squarely applicable to facts of assessee s case, since assessee had never disclosed break-up of sale consideration. learned CIT(A) held AO to be incorrect in assigning slump price over various assets and that also, selectively. Further, learned CIT(A) held that s. 50 of IT Act had no applicability in case of slump sale, like that in case of assessee; that Betalactum Division of assessee constituted separate identifiable asset of assessee; that this asset was long-term asset of assessee; that slump sale was completed during previous year ended on 31st March, 1998; that capital gain was to be computed by deducting indexed cost of acquisition and indexed cost of improvement from sale consideration as computed by assessee; and that only WDV of assets pertaining to Betalactum Division were to be reduced from respective losses. issue before us is as to whether learned CIT(A) has correctly held sale to be slump sale, to which ss. 50 and 50A of Act are not applicable. First of all, it is to be seen as to what "slump sale" is. Sec. 2(42C) of IT Act, which is applicable from 1st April, 2000, defines "slump sale" to mean transfer of one or more undertakings as result of sale for lump sum consideration, without values being assigned to new assets and liabilities in such sale. In other words, if undertaking is transferred as going concern, with all its assets and liabilities, without valuations having been assigned to individual assets, such transaction is to be regarded as "slump sale". As per Expln. 1 to s. 2(42C) of Act, "undertaking" shall have meaning assigned to it in Expln. 1 to s. 2(19AA) of Act. Explanation 1 to s. 2(19AA) states that for s. 2(19AA), "undertaking" shall include any part of undertaking or unit or division of undertaking or business activity taken as whole, but does not include individual assets or liabilities or any combination thereof not constituting business activity. From above, it is amply clear that where assets and liabilities of undertaking are sold as group, lumped together, such sale would qualify as slump sale. As per cl. 1.1(i) of MoU, dt. 30th June, 1977, Betalactum undertaking (Division) of assessee comprised of following assets of Betalactum business: "(a) plant and equipment to manufacture betalactum antibiotics in bulk located at Bhai Mohan Singh Nagar, Toansa, Tehsil Balachaur, District Nawan Shahr -144533 (Punjab); (b) Freehold land admeasuring 244 Kanal 08 Marlas 03 Sirsai or thereabout together with hereditaments thereof situated in Bhai Mohan Singh Nagar, Toansa, Tehsil Balachaur, District Nawan Shahr -144533 in State of Punjab, more particularly described in Annex. 1 hereof together with all buildings and structures constructed thereon; (c) Leasehold land admeasuring 27 Kanal 09 Marlas situated at Bhai Mohan Singh Nagar, Toansa, Tehsil Balachaur, District Nawan Shahr-144533 in State of Punjab, more particularly described in Annex. 2 hereof, together with all buildings and structures constructed thereon." Further, Betalactum Division, as per said cl. 1.1(i) of MoU also means following: "(a) Raw material, stores, spares, tools, office furniture, vehicles and equipment; (b) All intellectual property and know-how (including technical know-how pertaining to Betalactum business); (c) All workers and employees engaged in manufacture, marketing and sale of betalactum antibiotics manufactured at plant of seller situated at Bhai Mohan Singh Nagar, Toansa, Tehsil Balachaur, District Nawan Shahr- 144533 (Punjab); (d) All licenses, permits, approvals, registrations, incentives, utility connections with respect to Betalactum business and which are capable of being transferred; (e) All arm s length contracts with clients and suppliers relating to Betalactum business; (f) Any and all liabilities (whether or not contingent) and bank/other guarantees extended by seller for continuance of business." Undisputedly, above was transferred by way of sale w.e.f. 1st July, 1997. Clause 2 of MoU specifically provided that sale of Betalactum business shall be on going concern/running concern and as is where is basis, together with all intangible rights comprising of all licenses, permits, registrations, approvals, quotas, consents and benefits appertaining thereto, except for "technical know-how developed and improved by seller, which shall be transferred by seller to purchaser on 1s July, 2000". intention of assessee thus is entirely clear from above clauses of MoU dt. 30th June, 1997. assets and liabilities of undertaking were sold together as group and this sale entirely fell in line with idea of slump sale, as provided under Act, as discussed hereinabove. Though aforesaid definition of slump sale is not applicable to assessment year under consideration, i.e., asst. yr. 1998-99, it was only such sale which was envisaged by legislature to be slump sale and none other. learned CIT(A) has held that undertaking comprising Belalactum Division of assessee was distinct and separate identifiable asset of assessee. Is such conclusion correct? Sec. 2(14) of IT Act lays down that "capital asset" is property of any kind held by assessee, whether or not connected with his business or profession, but does not include any stock-in-trade, stores and raw materials, etc., held for purposes of his business; personal effects like movable property, held for personal use by assessee or any member of his family dependent on him. undertaking, it is seen, as correctly held by learned CIT(A), is capital asset distinct and separate from assets constituting it. It was sold by assessee as business activity, taken as whole. It was sold including land, building, plant and machinery, furniture and fixtures, office equipment, motor vehicles, capital WIP, inventories, sundry debtors, and loans and advances as assets and bank overdrafts, sundry creditors and other liabilities as liability. Betalactum Division of assessee comprised of licenses, permits, approvals, registrations, incentives, utility connections, all arm s length contracts with clients and suppliers, workers and employees and contingent liabilities. All these were sold in sale. undertaking was sold as going concern at slump price. In CIT vs. West Coast Chemicals & Industries Ltd. (In Liquidation) (1962) 46 ITR 135 (SC), facts were that on 9th May, 1943, assessee company entered into agreement for sale of lands, buildings, plant and machinery of match factory belonging to it for Rs. 5,75,000, with view to close down this business. purchaser made default in payment. On 9th Aug., 1953, fresh agreement was entered into between parties for sale of properties mentioned in first agreement and also chemicals and papers used for manufacture which had not been included in first agreement, for sum of Rs. 7,35,000. Since memorandum of association of assessee company allowed assessee to manufacture and sell chemicals, and even after sale, company carried on manufacture on behalf of purchaser, Department sought to assess profit derived from sale of chemicals and paper, viz., Rs. 1,15,259 as profits from business. assessee stated that it was realisation sale and that this amount was not liable to tax. Hon ble Supreme Court held that question whether sale was realisation sale or sale in course of business is not easy to decide and depends upon facts. On facts of that case, it was held that sale of chemicals and material used in manufacture of matches was only winding up sale to close down business and to realise all assets; and that fact that memorandum gave power to company to sell chemicals was not of much significance, especially as this power was rarely exercised. It was also held that fact that business of company was sold as going concern and was, in fact, worked by assessee on behalf of buyer till entire consideration was paid, made no difference, as agreement clearly indicated that assessee was keeping factory going, not on his own behalf but entirely on behalf of buyer and that, as such, it could not be fairly said that sale of chemicals and raw materials for match manufacture was anything more than winding up sale, not with view to trading in chemicals and raw materials, except by comparing two prices offered to be paid by buyer, i.e., price without chemicals and raw materials and price with them; and that, however, from that alone, it was impossible to infer that chemicals and raw materials were sold in ordinary way of business or that assessee company was carrying on trading business. In CIT vs. Mugneeram Bangur & Co. (Land Department) (supra), firm, which carried on business of buying land, developing it and then selling it, pursuant to agreement, sold business as going concern with its goodwill and all stock-in-trade, etc., to company promoted by partners of firm, company undertaking to discharge all debts and liabilities, development expenses, and liability in respect of deposits made by intending purchasers. consideration of Rs. 34,99,300 was paid by allotment of shares to partners or their nominees. Tribunal held that firm had no goodwill and that sum of Rs. 2,50,000 allocated towards goodwill was really excess value of land, which was stock-in-trade of company and that although sale was that of business as going concern, value of this stock-in- trade could be traced, but that transaction was mere adjustment of business position of partners and firm was not entitled to take book keeping entries as evidence of any profits. Hon ble Supreme Court held that sale was sale of whole concern and no part of price was attributable to cost of land and no part of price was taxable; that fact that in schedule to agreement, price of land was stated, did not lead to conclusion that part of slump price was necessarily attributable to land sold; and that what was given in schedule was cost price of land as it stood in books of vendor, and even if sum of Rs. 2,50,000 attributed to goodwill could be added to cost of land, there was noting to show that this represented market value of land. In Syndicate Bank Ltd. vs. Addl. CIT (1985) 45 CTR (Kar) 68: (1985) 155 ITR 687 (Kar), it was held that term "capital asset", as defined in s. 2(14) of IT Act, 1961, has wide meaning and includes every kind of property as generally understood, except those expressly excluded in definition; that business undertaking as whole would constitute capital asset within meaning of s. 2(14); that however, in deciding whether income-tax could be levied on capital gains, it has to be kept into account (i) that there are assets of different nature, those involving cost in acquisition and those which could be acquired by way of production in which cost element cannot be identified, but none of provisions pertaining to "capital gains" suggests that they include asset in acquisition of which no cost at all can be conceived; (ii) cost of acquisition mentioned in s. 48 of Act implies date of acquisition; and (iii) if cost of acquisition and/or date of acquisition of asset cannot be determined, then, it cannot be described as "asset" within meaning of s. 45 and, therefore, its transfer is not subject to income-tax under head "Capital gains"; that if there is transfer of whole concern and no part of agreed price is indicated against different and definite items having regard to their valuation on date of sale, agreed price cannot be apportioned on capital assets in specie; that what is sold in such case is not individual items of property forming part of aggregate, but capital asset consisting of business of whole concern or undertaking; and that what would arise for consideration from point of view of taxation is only gain in respect of that transaction, and nothing else. In CIT vs. F.X. Periera & Sons (Travancore) (P) Ltd. (1991) 94 CTR (Ker) 176: (1990) 184 ITR 461 (Ker), it was held that transfer of business as going concern would constitute transfer of capital asset. In CIT vs. Narkeshari Prakashan Ltd. (1992) 196 ITR 438 (Bom), assessee was publishing house, having two branches. branches were sold along with their assets and liabilities. Tribunal found that entire branch businesses were sold as whole as going concerns, for slump price, that value of liabilities stood adjusted against value of assets and that inventory was made for identification and value was indicated against each item. Hon ble Bombay High Court held that overwhelming character of t h e transaction did not stand changed and that Tribunal was justified in deleting addition made as profit on sale of branches and that no question of law arose. In CIT vs. Kar Valves Ltd. (1992) 197 ITR 95 (Ker), it was held, inter alia, that business undertaking is capital asset. In Premier Automobiles Ltd. vs. ITO & Anr. (2003) 182 CTR (Bom) 202: (2003) 264 ITR 193 (Bom), it was held that where entire undertaking of manufacture and sale of motor cars was sold as going concern, where business was continuing and there was no sale of items of assets, transaction amounted to slump sale. In Asstt. CIT vs. Raka Food Products (2005) 199 CTR (Mad) 151: (2005) 277 ITR 261 (Mad), it was held that in case of transfer of entire business undertaking as whole, including land, bifurcation of sale consideration of particular asset was not possible and that entire gains were to be treated as long-term capital gains. In Modi Electric Supply Co. Ltd. vs. ITO (1986) 17 ITD 1057 (Chd), Tribunal held that where assessee was running undertaking carrying on generation and supply of electricity, which was taken over by State Electricity Board as whole together with its depreciable assets and liabilities and arbitrator s award fixed slump price without itemisation of different items of assets, profits could not be assessed under s. 41(2) of IT Act. From above, it is evident that for sale to be termed as slump sale , it is not essential that all assets and liabilities must be transferred. Even if some assets and liabilities are retained by transferor, sale would not lose character of being slump sale, if transfer is of going concern, on that basis and transferee is in position to carry on business without any interruption. In present case, right to use technical know-how developed by assessee was granted by assessee to transferee against payment of separate consideration. proprietary rights therein were retained till 30th June, 2000. On facts, in view of above numerous judicial pronouncements, it cannot be said that what transferee acquired was not going concern. Rather, after transfer, transferee carried on business without any disruption therein. In CIT vs. West Coast Chemicals & Industries Ltd. (In Liquidation) (supra), CIT vs. F.X. Periera & Sons (Travancore) (P) Ltd. (supra), Premier Automobiles Ltd. vs. ITO & Anr. (supra), and Asstt. CIT vs. Raka Food Products (supra) amongst others, it has been held that in case of sale of undertaking as whole, on going concern basis, if some assets are retained by transferor or some liabilities are not taken over by transferee, this fact does not render slump sale as not slump sale. similar view has been expressed by Delhi Bench of Tribunal in ITA Nos. 2584/Del/2003, for asst. yr. 1999-2000 and 5507/Del/2003, for asst. yr. 2000-01, in case of M/s ECE Industries Ltd., vide order dt. 29th Sept., 2006 (copy placed on record). Therefore, findings of learned CIT(A) in this regard are upheld. Further, s. 50B of IT Act has correctly been held by learned CIT(A) as having no applicability to slump sale, as in present case. It is significant that this section was inserted in Act by Finance Act, 1999 w.e.f. 1st April, 2000. It has not been stated to be applicable retrospectively. In absence of any such specific statement, it can only apply prospectively. In view of above, we hold that there is no force in grievance of Department, by way of ground No. 1, that CIT(A) has erred in holding that sale of Betalactum Division of assessee company was slump sale and ss. 50 and 50A of Act are not applicable and that long-term capital gain has to be computed by indexing cost of acquisition. Ground No. 1 is therefore, rejected. According to ground No. 2, learned CIT(A) erred in deleting disallowance of Rs. 5 lacs paid for securing membership of club for Shri Ashwani Windlass, Jt. Managing Director of assessee company, and that this membership was of nature of personal benefit. Before AO, it had been submitted by assessee that payment had been made towards individual membership not transferable to any member. AO, however, observed that it had not been explained as to how amount of Rs. 5 lacs had been adjusted in t h e books of assessee s account when Shri Ashwani Windlass left assignment as Dy. Managing Director; and that since expenditure in question was not revenue expenditure, it could not be allowed. learned CIT(A), deleting addition made, held that membership of club does not bring into existence any benefit of enduring nature and that expenditure in question was of revenue expenditure; and that mere fact that sum of Rs. 5 lacs was not periodic fee, but entrance fee, did not lead to presumption that expenditure was not of revenue account. learned Departmental Representative has argued that expense under consideration is not with regard to this year itself; that this benefit is regarding particular person, i.e., Shri Ashwani Windlass, but benefit would accrue over period and so, it cannot be termed as revenue expenditure. learned counsel for assessee, on other hand, supporting impugned order in this regard, has relied on decision of Hon ble Bombay High Court in case of Otis Elevator Co. (India) Ltd. vs. CIT (1991) 96 CTR (Bom) 14: (1992) 195 ITR 682 (Bom) and that of Hon ble Gujarat High Court in case of Gujarat State Export Corporation Ltd. vs. CIT (1996) 131 CTR (Guj) 23: (1994) 209 ITR 649 (Guj). It has been argued that it is not personal expenditure, rather, it is only entrance fee for club. A. This issue is squarely covered in favour of assessee by decision of Hon ble Bombay High Court wherein club membership fee has been held to be allowable business expenditure. CIT vs. Sundaram Industries Ltd. (2000) 158 CTR (Mad) 437: (1999) 240 ITR 335 (Mad), Gujarat Petrosynthese Ltd. vs. Dy. CIT (2001) 71 TTJ (Ahd) 349: (2001) 76 ITD 257 (Ahd), Dy. CIT vs. Hindustan Dorr Oliver Ltd. (1994) 48 TTJ (Bom) 552, Apollo Tyres Ltd. vs. Dy. CIT (1992) 44 TTJ (Coch) 534 and ITO vs. Soya Production & Research Association, (1985) 22 TTJ (Del) 594 also carry same ratio. In Anarkali Chit Fund (P) Ltd. vs. ITO (1988) 32 TTJ (Hyd) 134: (1989) 43 TAXMAN 292 (Hyd)(Mag), it was held that life term membership of club taken by managing director of company is business expenditure and not personal expenditure of managing director. It was held therein that it might be that membership of club gave some personal benefits to managing director also, but so far as assessee was concerned, it was allowable business expenditure. In Gujarat State Export Corporation Ltd. vs. CIT (supra), it has been held that payment of entrance fee for sports club is not made with intention of acquiring any capital asset or advantage for enduring benefit of business of business and same being for running business or for bettering conduct of business, is deductible revenue expenditure. In view of above, ground No. 2 is rejected. Ground No. 3 states that learned CIT(A) has erred in deleting addition on account of expenses of Rs. 4,22,084 incurred for revaluation of fixed assets. According to Department, expense on valuation required for purpose of sale of Betalactum Division of assessee were not incidental to its business. AO observed that as per legal and professional expenses filed, sum of Rs. 4,22,084 had been claimed as expenditure for revaluation report as on 31st March, 1997 for fixed assets of Betalactum Division on 1st July, 1997. AO was of view that since expenditure claimed related to valuation of items of plant and machinery, furniture, land and vehicles, etc., belonging to Betalactum Division of furniture, land and vehicles, etc., belonging to Betalactum Division of assessee, which was transferred on 30th June, 1997, this expenditure related to transfer of capital asset and did not constitute revenue expenditure, but same had been incurred in connection with same, it was to be considered by recomputing capital gain. This expenditure was disallowed and added to total income of assessee with observation that sale took place on 1st July, 1997. learned CIT(A) deleted addition. Supporting assessment order in this regard, learned Departmental Representative has argued that even otherwise, revenue expenditure can be that which has nexus with assessee s business or profit-making processes, whereas revaluation under consideration had nothing to do with either assessee s business or its profit-making process. It has further been argued that just because valuation was carried out since unit was to be sold by assessee, it cannot be said that it did not relate to transfer of assets. On other hand, learned counsel for assessee has submitted that this expenditure does not relate to transaction of slump sale; that revaluation was carried out on 31st March, 1997, whereas sale took place on 1st July, 1997; that revaluation was necessary to obtain bank loans; that revaluation was with regard to fixed assets of Betalactum Division; that this revaluation was not carried out for purpose of transfer of undertaking; and that revaluation exercise is carried out in routine, whenever assessee company approaches financers/financial institutions to secure finance for its business needs; and that expenditure was thus incurred wholly and exclusively for purpose of assessee s business. It has been argued, without prejudice to these arguments, that if it is considered that expenditure was connected with transfer of Betalactum Division, same may be allowed to be deducted in computing capital gain/loss on transfer of undertaking as expenditure incurred in connection with said transfer. We have considered rival submissions in this regard. facts are that revaluation was got done on 31st March, 1997 and sale took place on 1st July, 1997. It is evident that assessee got revaluation done for purpose of sale. assessee has contended that this exercise was carried out in routine in order to secure finance from financers/financial institutions, for business needs of assessee. However, it is seen that such revaluation is not regular feature of assessee. At least no other such instance of revaluation, at any other point of time, has come on record. Moreover, assessee has also not placed on record any material to show that any finance was secured from financial institutions/financers in pursuance of said revaluation. Anyhow, alternative contention of assessee appears to be right and is accepted as such. This expenditure will be allowed to be deducted in computing capital gain/loss on transfer of Betalactum Division, since this expenditure was incurred in connection with said transfer. Ground No. 3 is, as such, accepted in above terms. As per ground No. 4, learned CIT(A) has erred in holding that non- compete fee of Rs. 5 lacs received by assessee company from M/s Max GB Ltd. is capital receipt not liable to tax and is not capital gain. Department contends that this amount was declared by assessee itself as capital gain during assessment proceedings, where revised computation of income was filed on 29th May, 2000. assessee transferred its right to manufacture for definite period and in terms, amount received was its capital gain, liable to be taxed. It is further contended that even if it is accepted that no right is extinguished permanently, as held by learned CIT(A), Rs. 5 lacs should be treated as revenue receipt earned by assessee by lending of rights and same be taxed as income. Before AO, assessee s case was that this receipt of Rs. 5 lacs had been declared as capital gain, for selling its right to manufacture or produce any article or thing and trading in betalactum antibiotics, including any service connected with said business; that amount represented receipt of capital nature, in view of provisions of s. 55(2)(ii) of Act, as per which, right to manufacture, produce or process any article or thing is capital asset and which provides that cost thereof shall be taken as nil ; that suitable part of said consideration represented long-term capital gain and balance was exempt from tax, being capital receipt; that in view of specific definition contained in s. 55(2)(ii), fee received had been shown as capital gains; that amount received also included arrangement binding on company not to carry out other activity, i.e., trading, etc., in medicines produced by carry out other activity, i.e., trading, etc., in medicines produced by Betalactum Division, which did not fall in definition of asset as per s. 55(2)(ii); and that reasonable amount be exempted from being considered as capital receipt. AO observed that this issue had not been pressed by assessee. As such, AO took entire amount of Rs. 5 crores declared as capital gain, as such capital gain. assessee, however, challenged this finding of AO before learned CIT(A). It was argued that as per assessment proceedings, assessee was required to show cause as to why non-compete fee could not be treated as business income; that after detailed deliberations on subject- matter, AO had agreed that said fee represented capital receipt and not business receipt; that question, therefore, was as to whether said capital was liable to tax as capital gain; that under s. 45 of Act, it was only profits and gains arising on transfer of capital asset, which could be taxed; that in present case, since signing of negative covenants, i.e., undertaking not to carry out manufacturing or trading was self-imposed restriction, there was no transfer whatsoever and, therefore, amount of Rs. 5 crores was not liable to tax, as provided by s. 45 of Act. learned CIT(A) decided this issue in favour of assessee holding that undisputedly, right to manufacture constituted capital asset, but s. 45 of Act could be invoked only if there was transfer and not otherwise; that he agreed with assessee s contention that there had been no sale, since no profit had been passed on to other party, nor was it case of exchange, since no property had passed on from signing of negative covenants; that nor was it case of relinquishment of asset, since person signing negative covenants did not relinquish anything, it had already retained right to manufacture or trade, it had agreed to restrain for limited period; that nor was it case of extinguishment of any right, since right to manufacture or trade was made intact after period for which negative covenants had been signed; that as pointed out by assessee, in Saroj Kumar Poddar vs. Jt. CIT (2001) 72 TTJ (Cal) 120: (2001) 77 ITD 326 (Cal), non-compete fee is not taxable for reason that there is not transfer; that as also pointed out by assessee, this line of reasoning has been cancelled by legislature while inserting cl. (viii) in s. 28 of Act, to treat amount received or receivable under agreement for not carrying out any activity in relation to assessee s own business, as business income, such amendment taking effect from asst. yr. 2003-04 only, exempting from taxation such amounts received upto and including asst. yr. 2002-03. Aggrieved, Department has raised ground No. 4 before us. Before us, learned Departmental Representative has submitted in this regard that perusal of impugned order shows that learned CIT(A) has not taken into account fact, as noted in assessment order, that this issue was not pressed before AO; and that this being so, learned CIT(A) erred while going into merits of case. learned counsel for assessee, on other hand, has submitted that even if issue was not pressed before AO, there was no estopple in law to press such claim before learned CIT(A); that moreover, before learned CIT(A) Department was duly represented by AO, who raised no objection to matter being proceeded with on merits; that learned CIT(A) has powers co-terminus with those of AO and, therefore, he was justified in deciding issue as he did; that further, issue as to whether non-compete fee is or is not taxable, is legal issue which can be raised at any time; that non-compete fee in question arose from same agreement as is in question regarding other issues; that this agreement was already before AO and h e could well decide issue on merits, taking into consideration said agreement; that this being so, nothing remained to be examined afresh by AO and so, learned CIT(A) was not obliged to remit issue back to AO n d so, findings recorded by learned CIT(A) on this count are well sustainable. On merits of issue, learned counsel for assessee has submitted that non-compete fee received for undertaking negative covenant for not carrying on business is in nature of capital receipt not liable to tax; and that amendment in s. 28(va) of Act, w.e.f. 1st April, 2003, further fortifies statement that prior to asst. yr. 2003-04, non-compete fee was not liable to tax. We have heard parties and have perused material on record. first dispute here is as to whether learned CIT(A) was justified in deciding issue on merits in favour of assessee, in view of fact that as recorded in assessment order, assessee had not pressed issue before AO. In this regard, we find that assessee is correct when it contends that issue of taxability of non-compete fee being legal one, even if assessee did not press it before AO, it could well have been pressed before learned CIT(A), as was done. Further, it is also correct that all facts being before AO, CIT having powers co-terminus with those of AO, was not incorrect in not remitting issue to AO for decision. Moreover, evidently, AO duly represented case of Department before learned CIT(A) and no objection was raised regarding assessee having not pressed issue before AO. On merits, evidently, there has been no transfer of assets as envisaged under s. 45 of Act r/w s. 2(47) of Act. AO, pertinently, had agreed that fee in question represented capital receipt and not business receipt. B y signing negative covenant, assessee undertook not to carry out manufacture or trade of products for period of time. That being so, this act amounted only to self-imposed restriction and not transfer within meaning of Act. It was neither sale or exchange or relinquishment of asset, nor was any right therein extinguishable, right to manufacture or trade remaining intact after period for which negative covenants were signed. In CIT vs. Saroj Kumar Poddar (supra), which also appears at (2006) 200 CTR (Cal) 616: (2005) 279 ITR 573 (Cal), besides in host of other decisions, including following, it has been held that non-compete fee is not taxable, since there is no transfer involved in transaction: CIT vs. A.S. Wardekar (2005) 199 CTR (Cal) 255; CIT vs. Milk Food Ltd. (2005) 199 CTR (Del) 567: (2006) 280 ITR 331 (Del); T.S. Manocha vs. Dy. CIT (2006) 5 SOT 277 (Asr). Further, as rightly pointed out, amendment in s. 28(va) of Act, w.e.f. 1st April, 2003 also supports submission that before asst. yr. 2003-04, non-compete fee was not liable to tax. This amendment defines intention of legislature in this regard. In view of above, we hold that learned CIT(A) was justified in deciding issue on merits in favour of assessee. Such finding of learned CIT(A) is, therefore, hereby upheld. Ground No. 4 is thus rejected. As per ground No. 5, learned CIT(A) has erred in treating amount of Rs. 50 lacs received by assessee on assignment/sale of trademark from M/s Rhone Poulenc (India) Ltd. and declared by assessee as capital gain in its return of income. facts in this regard are that in its return of income, assessee had offered capital gains of Rs. 50 lacs on sale of self-generated trademarks, taking cost of acquisition thereof as nil . On basis of amount offered by assessee, AO added same in assessment. Before learned CIT(A), assessee contended that business of pharmaceutical formulations constituted source of income for assessee; that brands were self-generated assets of assessee; that, therefore, consideration received without assignment of such trademarks/brand names constituted capital receipt in hands of assessee, not liable to tax; that since cost of trademarks/brand names, being self-generated assets of assessee, could not be determined, computation provisions failed and so, amount could not be taxed, as held by Hon ble Supreme Court in case of CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138: (1981) 128 ITR 294 (SC); that amendment in s. 55(2)(a) of Act w.e.f. 1st April, 2002, providing that cost of acquisition of trademarks or brand names associated with business shall be nil , is prospective, being applicable only from asst. yr. 2002-03, and, as such, it was not applicable to case of assessee; and that in ICI India Ltd. vs. Dy. CIT (2002) 75 TTJ (Cal) 932: (2002) 81 ITD 348 (Cal), it has been held that right to use trademark "cannot be treated at par with goodwill" and, as such, provisions relating to computation of cost of acquisition and cost of improvement in case of self-generated goodwill" will not apply in case of trademarks. learned CIT(A) agreed with contentions of assessee and held amount of Rs. 50 lacs to be not liable to tax. of assessee and held amount of Rs. 50 lacs to be not liable to tax. learned Departmental Representative has, before us, contended that perusal of assessment order shows that AO has not discussed this issue at all and that, therefore, it needs to be sent back to AO. learned counsel for assessee, on other hand, has supported impugned order in this regard. It has been contended that AO did make addition, which was deleted by learned CIT(A) by passing reasoned order. It has been submitted that self-generated trademarks like ones under consideration, have no cost of acquisition; that capital gains cannot be determined in such cases, as held by Hon ble Supreme Court in case of B.C. Srinivasa Setty (supra); and that it has been held in case of Voltas Ltd. vs. Dy. CIT (1998) 64 ITD 232 (Bom), that in case of transfer of self-generated trademarks, computation machinery fails, for reason that these trademarks have no cost o f acquisition. learned counsel for assessee has contended that amendment in s. 55(2)(a) w.e.f. 1st April, 2002, to treat nil cost of acquisition for self-generated trademarks, also goes to show that prior to asst. yr. 2002-03, no capital gains could be computed in such cases. With regard to this issue, stand taken by Department is not found acceptable. As seen while dealing with ground No. 4 above, Department was duly represented by AO before learned CIT(A). AO had made addition, which had been challenged by assessee before learned CIT(A). learned CIT(A) decided this issue in favour of assessee. It is reasoning taken by learned CIT(A) in so deciding matter, which is in appeal before us. In this regard, evidently, before asst. yr. 2002-03, B.C. Srinivasa Setty (supra), rendered by Hon ble Supreme Court was law of land. Till such time, when s. 55(2)(a) of Act was amended w.e.f. 1st April, 2002, no capital gains could be computed on transfer of self-generated trademarks, such trademarks having no cost of acquisition. Therefore, learned CIT(A) has correctly deleted addition made. Accordingly, ground No. 5 raised by Department stands rejected. Ground No. 6 states that learned CIT(A) has erred in allowing project development expenses amounting to Rs. 29,25,019, which project expenses were carried forward as deferred revenue expenses. It is case of Department that assessee was following mercantile system of accounting and that these expenses were required to be claimed in relevant year. assessee had incurred expenditure of Rs. 31,68,663 during period 1st April, 1997 to 30th April, 1998, which was debited under head Project development expenses in books of account relevant to asst. yr. 1999-2000. In asst. yr. 1999-2000, AO had allowed deduction of Rs. 2,43,743, holding that balance amount of Rs. 29,25,019 pertained to asst. yr. 1998-99. said order is on record. It was pursuant to above findings of AO for asst. yr. 1998-99, that assessee filed additional ground before learned CIT(A) in asst. yr. 1998-99, claiming deduction of Rs. 29,25,019. assessee contended that project development expenses were basically revenue expenses like salary to project engineers, their conveyance, travelling expenses, etc., and that since expenses pertained to year ended on 31st March, 1998, they needed to be allowed in asst. yr. 1998-99. learned CIT(A) held in favour of assessee, observing that AO had himself allowed Rs. 2,43,743 out of sum of Rs. 31,68,663, wherein he had disallowed remaining sum of Rs. 29,25,019 for reason that it pertained to asst. yr. 1998-99; that since assessee had been able to show that sum of Rs.29,25,019 had not already been claimed and allowed for asst. yr. 1998-99 and that since assessee had been following mercantile/accrual method of accounting, it was entitled to Rs. 29,25,019 for asst. yr. 1998-99. In this regard also, learned Departmental Representative submitted that this issue was not discussed before AO and so, issue needs to be examined by AO, for which matter be remitted to his file. learned counsel for assessee, on other hand, supporting impugned order, has submitted that nature of expenses in question is not at all in dispute; that assessee had made claim in asst. yr. 1999-2000; that AO had allowed part thereof, as above, and had held that balance was regarding earlier year; and that in books of account of assessee, these expenses have been treated as deferred revenue expenditure. It has been further contended that this Bench of Tribunal, in assessee s own case, for asst. yr. 1991-92 (copy of order placed on record) has allowed revenue deduction for same expenditure. With regard to this issue too, we are at one with assessee. treatment given by assessee to these expenses in its books of account is that of deferred revenue expenditure. AO, for asst. yr. 1991-92, had disallowed amount of Rs. 29,25,019 pertaining to asst. yr. 1998-99. nature of expenses not being in dispute, learned CIT(A) was justified in allowing deduction. As such, ground No.6 stands rejected. According to ground No. 7, learned CIT(A) has erred in allowing deductions under s. 35D. facts are that in asst. yr. 1992-93, assessee had incurred expenditure on issue of convertible debentures. It was claimed as deduction during year, as revenue expenditure. issue was raised before learned CIT(A) by way of additional ground, pleading that deduction of Rs. 2,21,459 disallowed under s. 35D in earlier year on account of expenses, be allowed. In statement of assessable income, in return for asst. yr. 1998-99, assessee clarified that deduction claimed on account of s. 35D did not include sums of Rs. 13,580, Rs. 1,87,879 and Rs. 20,000, aggregating to Rs. 2,21,459, on account of expenses disallowed by Department in assessments completed for asst. yrs. 1991-92 and 1992-93 and considered as deduction under s. 35D; that additional deduction in this regard was allowed by AO upto 1997-98; that for asst. yr. 1998-99, sum of Rs. 22,459 had not been allowed as additional deduction, which should have been allowed. learned CIT(A) accepted assessee s contentions. learned Departmental Representative submitted that once again this issue has not been discussed by AO and, therefore, this matter also be remitted to AO. learned counsel for assessee, on other hand, has submitted that Tribunal has decided this issue in favour of assessee for asst. yr. 1992-93 (copy of order on record), holding that expenses need to be amortised under s. 35D and that this is deduction which had been allowed by Department this year and till 1997-98. A. Here again, we find that Department cannot backtrack from stand consistently taken by it for earlier years. Therefore, we hold that learned CIT(A) was correct in deciding issue in favour of assessee. Accordingly, ground No. 7 also stands rejected. In result, appeal of Department stands partly allowed, as indicated. *** DEPUTY COMMISSIONER OF INCOME TAX v. MAX INDIA LTD.