ITAT : Self-generated patent transfer triggers taxable capital gains; Rejects taxpayer's unascertainable cost plea

Mumbai ITAT rules that consideration received by assessee-company (engaged in research development, manufacturing, licensing of bio-pharmaceuticals products)  on assignment of indigenously developed patent of a medicine shall be taxable as ‘capital gains’ and shall be subject to  applicability of Sec. 55(2) (which states that cost of acquisition for self-generated goodwill, right to manufacture etc. shall be taken at ‘nil’) for AY 2008-09; Assessee had argued that the amount was a non-taxable capital receipt, as no cost was incurred for developing the patent and further even if cost was incurred, it was not ascertainable, moreover transfer of know–how/patent was not covered by Sec. 55(2);  ITAT notes that for developing a patent of medicine, assessee has to carry out research analysis and experimentation, further notes that medical patents require clinical tests and administering drugs to the patients, hence the claim that no cost was incurred is not acceptable; ITAT holds that assessee’s case falls under the ambit of ‘right to manufacture/produce/process any article or thing’ as envisaged u/s 55(2)(a), distinguishes assessee’s reliance on ITAT ruling in Kwality Biscuit (P.) Ltd. as it dealt with trade-mark and brand name, similarly distinguishes assessee’s reliance on Bombay HC ruling in Fernhill Laboratories and Industrial Establishment on facts:ITAT