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2010 (11) TMI 107 - DELHI HIGH COURTCapital or Revenue receipt - In computing the taxable income, the amount of Rs. 4.25 crores received from DCM under the Agreement dated 30th October, 2000 was, however, not claimed as a "capital receipt". The said amount was credited to the profit and loss account under the head "other income". During the course of assessment proceedings, the appellant by a letter dated 24th September, 2003 claimed that the said sum of Rs. 4.25 crores was a "capital receipt'. the Supreme Court held that the compensation agreed to be paid was not only in lieu of the giving up of the agency but was also for the assessee accepting the restrictive covenant for the specific period of five years. In the present case, a reading of the agreement makes it abundantly clear that the compensation paid to the appellant in the instant case by the DCM was not on account of the restrictive covenant which was treated as an incidental matter, but on account of the dispute between the parties relating to the termination of the agreement dated 24th November, 1988 it could hardly be said that given the nature of the restrictive covenant in the Agreement, the appellant was hampered from operating its profit making apparatus in other spheres and even in the very same sphere. Apparently for this reason it did not even strike the appellant at the time of filing of its return, to claim that the sum of Rs. 4.25 crores was a capital receipt. Subsequently, it appears that on account of legal advice received by the appellant during the course of the assessment proceedings and about two years after the filing of its return, the appellant, by a letter dated 24thSeptember, 2003 staked the claim that the sum in question was a capital receipt. Even thereafter, the claim does not appear to have been seriously pressed as is quite obvious from the fact that it was not even dealt with by the Assessing Officer and the CIT (A) also while dealing with this aspect of the matter dealt with it incidentally. It was only when the matter reached the Tribunal that this claim of the appellant appears to have been seriously pressed. Amount of Rs.4.25 crores was in the nature of trading receipt and the revenue authorities have rightly held it to be so - The appeal is dismissed
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