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2010 (1) TMI 773 - ITAT, MUMBAIWhether the compensation is capital or revenue - compensation received from a supplier against the loss of reputation and goodwill - held that:- The main criteria to judge as to whether the compensation is capital or revenue is to ascertain the purpose for which such compensation is awarded. If the compensation is to recoup the loss suffered by the assessee in its business activity then it will be a revenue receipt. If however the purpose is unrelated to the trading activity of the assessee, as is the case before us in which it is for the loss of reputation and goodwill, it will be in the nature of a capital receipt. We find that similar view has been taken by the Pune Bench of the Tribunal in Serum Institute of India Ltd. v. Dy. CIT (2005 -TMI - 71292 - ITAT PUNE-B) - Since the amount of Rs. 41.58 lakhs was to make good the loss of reputation and goodwill of the assessee-company, in our considered opinion, the same constituted a capital receipt not liable to tax. - Decided in favor of assessee.
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