TMI Blog2014 (1) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'profession' as well, it would be doing violence to the provisions of the Act. Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law. It can be safely construed that business and profession are two different streams and treatment has to be given differently in case the statue provides for taxing any income under the head 'business' only - The income arising out of sale of goodwill in case of 'profession' relates to the personal competence of the 'professional' - In profession, goodwill is gained by an individual from his personal skill and experience which he gains over the period of time - The sale of goodwill in the present case results in generation of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch commencing from 1st May 2007. The assessee claimed the lumpsum receipts as capital receipts and credited the same to capital account. The assessee claimed the said amount as exempt from tax. The assessee also invested Rs. 50.00 Lakhs in bonds on 31-10-2007 to claim exemption u/s.54EC. As regards other assets i.e., buildings, medical equipment, electrical installations, fixtures etc., owned by the assessee in Prem's Eye Clinic, the same were taken on license/lease on a monthly rental basis by the new entity. 3. The assessee filed his return of income for the AY. 2008-09 on 30-01-2009 declaring his total income as Rs. 95,83,820/- and agricultural income Rs. 8,00,850/-. Notice u/s. 143(2) of the Income Tax Act, 1961 (herein after referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that as per the provisions of section 55(2), goodwill is taxable only in case of business. In the instant case the amount has been received on account of transfer of goodwill of profession, therefore, the capital receipts are not taxable. The ld. AR contended that the CIT(Appeals) instead of deleting the addition made by the Assessing Officer has enhanced the rate of tax by treating the capital receipts as non-compete fee under the provisions of section 28(va). The ld. AR placed on record a copy of PCA to show that the moneys received by the assessee are not in the nature of non-compete fee but are for transferring of reputation and goodwill. The ld. AR in order to support his contentions and to distinguish business from profession, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name and style of 'Prem's Eye Clinic' and form a new entity by the name and style of 'Vasan Eye Care Hospital Associate Partner of 'Prem's Eye Clinic'. The assessee agreed to transfer his existing cliental to the new entity. In lieu of transferring his reputation and goodwill, Dr. Arun agreed to pay a sum of Rs. 350 Lakhs to the assessee in a scheduled manner. The relevant extract of the agreement with regard to purchase of goodwill and reputation is reproduced herein below: "3. PURCHASE OF GOODWILL In consideration of Dr. K. Premraj transferring his reputation and goodwill under this Agreement, Dr. Arun will pay a sum of Rs. 350 Lakhs (Rupees Three Hundred and Fifty Lakhs) to Dr. Premraj as per the following schedule a. At the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has admitted that the amount received in lieu of goodwill is a capital receipt. The Assessing Officer has also held the same to be capital in nature. However, the point of difference between the contention of the assessee and the view of Assessing Officer is; the assessee is treating the capital receipts, received in the course of profession different from the one received during business. Whereas, the Assessing Officer has held business and profession to be the same and the capital receipts on the sale of goodwill to be taxable under the provisions of section 55(2). The ld. AR to support his contentions has relied on the judgment of the Hon'ble Supreme Court of India in the case of G.K.Choksi Co (supra). The Hon'ble Apex Court while de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head 'business' only. A perusal of section 55(2)(a) which is re- produced herein below would show that the term used in the Act is business. "55(2) For the purpose of sections 48 and 49, 'cost of acquisition' (a) In relation to a capital asset, being goodwill of a business [or a right to manufacture, produce or process any article or thing] [or a right to manufacture, produce or process any article or thing] [or right to carry on any business], tenancy rights, stage carriage permits or loom hours, - (i) In the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price; and (ii) In any other case [not being a case falling under sub- clauses (i) to (iv) of sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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