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2012 (2) TMI 217 - AT - Income TaxTaxability of Non-Compete fees – Capital gain vs Business Income or capital receipt not chargeable to tax - assessee being director of RCL & SVCL hostily taken over by ICL – consideration paid by ICL vide adjustment towards amount due to RCL – Held that:- It is established that such adjustment of consideration towards amount due to RCL would qualify as non-compete fees. However, consideration was not for sale of any business nor was it for not carrying on any business which he was carrying on, which he had transferred. It was also not a payment for a “right to manufacture, produce or process any article or thing”. The provisions relating to capital gains are therefore not attracted. The amount was paid for “not carrying out any activity in relation to any business” and would fall within the ambit of Sec.28(va)(a), which at the relevant point of time of accrual in the hands of assessee viz., 27.10.1999, was a capital receipt not chargeable to tax. Such receipts became taxable on and from 1-4-2003. As held in the case of Guffic Chemical Industries (2011 - TMI - 202401 - Supreme Court), the provisions of Sec.28(va)(a) are not clarificatory and were applicable only prospectively from 1-4-2003. Therefore the receipts in question were capital receipts and not chargeable to tax in AY 00-01 – Decided against the Revenue.
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