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2013 (1) TMI 681 - HC - Income TaxAmount received from DTTI in terms of release agreement - capital receipt or revenue receipt - assessee a firm of chartered accountants entered into understanding with Chartered Accounts of Calcutta referred to them by Deliotte Haskins & Sells (DHS)part of the chartered accountants firm by name “Deliotte Touche Tohmatsu International” (DTTI), based in USA - release agreement entered into on 14.11.1996 under which the assessee firm was to no longer represent DHS in India & thereafter DHS would not refer any work to the assessee-firm - Held that:- As decided in Kettlewell Bullen & Co. Ltd. v. CIT [1964 (5) TMI 4 - SUPREME COURT] where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue & where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee’s income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt. Also see Oberoi Hotel Pvt. Ltd. Versus Commissioner of Income-Tax [1999 (3) TMI 2 - SUPREME COURT] CIT v. Best & Co. (P) Ltd case [1965 (11) TMI 23 - SUPREME COURT] as relied upon by revenue will not apply here as the facts of the case are not in pari materia with it the assessee in Best & Co, case had innumerable agencies in different lines and it only gave up one of them and continued to do business without any apparent mishap and that the correspondence showed that the assessee gave up the agency without any protest “presumably because such termination of agencies was part of the normal course of its business” . Thus answer the substantial question of law by holding that the amount of ₹ 1,15,70,000/- received by the assessee in terms of the release agreement dated 14.11.1996 represents a capital receipt, not assessable to income tax. The appeal of the assessee is allowed - against revenue.
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