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2015 (3) TMI 407 - HC - Income TaxSalary income or not - amount received by the appellant under the non-competition agreement - AO, CIT(A) and ITAT confirmed the taxability udner the head salary income - assessee had rich experience in design, development and commissioning of Industrial Drives, power electronic equipments, such as High Power Battery Chargers and UPS Systems - Held that:- In the present case, this Court finds that the employment contract is between the joint venture Indian company, viz., CTIL and the assessee and the terms and conditions of the employment is restricted only in relation to three items, which we have already referred to in the earlier part of this order and there is nothing to show that it has any relation with the industrial drives in question and, therefore, the foreign collaborator was justified in entering into a non-competition agreement, i.e., only after 26.9.95 when the Government of India, Ministry of Industries, granted approval to increase the shareholding of the foreign company in the joint venture Indian company. There are clear indications as to why the foreign company entered into the non-competition agreement after this approval given by the Government of India, Ministry of Industries, Department of Industrial Policy and Promotion, Foreign Collaboration-II Section. The Tribunal erred in holding that the amount paid by the foreign company to the assessee/appellant is by the employer to the employee, which conclusion, on the face of it, is not correct, as there is no relationship of employer and employee between the foreign company and appellant/assessee and this conclusion arrived at by the Tribunal is a misreading of the agreement. On a plain interpretation of Section 15 read with Section 17 of the Act, we are unable to subscribe to the view of the respondent/Revenue as has been confirmed by the CIT (Appeals) and the Tribunal, that the payment received in this case is in the nature of salary. The principles, as laid down by the Supreme Court in Guffic's case (2011 (3) TMI 6 - Supreme Court) is squarely applicable to the facts of the present case. In view of the aforesaid reasoning and findings, this Court holds that the payment in this case, received by the appellant/assessee, is not in the nature of a salary and it is only a capital receipt. - Decided in favour of the appellant/assessee.
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