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2015 (11) TMI 1299 - AT - Income TaxAmount received on account of non-compete fees - whether chargeable as business income or capital gains? - Held that:- Only on the basis of clause No.3.4 of the agreement dated 29-5-2003, the AO inferred that entire amount was received by assessee on account of non-compete clause. We found that this clause is merely consequent to the transfer of the business. Obviously, the vendor cannot carry on the business because it has already been transferred major part of its business. The assessee group held major shareholding of 51% in the transferee company and after the transfer of contract, employees, customers, licence of premises, market standing, goodwill, etc., there is very few possibility of competition. However, keeping in view the nature of assessee‟s business and the fact that assessee entered into a non-competitive agreement for a period of one year by which it would have established itself in the market and sort of production of the assessee would have ceased, the CIT(A) had very rationally attributed ₹ 4.5 crores as non-competitive fees falling under Section 28(va) of the Act. The balance amount was for transfer of intangible assets and goodwill, therefore, treated by CIT(A) as capital receipt liable to tax under the head capital gains amounting to ₹ 50.23 crores, we do not find any infirmity in the decision arrived at by CIT(A), which is based on material on record, therefore, do not require any interference on our part.
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