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2017 (3) TMI 1699 - AT - Income TaxExigibility to tax in law of the ‘non-compete fees’ arising to the assessee - whether treated as profit in lieu of salary - Held that:- Given the huge outlay of capital and business risk involved in a new business, highly improbable for a person to, at an advanced stage of his life, start a new venture, risking both, the regular income that he could otherwise fetch by self-employment or by service, as he actually does by becoming a director (in CABL, i.e., the payer company), as well as his savings generated over the years. Why, the very fact that all such persons, whose cases stand referred to in this order, were directors and majority shareholders in the old company, were paid a ‘non compete fee’ and later co-opted as directors, itself indicates the same to be a part of a plan, a pre-mediated transaction, and integral to the takeover of the business of Citadel Fine Pharmaceutical Company Ltd. The same could be a part of the business restructuring as well, though the claim cannot be lightly made, nor can, like-wise, the Revenue’s claim of the impugned sum being profit-in-lieu of salary, assessable u/s. 15 r/w s. 17(3), be brushed aside so (lightly), particularly in this context. The assessee shall have to bring material or evidence on record to substantiate/prove his claims, which can only be decided on the basis of the facts borne out thereby, i.e., on the basis of given/proven facts. CIT(A) shall then, where relevant, determine whether the assessee’s method of accounting, which is only for income from business and from other sources, regularly followed, is, as contended by him, ‘cash’, in which case the un-received sum of ₹ 500 lacs could be considered for its assessibility as income only on its receipt. Two, where not so, so that the assessee’s method of accounting, which has to be either cash or accrual, is indeed accrual, can the said amount be considered as accrued under the given facts and circumstances. The matter, accordingly, as afore-stated, is restored back to the file of the ld. CIT(A) – who was bound by the order by the tribunal in the first round, and whose directions shall continue to obtain, for a decision on merits, issuing definite finding of facts upon allowing the parties opportunity to represent their case before him.
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