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2016 (4) TMI 673 - AT - Income TaxRevision u/s 263 - whether Non-compete premium is taxable in the hands of the assessee under the head capital gains u/s. 55(2)(a) read with proviso (i) to section 28(va) - assessee is a non-resident company of UK in term of Article-7 of Double Taxation Avoidance Agreement (DTAA) with UK - Held that:- It is not the case of the revenue that the assessee is having a permanent establishment in India and as such in term of Article-7 of DTAA, being non- compete premium received by assessee cannot be taxed in India. The AO while framing assessment u/s. 143(3) of the Act, after considering the provisions has not taxed the non- compete premium in accordance with the provisions of the Act and the provisions of the DTAA. We are of the view that a perusal of non-compete agreement clearly shows that by any stretch of imagination it cannot be held that there is a transfer within the meaning of section 2(47) of the Act resulting in assessment being erroneous and prejudicial to the interest of revenue for not assessing non-compete premium as capital gains. The assessee clearly accepted that the provisions of section 28(v)(a) of the Act will apply to this non-compete section 28(va) premium being business income but that will be taxed in UK being assessee a non-resident British Company having no permanent establishment in India in term of Article-7 of DTAA. Thus we hold that the above said non-compete premium received by assessee is a business receipt assessable u/s. 28(va) of the Act but in term of Article- 7 of DTAA any business income arising to the enterprise of a contracting state is taxable only in that state, assessee being a non-resident company and does not have a permanent establishment in India, liable to tax in UK only. Accordingly, the assessment framed by AO is neither erroneous nor prejudicial to the interest of revenue and hence, the revision order passed by DIT(IT) is without any basis and quashed. - Decided in favour of assessee
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