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2016 (7) TMI 337 - AT - Income TaxCompensatory sum received in terms of settlement agreement for not using the word ‘Longman’ in the name or trade mark of the assessee - business income or a capital receipt not liable to tax - Held that:- The agreement was towards settling various disputes on the use of name ‘ Longman’ and does not relate to any transfer of trade mark etc. While the assessee is precluded from using the name ‘Longman’, the corresponding Pearson Group is also precluded from using the name ‘Orient’. Thus, mutual obligations exists on both parties to the agreement. Section 28(va)(b) only deals with payment received for not sharing trade mark etc. this would presuppose that the assessee should own the trade mark and for a given consideration, has agreed no to share it with any other person. The word ‘sharing’ postulates there must be someone to use the trade mark. But in the present case, the sharing or otherwise is not possible when trade mark itself ceases to exist. We note that the settlement agreement has not been entered into in the ordinary course of business, therefore compensation received under a negative covenant for impairment of right to use the word ‘LONGMAN’ is in the nature of capital receipt. We find support for this proposition from the decision of coordinate bench in case of Govindbhai C. Patel vs. Dy. CIT Ahmedabad bench (2009 (10) TMI 637 - ITAT AHMEDABAD) wherein it was held that compensation received towards relinquishment of the assessee's right to sue it in the Court of law cannot be treated as revenue receipt taxable as business income under S. 28(va). - Decided in favour of assessee.
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