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2017 (5) TMI 787 - HC - Income TaxDisallowance in respect of payment to sole selling agent - revenue or capital expenditure - Held that:- It is required to be noted that there was a valid reason for the assessee to terminate the sole selling agreement prematurely. The graphic division was sold w.e.f. 30/6/2006 as the graphic division was running in loss. That was the reason why the assessee thought it fit to terminate the sole selling agency and as the same was not viable and therefore, it discontinued the sole selling agency prematurely. As rightly observed by the learned tribunal, it was not for the A.O to consider the sufficiency of the reasons and/or to consider whether to continue or not the agency and whether the agency was viable or not. The learned tribunal has rightly observed that the A.O. cannot sit in the proverbial “armchair” of the assessee to decide the incurring of expenditure. As rightly observed by the learned tribunal, it was the prerogative of the assessee to run the business in a particular manner. Under the circumstances, making above observations in para 3.3 when the learned tribunal has treated and considered the payment of ₹ 2.5 Crores paid to sole selling agency - M/s. ATE Marketing (P) Ltd. as revenue expenditure, it cannot be said that the learned tribunal has committed any error. Receipt in lieu of sale of goodwill - LTCG - Held that:- We are in complete agreement with the view taken by the learned tribunal, more particularly when against the total sale consideration of ₹ 15.24 Crores, a sum of only ₹ 10 Lacs only was treated on sale under the head of goodwill and that sale consideration of ₹ 15.24 Crores included the amount of ₹ 10 Lacs under the head of goodwill. It is also required to be noted that in fact, the assessee had offered entire sale consideration as Long Term Capital Gain, however, out of the aforesaid, only ₹ 10 Lacs was claimed on sale under the head of goodwill. Considering the aforesaid facts and circumstances of the case, it cannot be said that the learned tribunal has committed any error in treating the receipt of ₹ 10 Lacs on sale of goodwill and treating the same as Long Term Capital gain.
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