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2017 (8) TMI 731 - DELHI HIGH COURTPayment of non-compete fee - real nature of the transaction - genuine Non-Competition Agreement - payment of compensation in lieu of the non-compete agreement after retirement - whether not taxable in the hands of the assessee being a capital receipt - Held that:- The AO, incorrectly, interprets Clauses 2, 3 & 4 in holding that they actually contradict each other. The AO was clearly wrong in holding that the agreement was structured in a manner so as to give the Assessee “adequate loopholes” to bypass the restrictions with the “consent of MEW”. He termed the agreement as being non-serious. The AO also appears to have wrongly construed the fact that the payment was received prior to the signing of the agreement and hence it is nothing but a terminal benefit. In the statement of the Assessee, which was recorded by the AO on 9th December, 1997, she had explained to the AO that it was due to her personal efforts that the business of the company had grown and expanded from one office in Delhi to offices in several cities including Mumbai, Bangalore, Calcutta, Chennai and Kathmandu. She has explained the reason to leave TSME, as MEW wanted to drop her name from TSME in order to have a competitive advantage in India. She further explained that the money being paid to her as a non-compete fee was not directly related to the remuneration she was receiving from TSME, thus subsequent conclusion of the AO that the money paid to her was not a non-compete fee but a terminal benefit is wholly unsustainable. The Assessee, as clearly ascertainable from the record, was a lady who enjoyed a stature in the advertising industry and the Non-Competition Agreement, by which she agreed not to compete in India with MEW, was clearly not a sham. She is now 82 years of age and considering that the Revenue’s appeal challenges concurrent findings of the CIT (A) and ITAT, we do not find any cause to interfere. In the facts of the present case, this Court is persuaded to follow the decisions in Guffic Chemical Pvt. Ltd (2011 (3) TMI 6 - Supreme Court), Khanna and Annadhanam (2013 (1) TMI 681 - DELHI HIGH COURT) and Rohitasava Chand (2008 (3) TMI 16 - HIGH COURT OF DELHI ) to hold that the Non-Competition Agreement is genuine and the payment made thereunder is indeed a non-compete fee. - Decided in favour of the Assessee
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