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2018 (3) TMI 311 - HC - Income TaxNon-competition agreement with Ranbaxy Laboratories Ltd. - nature of receipt - capital receipt or a revenue receipt - Held that:- Undoubtedly the right to manufacture the products was with the company when the non-competition agreement was entered into, in the absence of any material showing that a similar non-competition agreement was entered between the company and the appellant, it cannot be inferred that merely because the company was at the relevant time using the technical know-how possessed by the appellant, the latter was barred from using the same in future. Indubitably knowledge and technical know-how are intellectual properties and they undoubtedly constitute capital. When an individual is deprived of using such property in future, the same amounts to capital loss and the income derived from such capital loss constitutes capital receipt. In our opinion, the Tribunal has fallen into error in holding that the appellant has failed to prove that the specialized knowledge was treated as a capital asset. On its own finding the Tribunal held that it is the appellant who pioneered the Time Release Technology and promoted the company. This by itself would show that the technical know-how constituted a part of the capital. As observed hereinbefore, unless any specific material existed showing that the appellant has once and for all transferred the technical know-how in favour of the company and that there was no possibility for him to use the same in future without the permission of the company, it would be highly presumptuous for the Tribunal to hold that the appellant had no right to use the technology. Though a vague finding was rendered that the amount which was otherwise receivable by the company was diverted by the appellant, the same was not substantiated by the Tribunal. This finding, in our opinion, is based on a mere surmise or conjecture in the absence of a finding that the two agreements entered with RLL and SPIL are sham and nominal. - Decided in favour of assessee
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