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2019 (4) TMI 668 - AT - Income TaxLong term capital gain - transfer of Internal Audit and Risk Consultancy practice (IARC) to company - "client relationship and goodwill‟ - capital receipt - Entitled to deduction under section 54EC - HELD THAT:- Assessee has transferred it capital assets as defined u/s 2 (14) it cannot be said that the above sum received by the assessee is a capital receipt which is not chargeable to tax. According to us, the assessee has transferred capital asset, therefore, it is chargeable to tax under the head capital gain. It can also not be considered as a non-compete fees because in the agreement through which the assessee has received INR 29 Lacs does not talk about the non-compete conditions. For the same the assessee has entered into another agreement for which INR 1,600,000 have been paid by the buyer to the assessee, which has been offered by them as a non-compete fees as business income. As the above client list and contract relationship is been built by the assessee over past 30 years it can also not be held to be a short-term capital asset but they are a long-term capital asset. Now the 2nd question arises about the cost of acquisition of these assets. The assessee has not purchased the reassessment are self-acquired therefore according to the provisions of section 55 (2) (a) (ii) the cost of the acquisition of these essential be taken to be nil. Therefore INR 2,900,000 on by the assess is chargeable to tax under the head capital gain and the cost of acquisition being nil. Therefore, INR 2,900,000 cannot be taxed as non-compete fees and also cannot be considered as capital receipt but is chargeable to tax under the head capital gains. As the assessee has made an investment in the specified bonds and capital gain has arisen to the assessee from transfer of a long-term capital asset, assessee is also eligible for exemption under that section. Disallowance as bonus paid to the partners - HELD THAT:- The remuneration payable was to be mutually agreed between the partners from time to time further in para number 10 on interpretation of clause 2 of the supplementary deed the honourable high courts held that conjoint reading of clause 7 of the partnership deed dated 01/05/1976 and clause 1 and 2 of the supplementary partnership deed dated 01/04/1992 conditions of section 40(b)(v) are not satisfied. The honourable High Court held so because there was no manner of quantifying the amount payable to the partners. In the impugned case before us, the assessee has clearly mentioned the amount payable to each of the partner as bonus. Hence, the revenue‟s reliance on the above decision is misplaced. Further in another decision of relied upon by the learned authorised representative in VAISH ASSOCIATES [2015 (8) TMI 855 - DELHI HIGH COURT] wherein a supplementary deed was executive on 01/08/2009 was considered to be effective from 01/04/2009 for assessment year 2009-10. Accordingly, the disallowance of rupees for 972773/– made by the learned AO because of bonus/remuneration paid to the partners is not sustainable. Therefore we reverse the order of the learned CIT – A and direct the AO to delete the above addition.
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