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2019 (5) TMI 548 - HC - Income TaxPayment of compete fee - nature of expenditure - revenue or capital expenditure - HELD THAT:- The payment of non-compete fee was held to be allowable as revenue expenditure. See ID = 1753241 Expenses on account of expansion of business of healthcare division and expansion of Maxxon business, Max Foil Division - HELD THAT:- Expenses incurred for starting entirely different line such as health care division and for expansion of business are revenue expenditure. See M/S MAX INDIA LTD. [2016 (1) TMI 784 - PUNJAB AND HARYANA HIGH COURT] Disallowance of speculation loss in trading of shares - Explanation to Section 73 - conversion of stock into investment - HELD THAT:- . The CIT(A) decided the issue in favour of the assessee by holding that the assessee was at liberty to classify shares received on amalgamation as stock in trade or investment. The Tribunal held the aforesaid conversion from stock in trade to the investment as valid and upheld the order of the CIT(A) treating the loss on sale of investment arising in the assessment year 2001-02 as not speculative business loss. Explanation to Section 73 of the Act invoked by the Assessing Officer was held to be not applicable in relation to sale of investments in the appeal for the assessment year 2001-02. Learned counsel for the appellant-revenue has not been able to show that the findings recorded by the Tribunal are illegal, erroneous or perverse warranting interference by this Court. - answered in favour of the assessee Signing of negative covenant for not carrying out a speciality business - whether it does not amount to transfer of right to carry on business, the consideration of which is liable to be taxed as capital gain - AO held that since the assessee extinguished its right to re-enter the market of plating chemicals and process for general metal finishing and electronics plating for consideration, the same amounted to transfer of right to carry on business and therefore the amount of consideration received was liable to be taxed under the head capital gains - CIT(A) held that undertaking a restrictive convenant not to carry on business without transfer of any business was not in the nature of right to carry on business to be regarded as transfer of capital asset - CIT(A) held non compete fees received as capital receipt not exigible to tax under the provisions of the Act - HELD THAT:- Identical issue was considered by the Tribunal in assessee’s own case for the assessment year 1998-99 and the Tribunal held that taking over a restrictive obligation did not amount to transfer of right in any business and therefore non compete fee could not be considered as resulting in capital gains. Even Section 55(2)(a) of the Act which was prospective in nature was not held to be applicable to the facts of the present case in the absence of any capital asset being transferred by the assessee in lieu of which the assessee had received the impugned amount of non compete fee. Learned counsel for the appellant has not been able to show that the findings recorded by the Tribunal are illegal or perverse warranting interference by this Court. - answered in favour of the assessee
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