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2023 (10) TMI 1282 - HC - Income TaxNature of receipt - non- compete fee - capital or revenue receipt - assessee had been restrained both directly and indirectly from undertaking any business which would compete with the business of WSIL - as per CIT(A) non- compete fee was a camouflage for payment of money or transfer of business - HELD THAT:- According to us, a bare perusal of what is recorded by the CIT( A) of his order would show that the consideration was paid against various agreements, which included the non-compete agreements. A plain reading of the extract embedded in the aforementioned proceeding order does not convey that the assessee had conceded, as is sought to be portrayed before us, that the non-compete agreements were sham agreements and the consideration was artificially bifurcated into that which were paid for various assets [both fixed and movable] and transfer of IPR rights. There is, in fact, no elucidation of the note said to have been submitted by the authorized representative of the assessee. Tribunal, in our view, has applied the correct test, which is that there was no material on record for the CIT(A) to conclude that non- compete fee was a camouflage for payment of money or transfer of business. Tribunal, in brief, is seeking to convey is that because the assessee had executed a non-compete agreement with WSIL, the conversation the CIT(A) had with the assessee could not be used to vary, add or subtract from the obligations contained in the said agreement. Assessee had been restrained both directly and indirectly from undertaking any business which would compete with the business of WSIL. Clearly, for the period in which the non-compete agreement was to operate, which in this case was 10 years, the assessee’s source of income had been clamped and, therefore, compensation received by him could only be treated as capital receipt. - Decided in favour of assessee.
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