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1965 (11) TMI 23 - SC - Income Tax
Whether the sums of ₹ 66,790 and ₹ 3,35,371 are assessable under section 10 for the assessment years 1951-52 and 1952-53 ?
Held that:- In the present case, the covenant was an independent obligation undertaken by the assessee not to compete with the new agents in the same field for a specified period. It came into operation only after the agency was terminated. It was wholly unconnected with the assessee's agency termination. We, therefore, hold that that part of the compensation attributable to the restrictive covenant was a capital receipt and hence not assessable to tax.
The answer to the question referred to the High Court is that only such part of the sums of ₹ 66,790 and ₹ 3,35,371 as is attributable to the loss of the agency is assessable under section 10 of the Act for the assessment years 1951-52 and 1952-53. We accordingly modify the answer given by the High Court in that regard. Appeal allowed in part.