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2015 (4) TMI 323 - AT - Income TaxTaxability of compensation - CIT(A) while deciding the appeal has held the impugned amount to be specifically taxable u/s 28(va) of the IT Act - notice u/s 153C - Held that:- Search in the premises of Cabana group was conducted on 31-7-09 whereas the settlement agreement in question and other agreements were executed much earlier on 24-11-08. It has not been alleged that the agreements are a subterfuge, thus the genuineness of agreements is not in question. All the clauses of the agreement read together reflect that the real intent, objective and purpose of the payment of compensation as per Settlement Agreement was to ensure withdrawal of all the pending litigation by Satyam from various forums instituted for breach of terms of conditions. The dominant consideration for compensation being surrendering the right to sue; its neither in lieu of surrender of any agency or agreement for non competition. This being so the compensation neither falls in the ambit of sec. 28 (ii) c as held by AO nor u/s 28 (va) as held by ld. CIT(A). Assessee has vehemently denied having any where admitted that part of the compensation was for non competition. In our considered view the compensation in question was meant, intended and paid for withdrawal of aforesaid litigation instituted by assessee which could have resulted in many adverse consequences for the reputation of Coca Cola/Atlantic besides entailing huge cost and efforts of litigation. Relinquishment of right to sue is neither a capital asset nor taxable u/s 28 which provides specific types of receipt to be held taxable as business income. Relinquishment of right to sue does not find any mention therein. In this eventuality we have no hesitation to hold that the impugned amount of ₹ 8,16,22,040/- is a capital receipt not liable to Income Tax. The addition is deleted, assessee's grounds in this behalf are allowed. Apropos the issue about validity of satisfaction u/s 153C, since we have allowed the relief on merits we find no necessity to dwell on this technical issue. - Decided in favour of assessee.
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