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2015 (11) TMI 1302 - AT - Income TaxProfits in lieu of salary - chargeable to tax under section 17(3) or section 28(va) or any other section of the Income-tax Act - Held that:- The wide amplitude of the role assigned to the appellant clearly show that he was not subject to the direct control or supervision of Suzuki India, but was managing all affairs of the company; evolving business strategies; and advising the company. His role was clearly that of a joint venture partner in Suzuki India and not that of an employee of the company. In view of the foregoing and the submissions made by Shri Aggarwal, we are of Opinion that the appellant was not an employee of Suzuki India and, as such, the sum received by him from the company cannot be taxed as “profits in lieu of salary” under section 17(3) of the Act. We agree with Shri Aggarwal that as the sum of ₹ 1,32,00,000 was paid by Suzuki India to the appellant in consideration of not providing “the benefit of his knowledge of regulatory matters, negotiating skills and strategic planning expertise to any other person in India in the two wheeler segment” it cannot be regarded as non-competition fee because it has not been paid for not competing with the payer, but for not providing the benefit of his knowledge, expertise, skills etc. to any other person in the two wheeler segment. Thus compensation attributable to a negative/restrictive covenant is a capital receipt. Hence, as the sum received by the appellant does not fall within the ambit of section 28(va), and being a capital receipt is not taxable under the Income-tax Act - Decided in favour of assessee.
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