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2016 (6) TMI 302 - MADRAS HIGH COURTNon-compete amount received - revenue v/s capital receipt - Applying the legal principles enunciated by the Supreme Court in Rai Bahadur Jairam Valji s case, Kettlewell Bullen & Co Ltd [1958 (10) TMI 6 - SUPREME Court], Gillanders Arbuthnot & Co Ltd [1964 (5) TMI 5 - SUPREME Court], Karam Chand Thapar & Bros [1971 (1) TMI 13 - SUPREME Court], Oberoi Hotel (P) Ltd [1999 (3) TMI 2 - SUPREME Court] and Guffic Chem (P) Ltd [2011 (3) TMI 6 - Supreme Court] the amount equivalent to 4,99,000 pounds paid by the LIG is liable to be treated as a measure of compensation towards the negative covenant of non compete entered into by and between Bio-med Limited and LIG. In our opinion, it is not necessary that the assessee need to shelve all his other sources of income as well, for the receipt of compensation to amount to a capital receipt. Like in the Oberoi Hotel's case where assessee has only lost a right to a particular property only a part of several other business activities which it carries on - compensation received for partial impairment of the business activities normally undertaken by the assessee is liable to be treated as a capital receipt. The litmus test is whether the impairment is one of its sources of income or not and if the answer is that the injury has been caused to one of its sources of income, then it is enough to render the compensation received in that process as a capital receipt. At any rate, with effect from 01.04.2003, by virtue of introduction of Section 28(va) to the Act, all monies received pursuant to a negative covenant become liable for the incidence of taxation, thus obliterating the distinction between the two that was available till then. - Decided in favour of assessee.
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