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2016 (12) TMI 606 - ITAT JAIPURDisallowance of compensation received on termination of agreement of legal services claimed as capital receipts - Held that:- As decided in Khanna and Annadhanam vs. CIT [2013 (1) TMI 681 - DELHI HIGH COURT] when that source was unexpectedly terminated, it amounted to the impairment of the profit making structure or apparatus of the assessee firm. It is for that loss of the source of income that the compensation was calculated and paid to the assessee. The compensation was thus a substitute for the source. In opinion, the Tribunal was wrong in treating the receipt as being Revenue in nature. As in the present case as per the Resolution, ₹ 35 lacs was the amount of compensation paid to the assessee for termination of his services in accordance with the clause 5 of the agreement dated 14-06-2001 made between the assessee and Marut Nandan Educational Society and ₹ 15.00 lacs was paid towards arrears of his emoluments plus interest thereon. It is noted that the assessee had shown ₹ 15 lacs as professional income and paid due tax thereon and ₹ 35 lacs received on account of termination of employment as per clause 7 of the agreement was shown by the assessee as exempt being a capital receipt - Decided in favour of assessee.
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