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2017 (1) TMI 738 - ITAT HYDERABADNature of compensation/settlement amount paid to the erstwhile MD - addition on the ground that the payment was for non- competition and being in capital nature - Held that:- We are of the view that the services of the MD were terminated because the merger of the assessee company took place. Therefore, the compensation paid to the MD was as per the agreement between the assessee and the MD. The AO was wrong in disallowing the amount as capital in nature. The material placed in the paper book demonstrates that the compensation paid to MD is as per the agreed terms. Also, it is common practice in case of termination of employment to put forth the condition not to engage in act of competition for a year. This cannot be considered to treat the above payment as capital in nature. Therefore, we set aside the order of the CIT(A) and delete the addition made by the AO towards compensation/settlement payment made to the MD of the assessee. - Decided in favour of assessee.
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