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TMI Blog2015 (11) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... from salary from M/s. Toshbro Medicals Pvt. Ltd. and Chemito Technologies Pvt. Ltd. along with income from house property, income from capital gains and income from other sources. The assessment under section 143(3) of the Act was completed on 30/9/2011, whereby the total income was assessed at Rs. 5,88,33,904/-. The difference between the reported and the assessed income of Rs. 5.00 crores was on account of 'Non-compete fees' received by the assessee from M/s. Termo Electron LLS India Pvt. Ltd. In the return of income assessee had declared the said sum of Rs. 5.00 crores as a long term capital gain against which he claimed deduction under section 54EC to the tune of Rs. 50.00 lacs and the balance amount of Rs. 4.50 crores was deposited in the capital gain saving account. The Assessing Officer however, differed with the assessee and held that the 'Non-Compete fee' was liable to be treated as an income under the head 'profits or gains from business or profession' on the strength of section 28(va) of the Act. This stand of the Assessing Officer has since been upheld by the CIT(A) as well as by the Tribunal vide order ITA No.7034/Mum/2012 & others dated 16/1/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal (LOD) No. 2117 of 2012 dated 26/2/2013, a copy of which has been placed on record. 5. On the other hand, Ld. Departmental Representative appearing for the Revenue has defended the levy of penalty by pointing out that applicability of section 28(va) of the Act was clearly established in the present case and, therefore, the action of the assessee in considering 'Non-Compete fee' as a long term capital gain was erroneous. Ld. Departmental Representative also pointed out that it could not be said that the issue was debatable so as to mitigate the levy of penalty under section 271(1)(c) of the Act. At the time of hearing Ld. Departmental Representative has relied upon the judgment of Hon'ble Supreme Court in the case of Mak Data P. Ltd. vs. CIT, 358 ITR 593(SC) to submit that even in a case of a voluntary addition, penalty under section 271(1)(c) is justified. Ld. Departmental Representative has referred to the discussion made by the CIT(A) in his order whereby it has been concluded that the explanation of the assessee regarding nonapplication of section 28(va) of the Act was incorrect and not bonafide. Therefore, the penalty levied under section 271(1)(c) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller from assisting third parties whether as Consultant or otherwise in carrying out activities of the acquired business. Subsequently on 2/6/2008, purchaser company M/s. Termo Electron LLS India Pvt. Ltd. entered into a separate Non-Compete and Non-Solicitation agreement with the assessee whereby the assessee received a sum of Rs. 5.00 crores. In the return of income filed, assessee treated such receipt on account of Non-Compete and Non-Solicitation agreement as a long term capital gain. So however, the Assessing Officer was of the view that such receipt was assessable as a business income under section 28(va) of the Act. Broadly speaking, the amount of Rs. 5.00 crores received by the assessee from M/s. Termo Electron LLS India Pvt. Ltd. was for not carrying out the business of the similar nature for four years. The Assessing Officer stressed on the provisions of section 28(va) of the Act, which are as follows:- "(va) any sum, whether received or receivable, in cash or kind, under an agreement for - (a) Not carrying out any activity in relation to any business; or......" and concluded that the sum of Rs. 5 crores was an amount assessable under the head 'profits and gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Dr. B.V. Raju, 135 ITD 1(Hyd)(SB) upheld a proposition which is contrary to that laid down by the Mumbai Tribunal in the case of Mrs. Hami Aspi Balsara(supra). The Special Bench of the Tribunal in the case of Dr. B.V. Raju(supra) noted that when a business is sold and the purchaser enters into an agreement that there is no competition, he may enter into such agreement not only with the transferor of the business but also with persons connected with the transferor. Accordingly, as per Special Bench the purchaser of business may pay consideration to the transferor of business for not engaging in any competition but also to persons associated with the transferor for not engaging in competition. As per the Special Bench, the receipt of Non-Compete fee by the persons connected with the transferor for not indulging in competition would also fall for consideration under section 28(va) of the Act. It is this proposition which has prevailed and the issue has been decided against the assessee in the quantum assessment proceedings. 6.4 Be that as it may, the aforesaid discussion clearly brings out that the claim made by the assessee in his return of income to the effect that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per the authoritative pronouncement of the Hon'ble Supreme Court in the case of Reliance Petro Products Ltd. (supra), such a fact-situation does not amount to furnishing of inaccurate particulars regarding income within the meaning of section under 271(1)(c) of the Act. Thus, on this aspect itself the penalty is unsustainable. 6.6 To repeat, the entire fact-situation of the dispute reveals that difference between the assessee and the Revenue revolves around the head of income under which the impugned receipt from M/s. Termo Electron LLS India Pvt. Ltd. is liable to be taxed. The Hon'ble Bombay High Court in the case of M/s. Bennett Coleman & Co. Ltd.(supra) held that where there is only a change of head of income and in the absence of facts to show that the claim of the assessee was not bonafide, penalty under section 271(1)(c) of the Act is not maintainable. On this count also, we find that the penalty imposed under section 271(1)(c) in the present case is unsustainable. 6.7 Before parting, we may refer to the reliance placed by the CIT(A) as well as by the Ld. Departmental Representative on the judgment of Hon'ble supreme Court in the case of Mak Data P. Ltd.(sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case and in our view, the burden was on the Revenue to demonstrate that the explanation rendered by the assessee is bereft of any substance. In our considered opinion, the Revenue has failed to demonstrate that there is any conscious concealment or furnishing of inaccurate particulars of income in the return of income qua the amount of Rs. 5.00 crores received by the assessee as Non-compete and Non-solicitation fee from M/s. Termo Electron LLS India Pvt. Ltd. Therefore, the ratio of the judgment of Hon'ble Supreme Court in the case of Mak Data P. Ltd.(supra) does not help the case of the Revenue in the instant appeal. 6.8 In conclusion, we therefore, hold that having regard to the aforesaid discussion, the lower authorities have erred in imposing penalty under section 271(1)(c) of the Act amounting to Rs. 1,50,00,000/-. Accordingly, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the penalty levied under section 271(1)(c) of the Act. 6.9 In so far as the other captioned appeal in the case of Anurag Toshniwal is concerned, the facts and circumstances are identical to those considered in the case Arun Toshniwal in the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X
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