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2016 (7) TMI 575 - GUJARAT HIGH COURT

2016 (7) TMI 575 - GUJARAT HIGH COURT - TMI - Applacability of provisions of section 28(iv) - non-compete fees receipt - Held that:- The issue is covered by the decision of the Apex Court in the case of Guffic Chem (P.) Ltd. v. Commissioner of Income-tax [2011 (3) TMI 6 - Supreme Court ] wherein held that it is well settled that a liability cannot be created retrospectively. In the present case, compensation received under Non-Competition Agreement became taxable as a capital receipt and not as .....

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MR SUDHIR M MEHTA, ADVOCATE FOR THE OPPONENT : MR RK PATEL, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) By way of these appeals, the appellant has challenged the order of the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal ) whereby the Tribunal has allowed the appeal of the assessee. Hence Tax Appeal Nos. 1151 of 2008 and 1188 of 2008 have been filed by the revenue. Tax Appeal No. 800 of 2013 has been filed by the assessee against the order of the Trib .....

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llate Tribunal right in not holding that the amount of non-compete fees received by the assessee was taxable as capital gain u/s. 45 r.w.s. 55(2) of the I.T. Act? 3. So far as Tax Appeal No. 800 of 2013 is concerned, this court while admitting the matter has framed the following substantial questions of law: (1) Whether on facts and in law, the Tribunal is justified in its interpretation of scheme of the Income-tax Act, 1961, for upholding addition of ₹ 10 crore towards non-compete fees? ( .....

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e received by the assessee as non-compete tax was taxed under section 45 r.w.s. 55(2) of the Act. 5. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals) who dismissed the appeal vide order dated 23.4.2003 by holding that section 28(iv) of the Act is applicable to the case of the assessee. 6. Against the order of the Commissioner of (Appeals), the assessee preferred the appeal before the Tribunal. .....

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the scope of section 28(iv) of the Act. 8. Learned counsel for the respondent Mr. Patel has contended that the issue is covered by the decision of the Apex Court in the case of Guffic Chem (P.) Ltd. v. Commissioner of Income-tax reported in 332 ITR 602 where in paragraph No. 7 it is held as follows: Two questions arose for determination, namely, whether the amounts received by the appellant for loss of agency was in normal course of business and therefore whether they constituted revenue receip .....

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The High Court has misinterpreted the judgement of this court in Gillanders Arbuthnot & Co. Ltd. s case [(1964) 53 ITR 283 (SC)]. In the present case, the Department has not impugned the genuineness of the transaction. In the present case, we are of the view that the High Court has erred in interfering with the concurrent findings of fact recorded by the CIT(A) and the Tribunal. One more aspect needs to be highlighted. Payment received as non-competition fee under a negative covenant was al .....

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e created retrospectively. In the present case, compensation received under Non-Competition Agreement became taxable as a capital receipt and not as a revenue receipt by specific legislative mandate vide section 28(va) and that too with effect from 1.4.2003. Hence, the said section 28(va) is amendatory and not clarificatory. Lastly, in CIT v. Rai Bahadur Jairam Valji (1959) 35 ITR 148 it was held by this court that if a contract is entered into in the ordinary course of business, any compensatio .....

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