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2017 (2) TMI 456 - DELHI HIGH COURT

2017 (2) TMI 456 - DELHI HIGH COURT - TMI - Amount received under the agreement - whether held as a capital receipt not liable to tax or is it a business income? - Held that:- There cannot be a set formula or manner in which commercial entities engaged in business can be said to behave. - In the present case, the assessee along with other business entities came together. The assessee used to carry on a restaurant business and was also distributing ice cream and related products. The agreeme .....

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er competition which may deter it from entering into the same business. Whatever be the reasons, its desisting from the business on the one hand and agreeing to receive compensation on the other clearly points to the fact that the sum of ₹ 2 Crores was paid as non-compete fee. Therefore, it fell in the capital stream. - Decided in favour of the assessee - ITA 487/2004 - Dated:- 2-1-2017 - S. Ravindra Bhat And Najmi Waziri, JJ. For the Appellant : Mr. Rahul Chaudhary, Sr. Standing Counsel F .....

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on 14.10.1994. The arrangement included a non-compete agreement entered into on the same date whereby the assessee received ₹ 2 Crores as compensation which was sought to be treated as capital of the assessee. The assessment was originally completed under Section 143 (1) but later an assessment notice was issued on 19.02.2001 under Section 147/148 of the Income Tax Act, 1961; the AO completed the assessment treating the receipt as goodwill. The Commissioner (Appeal) set aside the AO s fin .....

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rely agreed to place an embargo upon the exercise of its rights including distribution rights for a period of ten years for which one lump sum amount was received. This could be the aggregation of the annual receipts which otherwise the assessee could very well have derived in the normal course of its activities. Counsel for the assessee, on the other hand, urges that the Tribunal s findings are correct and relied upon paragraph 20 of the impugned order. She relied upon clause 10 of the strategi .....

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e, as is evident from the factual discussion, the assessee along with several others entered into a strategic alliance agreement on 14.10.1994. This Court is not concerned with the stipulations in the strategic alliance agreement per se but rather with the other agreement entered into between the assessee and BBLIL on the same day. That agreement was really to further the objects of the strategic alliance agreement and specifically provided for two things, i.e., that the assessee would desist fr .....

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