TMI Blog2019 (8) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... entering into insurance business, which they had not done earlier, secondly, preventing the assessee from entering into an agreement with any other foreign insurance company. The condition is clear and lucid and it is to be treated as a 'restrictive covenant' and merely because the assessee was not in the insurance business is not a ground to read down the condition. Thus, we are of the considered view that the interpretation given by the CIT(A) to the said covenant is just and proper and we do not agree with the finding of the assessing officer as well as the Tribunal in this regard. CIT(A) was fully justified in holding that the amount received by the assessee was a capital receipt and was right in deleting the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brevity) is directed against the order passed by the Income Tax Appellate Tribunal C Bench, Chennai in I.T.A.No.955/Mds/05 dated 31.07.2007 for the assessment year 2001-02. 2. The above Tax Case Appeal has been admitted on 22.12.2008 on the following substantial questions of law:- 1. Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the amount received towards restrictive convenant is revenue receipt chargeable to tax? 2. Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the bad debts recovered by the appellant, which were written off and allowed as deduction in respect of Companies which g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income was determined at ₹ 120,65,85,728/-. The assessing officer while completing the assessment disallowed the amount received as compensation for restrictive covenant. In the agreement entered into between Royal and Sun Alliance Insurance (RSA), U.K., and General Insurance Company, India, the assessee was paid ₹ 16.80 Crores based on the agreement which according to the assessee is the receipt in the capital field, as it was received as consideration for restraining the assessee from entering into insurance business on its own and also restraining itself from negotiating with any other party for entering into insurance business. 7. The assessee filed an appeal before the Commissioner of Income Tax [Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee, which is not for the business of insurance and the payment is clearly towards 'exploitation of the service and infrastructure' of the assessee and hence falls under the revenue field. The assessee is before us on appeal challenging the said finding and we are required to answer the above framed substantial question of law. 10. The agreement entered into between the assessee and the U.K.Company is tiled as Letter of Intent agreed and accepted by the parties on 5th April, 2000 in London. The following clause is the subject matter of interpretation: At the instance of the U.K.Company, assessee restrained itself from interfering with any other party and also refrained fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign insurance company. The condition is clear and lucid and it is to be treated as a 'restrictive covenant' and merely because the assessee was not in the insurance business is not a ground to read down the condition. Thus, we are of the considered view that the interpretation given by the CIT(A) to the said covenant is just and proper and we do not agree with the finding of the assessing officer as well as the Tribunal in this regard. 12. Mr.T.Ravikumar, learned Senior Counsel for the respondent / revenue vehemently contended that the factual finding that the payment was received by the assessee before the commencement of business is the finding, which stares against the assessee and the same has not been chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 15. The learned counsel appearing for the assessee referred to the decision of the assessee's own case in TCA No.159 of 2009 dated 06.03.2019 , which pertains to the capital subsidy received by the assessee from the U.K.Company. 16. It is the submission of Mr.Ravikumar, learned Senior Standing Counsel for the respondent / revenue that the substantial question of law No.1 pertains to capital subsidy and in fact, the decision would enure in favour of the Revenue. We do not agree with the said submission as the Letter of Intent provides additional investment at the instance of the assessee and the condition stated 'if at the time of finalisation of shareholders agreement it is found that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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