TMI Blog2009 (12) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1999-2000. Since no scrutiny assessment was made under Section 143(3), he issued notice under Section 148 as he had reason to believe that income had escaped assessment. The Assessee vide letter dated 6-4-2004 submitted that the return filed on 31-12-1999 may be treated as return filed in response to notice issued under Section 148 of the Act. The assessing officer after issuing detailed notice to the Assessee and after considering the Assessees submissions, completed the assessment on 27-3-2006 at a total income of ₹ 31,26,26,750. An appeal was preferred before learned Commissioner (Appeals), who vide his order dated 10-8-2006 partly allowed the Assessees appeal. 3. Learned Commissioner-4 called for the income-tax records and noticed that the assessing officer did not tax the receipt of ₹ 9 crores on account of non-compete fees as income from business and profession under Section 28 of the Income Tax Act, 1961. He further noticed that this amount was offered for taxation and included by the Assessee in its return of income while computing the income from-business and only a note had been appended to the computation of total income claiming the sum of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partmental valuer, the valuation of the land, building and machinery, etc. transferred as a result of transaction. He, accordingly, set aside the assessment for being reframed afresh. 5. Learned Counsel for the Assessee submitted that while filing the return of income, the Assessee had, inter alia, included ₹ 9 crores as its income in the computation of total income without prejudice to its claim that the same amount, being in the nature of non-compete fees, was capital receipt. In this regard, he referred to the computation of income contained at p. 38 of paper book along with the notes to the computation of income contained at pp. 39 to 41 of paper book. Learned Counsel referred to note 10 in this regard given in it the notes to the computation of income, which reads as under: The company has received ₹ 9 crores towards non-competing allowance. This amount is paid to refrain the promoters of the company and its direct family members from engaging in the marketing of branded salt and becoming a competitor against the same person to whom the assets were sold. In Gillanders Arbuthnot Co. Ltd. v. CIT (1964)53 ITR 283 (SC) and CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: the amount of ₹ 9 crores as non-compete allowance should not be considered as compensation for the assets under transfer, especially since you are no more in the same business and you are in no way in a position to compete, and the break-up of the sale consideration into non-compete allowance was made only with the view of avoiding payment of taxes due ? 5.3 He further referred to p. 27 of paper book and pointed out that in para 8, p. 16 of the assessment order, the assessing officer has noted that the Assessee had filed its submissions dated 9-2-2005 and 31-5-2005. Learned Counsel referred to supplementary paper book filed by the Assessee on 26-5-2009, wherein the Assessee has filed the copy of reply dated 9-2-2005. He referred to p. 11 of the said reply and pointed out that the Assessee had replied in regard to this item as under: Amount of ₹ 9 crores shown as non-compete allowance proposed to be treated as compensation for the assets under transfer. 10. As regards the non-compete fees received of ₹ 9 crores, it is submitted that the said amount was received since the buyers desired that the Assessee should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following manner. 12. We submit that the Assessee has entirely sold its business along with plant, machinery and also the brand name with which it has established in the market over the years. When the Assessee has sold the assets in entirety it has resulted in the sale of source itself from which it was earning income and, therefore, what is transferred is the source itself and not the income, therefore, the receipt tantamounts to a capital receipt not liable to tax. 5.4 learned Counsel submitted that after considering the Assessees aforementioned reply, the assessing officer after duly examining the agreement, which was filed before him, accepted the Assessees plea, which was one of the possible views at that time because prior to 27-3-2006, there were several orders on this issue. Learned Counsel referred to the impugned order of learned CIT and pointed out that one of the grounds, as noted earlier, that there was no whisper about taxability of the said issue in the assessment order is, therefore, not correct. In regard to learned CITs observation that though assessing officer had taken into consideration the amount received on account of sale of copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the Tribunal, Delhi Bench in the case of Gomti Credits (P) Ltd. v. Dy. CIT (2006) 100 TTJ (Del-Trib) 1132, wherein it was held that non-compete fees was capital receipt. 5.7 He further referred to the decision of the Tribunal, Delhi Special Bench in. the case of Saurabh Srivastava v. Dy. CIT (2008) 111 ITD 287 (Del-Trib)(SB) and pointed out that same view has been taken in the said case though the decision is dated 7-12-2007. 5.8 He further referred to the decision dated 23-12-2005 of the Tribunal, Mumbai in the case of Jt. CIT v. Alfa Laval (I) Ltd. (2006) 104 TTJ (Mum-Trib) 791 with respect to assessment year 1996-97, wherein it was held that non-compete fees was not amenable to capital gains. 5.9 Learned Counsel submitted that it is evident from the above that on the date of passing of the assessment order, there were various decisions of the Tribunal supporting the view as adopted by the assessing officer. He further referred to the following decisions to submit that the said view has further been fortified by the decision of the Hon'ble Bombay High Court in the case of CIT v. Narendra D. Desai (2008) 1 DTR (Bom) 106. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luer. 6.1 Learned departmental Representative referred to the decision of the Hon'ble Supreme Court in the case of CIT v. Shelly Products and Anr. (2003) 261 ITR 367 (SC), wherein it was held that the Assessee is not entitled to refund of advance tax and self-assessment tax paid. Relying on this decision, learned departmental Representative submitted that the Assessee could not rescind to that extent. 6.2 Learned departmental Representative further referred to the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) and pointed out that the term prejudice has been defined which is of wider term. He submitted that it has been held in the said decision that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. He sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xability of non-compete fees of ₹ 9 crores, which was included in the return of income with a qualifying note in the computation of total income. One more objection of the learned Commissioner is regarding valuation aspect which had allegedly not been taken into consideration by the assessing officer. From the submissions of learned Counsel for the Assessee, noted above, with reference to show-cause notice issued by the assessing officer as well as reply filed by the Assessee, it is evident that the assessing officer had duly applied his mind to the issue regarding taxability of non-compete fees and then had reached to a conclusion that the same was not taxable and hence, it cannot be said to be a case of non-application of mind. Further, it is also evident from the decisions in the cases of Alfa Laval (I) Ltd. (supra) and Gomti Credits (P) Ltd. (supra) that the view taken by the assessing officer on the date of passing of the assessment order was a possible view. The assessing officers action further stands vindicated by the decision of the Tribunal, Special Bench in the case of Saurabh Srivastava (supra). The Hon'ble Bombay High Court in the case of Gabriel India Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee and even if the Assessee had inadvertently included a particular income as income, the assessing officer is supposed to determine the correct income by excluding the same. It is well-settled principle that the assessment proceedings are quasi judicial in nature and it is the basic function of the assessing officer to find out the correct tax liability under the provisions of law that could be imposed and collected from the Assessee. The assessing officers power being quasi judicial are coupled with a duty to be exercised by him to determine correct tax liability. The Hon'ble Bombay High Court in the case of Laxman v. CIT (1988) 174 ITR 465(Bom), inter alia, observed that once conditions required for exercise of discretion in any judicial or quasi judicial proceedings are satisfied, exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective. The duty of the assessing officer is even to allow deduction and relief which are warranted under the provisions of the Income Tax Act, even though the Assessee concerned was ignorant or diligent enough to claim such relief or such deduction. We may also refer to the Board ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, advance tax or tax on self-assessment which is in excess of his liability on the basis of the return furnished, it is open to the Assessee to claim refund of excess tax paid in the course of assessment proceedings. This is precisely the case before us where the Assessee has filed his return with a note in the computation of income regarding non-taxability of the impugned items which was duly considered by the assessing officer and the Assessees claim accepted. In our opinion, the decision in the case of Shelly Products (supra) supports the case of the Assessee and does not go in any manner against the Assessees contention. 14. Now coming the learned departmental Representatives reliance on the decision in the case of Goetze (India) Ltd. v. CIT (supra). In this case, the main issue was whether the Assessee could claim deduction without filing any revised return or not. It was held that if a deduction is claimed after filing of return then there is no power of assessing authority to entertain the said claim, which was, otherwise by way of revised return. We fail to appreciate as to how this decision is applicable to the facts of the case because, admittedly, in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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