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of <h1>Tax Appeal Dismissed: Non-compete fee deemed capital receipt, not taxable</h1> <h3>The ACIT Business Circle II, Chennai Versus Shri M. Ranjan Rao</h3> The Revenue's appeal against the CIT(A)'s order, which deleted the addition made towards a non-compete fee and treated it as a capital receipt not ... - Issues involved: Appeal filed by Revenue against CIT(A)'s order deleting addition made towards non-compete fee, treating it as profit in lieu of salary u/s 17(3) of the Act.Grounds of appeal by Revenue:- CIT(A)'s order contrary to law and facts.- Deletion of addition made towards non-compete fee.- Assessee employed as director in company involved in joint venture.- Compensation to director considered profit in lieu of salary.- Dispute over nature of receipt as non-compete fee.- CIT(A) failed to consider termination of joint venture.- Disagreement on characterization of sum received.- CIT(A) relied on non-final decision in another case.Arguments by CIT/DR:- Sole issue was deletion of addition for non-compete fee.- CIT(A) followed Tribunal's decision in similar case.- Distinction made from Supreme Court's ruling in another case.- Requested reversal of CIT(A)'s order.Arguments by Assessee's representative:- Presented Tribunal's order in similar case as precedent.- Showed Assessing Officer's treatment of similar cases as capital receipt.- Referred to CIT's order under section 263, later quashed by Tribunal.- Asserted non-compete fee as capital receipt not taxable.Judgment:- Assessee received non-compete fee from joint venture company.- Claimed fee as capital receipt not liable to tax.- Assessing Officer treated fee as profit in lieu of salary.- CIT(A) deleted addition following Tribunal's precedent.- Tribunal upheld CIT(A)'s decision based on identical facts.- No distinguishing features from previous case found.- Revenue's appeal dismissed, confirming CIT(A)'s order.This judgment highlights the dispute over the characterization of non-compete fee received by the assessee, with the Revenue contending it should be treated as profit in lieu of salary while the CIT(A) and Tribunal considered it a capital receipt not taxable. The decision was based on the interpretation of relevant legal provisions and precedents, ultimately upholding the CIT(A)'s order in favor of the assessee.
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