2017 (1) TMI 738

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.... business of sale and service of vacuum pumps and spare parts, filed its return of income for the AY 2011-12 on 30/11/2012 declaring a total income of Rs. 41,59,381/- under the normal provisions and book profits u/s 115JB are admitted at Rs. 48,72,592/-. The case was selected for scrutiny under CASS. The AO completed the assessment u/s 143(3) by making addition of Rs. 40,25,000/- towards settlement payments and assessed the income at Rs. 81,84,381/-. 2.1 The total income included a claim of Rs. 40,25,000/- paid as 'compensation/settlement payment' by the assessee to its erst-while Managing Director based on his terms of appointment and settlement agreement accounted and claimed as salary. His services were terminated during the c....

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....f the case, additions made in the assessment order and the submissions of the appellant. In this regard, the Assessing Officer has mainly disallowed the compensation paid to the Director treating it as capital in nature, even though the TDS was deducted. The appellant explained that as per Section 17 of the Act, it is to be treated as profit in lieu of salary in the hands of the Managing Director. However, the appellant failed to produce a copy of the return of income filed by the Managing Director as per which he has disclosed this amount as his income. Therefore, I agree with the Assessing officer and the addition made by the Assessing Officer is confirmed and the appeal is dismissed." 5. Aggrieved by the order of CIT(A), the assessee ....

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....pensation to its outgoing MD Rs. 40.25 lakhs due to merger of the company with Pfeifer Vacuum Technology (P) Ltd and the said payment was strictly as per employment agreement with him. He contended that the Assessing Officer wrongly treated this payment as capital in nature. It has to be treated as salary. To support his contention, ld. AR brought to our notice the agreement of employment, termination agreement, which are part of paper book. 7. Ld. DR submitted that the language used in drafting the termination agreement (refer page 64 of paper book) that it clearly demonstrates the intention to make payment for non-compete fees. According to him, it is not important how the assessee treats the same in the books of accounts and he relies....