TaxTMI 
TaxTMI 
2005 (5) TMI 34
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....ived by the assessee for entering into a restrictive covenant of not entering into a competing business with United Breweries group for a period of five years was receipt by the assessee in the nature of a capital receipt or whether it was a revenue receipt? (b) Whether in law the said receipt of Rs. 1.75 crores is not capital gain chargeable to capital gains tax but merely capital receipt not chargeable to any tax whether tax or capital gains tax at all? (c) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in deleting the addition of Rs. 1,74,95,000, made by the Assessing Officer as per the provision of section 10(3) of the Income-tax Act, 1961?" The facts found by ....
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....ure as in the past once he was free from WIEL. Therefore, the assessee and the UBL entered into another agreement whereby the assessee undertook not to engage himself directly or indirectly for a period of five years from the date of the agreement in any activity industrial, commercial or otherwise, which in any manner competes or comes into conflict with the existing business and activity of WIEL. In consideration of such undertaking, the UBL agreed to pay to the assessee a sum of Rs. 175 lakhs. The said sum was duly paid by UBL and its associate companies. It was in this background that the assessee had received the aforesaid amount of Rs. 175 lakhs. The Assessing Officer held that the receipt was of casual and non-recurring nature sub....
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.... by the order passed by the Commissioner of Income-tax (Appeals), preferred an appeal before the learned Income-tax Appellate Tribunal. The Tribunal held as under: "... we are of the opinion that the Commissioner of Income-tax (Appeals) rightly deleted the addition as a sum of Rs. 175 lakhs received by the assessee was not casual in nature and the same was received by virtue of restrictive or non-competitive covenant. So, the receipt was outside the purview of the definition of income. Hence, we find no infirmity with the order of the Commissioner of Income-tax (Appeals). The same is hereby upheld." Mr. R.K. Murarka, learned senior advocate for the assessee, submitted in view of an unreported judgment delivered by the jurisdictional c....
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....rial has been brought on record by the Assessing Officer to support that the 'non-compete agreement7 is a colourable device. In view of these undisputed facts, we find no reason to disturb the finding of fact of the Tribunal that the agreement is not a colourable device." The High Court dismissing the appeal by the Department held as under: "That left no doubt that the payment of amount under the agreement dated December 15, 1996, has been paid to the assessee by Gillette Company to refrain from engaging himself whether directly or indirectly in any business which undertakes or is engaged in the manufacture or marketing or distribution of razor blades, shaving systems or shaving preparations. That amount cannot be taxed as revenue receip....
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....newly constituted firm. It was held that none of the provisions pertaining to the head "Capital gains" indicated that they include an asset in the acquisition of which no cost at all can be conceived. It was held that goodwill generated cannot be described as an "asset" within the terms of section 45 and was not subject to income-tax under the head "Capital gains". Applying the principle laid down in CIT v. B.C. Srinivasa Setty reported in [1981] 128 ITR 294 (SC) this court in CIT v. General Industrial Society Ltd. reported in [2003] 262 ITR 1, in which one of us (D.K. Seth, J.) was a party, while considering whether the sum received on a transfer of licence was subject to capital gains or not, held that the cost of acquisition could not be....
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....st the Revenue. So far as question No. 3 is concerned, we find it is covered by the principles of law as laid down in the judgment of the Supreme Court in CIT v. D.P. Sandu Bros. Chembur P. Ltd. reported in [2005] 273 ITR 1, that tenancy right is a capital asset, the surrender of which would attract section 45 so that the value would be a capital receipt and assessable, if at all, under item E of section 14 and cannot be treated as a casual and nonrecurring receipt under section 10(3) and be subjected to tax under section 56. Their Lordships repelled an argument by the Revenue that even if the income cannot be chargeable under section 45 because of the inapplicability of the computation provided under section 48, it could still impose a ....