TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 159
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....nces of the cast and in law, the Ld.CIT (A) erred in deleting theaddition of Rs. 5,00,000/- towards non-compete fees without appreciating the fact that the supplementary non-compete agreement dated 14.01.2002 was an afterthought and the taxable income for future years AYs 2003-04 to 2008-09 was declared as non-taxable income in AY2002-03 by entering into the agreement dated 14.01.2002 with a view to evade tax on the non-compete fees and hence the addition made by the AO,was justified. 3. Briefly stated, the facts are that the assessee, a Director of Vossloh-Schwabe India Pvt. Ltd. ('VSIN') entered into a series of agreements culminating into a Joint Venture (JV) with Vossloh Group that took effect from 31.03.1998. Thereafter, VSIN and the ....
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.... Joint Venture itself was re-negotiated with effect from August 8, 2003 under which the Non-Competition Agreement along with all other documents were terminated and fresh arrangements were put in place. However, under the new agreement, the Parties did not negotiate a separate non-compete fee for the Appellant." In the return of income, the assessee had offered the income from non-compete fees as under: "During the Assessment years 1999-00 to 2001-02, the appellant disclosed non-compete fee of Rs. 5,00,000/- each and claimed that the said sums were capital receipts. This position was examined and duly accepted in the scrutiny assessment of the Appellant for Assessment year 1999-00. In the Return of Income of Assessment year 2002-03, th....
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.... Vossloh Schwabe India Pvt. Ltd. held on 27.02.2002, the said supplementary non-competition agreement was approved." Referring to clause 5 of the said agreement, the Ld. CIT(A) observed that all the balance amount remaining with the assessee on the date of execution of the agreement was to be the lumpsum consideration towards the non-compete covenants for the remaining period of the non-compete fees. Consequently, the balance amount of Rs. 35,00,000/- ceased to retain the character of deposit in the hands of the assessee and thus became consideration for the previous year relevant to the AY 2002-03. Holding that the assessee has rightfully disclosed the said amount in the return of income for AY 2002-03, claiming it as a capital receipt, t....
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....etter and spirit factored non-competition during the currency of the JV. Thus the Ld. counsel supports the order passed by the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. Admittedly, the non-compete arrangement between the assessee and VSIN was originally for a period of 10 years for which an initial amount of Rs. 50,00,000/- was paid. Thereafter, the Parties mutually decided that the said amount would not be subject to annual review although the non-compete agreement would hold good for the period of 10 years. Under the supplementary agreement dated 14.01.2002, the assessee and Vossloh agreed that the condition for annual option to termina....
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....fered to tax under the head 'Capital Gains' but taxed by the A.O. under the head "Income from Other Sources" and 'Salary' respectively, without appreciating the facts that the payment was in fact made by SKS Group including Candlelight to the assessee without any consideration. The ability of doing business which was terminated was in respect of me company which is a separate entity. The director of the company or any other person is a separate entity and cannot claim to be the same as the company unless the company is a farce. The injury to the company cannot be claimed to be to the individual in law, though it may entail the same in certain facts and circumstances. Hence, the income arising to the assessee on account of &#....
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.... head 'Capital Gains' and not under the head 'Income from Other Sources' and 'Salary' respectively. 11. Before us, the Ld. DR relies on the order of the AO, whereas the Ld. counsel relies on the order of the Ld. CIT(A). 12. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. Admittedly, the assessee entered into termination agreement dated 31.07.2006 in order to terminate the JV with M/s Panasonic Electronic Works Vossloh Schwab GmbH. Accordingly, the assessee received a sum of Rs. 3,01,32,443/- being Rs. 2,56,19,997/- as termination fee and Rs. 45,12,446/- as severance fee. Both the amounts were received towards termination of JV. In the case of Kettlewell Bull....