TaxTMI 
TaxTMI 
2024 (7) TMI 635
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication for condoning the said delay. On hearing both the sides, we deem it fit to condone the delay of two days in filing the present appeal as there being a sufficient cause for the said delay. Delay condoned. 3. The grounds of appeal raised by the Revenue reads as under: 1 Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) is correct in treating the receipt of non compete fees of Rs. 10 cr. as capital receipts as against revenue receipts held by AO and erstwhile CIT(A)? Rs. 3,57,00,000/- 2 Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A)erred in deleting the addition of Rs. 10 crore towards non-compete fees without appreciating the principle laid down by the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....units are situated at Mumbai, Valsad, Ankleshwar and at Tarapur. The assessee company had filed its return of income dated 31.10.2002, declaring total loss at Rs. 5,59,48,890/- under the normal provisions and book profit u/s. 115JB of the Act at Rs. 5,10,676/-. The assessee's case was selected for scrutiny and the assessment order u/s. 143(3) dated 30.09.2004 was passed by the ld. A.O. determining the total income at Nil after allowing set off of brought forward unabsorbed business loss and depreciation at Rs. 12,12,14,358/- and book profit u/s. 115JB of the Act at Rs. 5,10,676/- after making the following additions/disallowance: Sr. No Nature of addition /disallowance Amount (Rs.) 1 Receipt for non compete, scientific &technical in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceipt' and the such receipt was liable to tax only after A.Y. 2003-04 as per the amendment to section 28(va) of the Act vide Finance Act, 2002 w.e.f. 01.04.2003. 9. Aggrieved the Revenue is in appeal before us, challenging the order of the ld. CIT(A). 10. The learned Departmental Representative (ld. DR for short) for the Revenue contended that the assessee has not given up its source of income by way of the agreement signed by the assessee with LHHCL and has not proved that it had given up marketing and sale of other products other than those mentioned in the agreement. The ld. DR further contended that the non compete fee of Rs. 10 crores was a 'revenue receipt' liable to be taxed in the hands of the assessee. The ld. DR relied on the or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ereinafter referred to as 'products') till the time the assessee holds 26% of the total issued and paid up capital of LHHCL as per clause (1) of the said agreement. The ld. A.O. observed that the assessee was holding 51% in LHHCL and that the non compete agreement was merely a self imposed restriction which is not absolute and where the assessee can bring down its holding in LHHCL any time to less than 26% and compete with LHHCL in the business of marketing, distribution and sale of products. The ld. A.O. further held that the assessee was not confined to carrying on business of marketing, distribution and sale of other products which are not mentioned in the agreement, thereby holding that the source of income of the assessee is not in any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee. It is observed that the lower authorities have not disputed the genuinety of this agreement neither in the assessment order nor during the first appellate proceeding. Be that as it may, the Hon'ble Apex Court in the case of Shivraj Gupta vs. CIT (in Civil Appeal No. 12044 of 2016) has held that the Revenue has no authority to question the commercial expediency of the tax payer and cannot enter into the thicket of reasonableness of the amount paid. The assessee as well as the ld. CIT(A) have relied on the decision of Hon'ble Apex Court in the case of Guffic Chem (P.) Ltd. (supra) which has categorically held that the amendment to section 28(va) of the Finance Act, 2002 is only w.e.f. 01.04.2003 relevant to A.Y. 2004-05 onwards ....