Compensation for pre-closure of Contract Manufacturing Agreement is non-taxable Capital Receipt

Sai Mirra Innopharm Private Limited Vs ITO (ITAT Chennai) On perusal of details filed by the assessee, we find that the assessee has entered into a contract manufacturing agreement with Dr.Reddy’s Laboratories Ltd., for a period of 10 years for manufacturing of drugs as per the specification provided by the principals, but the know-how required for manufacturing of drugs is not possessed by the assessee. Subsequently, Dr.Reddy’s Laboratories Ltd., has terminated the contract before the completion of contract period for the reasons best known to them and demanded the assessee to surrender a...