Case Law Details
SIEL Limited Vs ACIT (ITAT Delhi)
ITAT Delhi held that receipt of non-competition fee on account of restrictive covenants in respect of restrain on the source of income are capital receipts. Accordingly, the same is not liable to tax.
Facts- During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has received non-competition fee from Collaborator amounting to Rs. 64,42,20,000/-. AO formed a strong belief that prior to receipt of non-compete fee, the assessee had already transferred all assets of its compressor limited and, therefore, non-compete fees is not a consideration received for transfer of any asset as all assets were already transferred. Accordingly, it cannot be treated as capital receipts.
Conclusion- Held that compensation received for loss of agency is taxable as revenue receipt, however, receipts attributable to the negative covenants for not to carry on a business are capital receipts not liable to tax. Thus, the amount received as non-compete fee is not taxable and the Assessing Officer is directed to delete the same.
FULL TEXT OF THE ORDER OF ITAT DEL-HI
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