Geojit Investment Services Ltd Vs CIT (Kerala High Court)
Kerala High Court held that amount received, under an agreement, for not carrying out any activity in relation to any business or profession would attract provisions of section 28(va)(a) of the Income Tax Act and hence the same is chargeable under the head of “Profits and gains of business or profession”.
Facts- The appellant was a wholly owned subsidiary of Geojit Financial Services Ltd. [GFSL], a public listed company, which was primarily engaged in the business of equity and derivatives brokerage. In March 2007, BNP Paribas S.A. [BNP Paribas], a French Bank, acquired 27.18% equity stake in GFSL, through a preferential issue.
In lieu of the appellant discontinuing the commodity brokerage business, BNP Paribas offered compensation of Rs.40 crores. Pursuant thereto, in a meeting held on 23.05.2008, resolution was passed by the Board of Directors of the appellant accepting the said offer.
The compensation of Rs.40 crores paid by BNP Paribas to the appellant was credited to the Profit & Loss account of the appellant for the year ending 31.03.2009 and disclosed as an ‘extraordinary item’. In the income tax return, the appellant included the compensation of Rs.40 crores while computing book profit and paid tax thereon as per provisions of Section 115JB. For the purpose of computing tax under the normal provisions of the Act, the appellant excluded such compensation, considering the same to be in the nature of non-taxable ‘capital receipt’.
