Compensation for refraining from carrying on competitive business is capital receipt till AY 2003-04

CIT Vs M. Ranjan Rao (Madras High Court)  The Supreme Court in Gillanders Arbuthnot & Co. Ltd vs. CIT [ 1964] 53 ITR 283 has brought out a dichotomy between receipt of compensation by an assessee for loss of agency and receipt of compensation attributable to the negative/restrictive covenant. If the compensation is received for the loss of agency, it is to be treated as a revenue receipt whereas, if the compensation is attributable to a negative/restrictive covenant, then, it would amount to a capital receipt. The Supreme Court in Guffic Chem (P.) Ltd. Vs. CIT [2011] 332 ITR 602/198 Taxma...