Case Law Details
Piramal Enterprises Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that compensation received by the assessee in out of court settlement for unilaterally terminating certain obligation under the agreement is an income assessed to business income and not an income assessed to capital gains as claimed by the assessee.
Facts- During the year under consideration it has been noticed from the computation of income assessee company that an amount of Rs.92,76,62,688/- received from Roche Diagnostics Gmbh (RDG) of Germany under a settlement agreement towards termination of agency, distribution and manufacturing rights granted to it by RDG vide agreement dated 30.06.1997 which has been offered by the assessee to tax under the head “capital gains” instead of showing the same as business income.
Another issue is that the assessee has collected sales tax from the parties on behalf of the government and was not deposited with the government as per scheme formulated by the Madhya Pradesh Government and was treated as deferred loan to the assessee. Subsequently the same was partly waived on prepayment and consequently the assessee has gained an amount of Rs.8.23 crore which was treated as revenue income by the Ld. CIT(A) instead of capital receipt claimed by the assessee.
Conclusion- Held that compensation received by the assessee from RDG to the tune of Rs.92,76,62,688/- in out of court settlement is a business income and not an income assessed to capital gains as claimed by the assessee and as such provisions contained under section 28(ii)(c) read with section 28(va)(a) of the Act are attracted. Hence, the Ld. CIT(A) has rightly confirmed the addition of Rs.92,76,62,688/- as business income.
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